25 September, 2019

Unfounded charging of reserve fund management services

The relationship between the building manager and apartment owners is a mandate relationship governed by the agreement on provision of management services and statutory law, notably the Housing Act and the Law of Property Code. With the agreement, the building manager undertakes to perform specific transactions for the apartment owners and is in return entitled to payment for its effort. Thus, the building manager, inter alia, manages the reserve fund, wherein the monthly payment the manager is entitled to is determined in the agreement on provision of management services.

Management of apartment buildings through building managers was governed already by the Housing Act from 1991, however, it was not until 1 January 2003 with the enforcement of the Law of Property Code when the obligation to provide payments to the reserve fund was introduced. In praxis, building managers started to charge in the monthly account on top of management services and operating and maintenance costs an additional fee for reserve fund management, however, without a legal basis. Management of the reserve fund is the building manager’s statutory obligation that is, therefore, obliged to perform such work, however, this does not mean that it can charge it without an agreement on the amount. Practically speaking this means that apartment owners bound by older management services agreements concluded prior to 2003 are usually not obliged to pay for the reserve fund management services because the reserve fund at that time did not yet exist.

Apartment owners may request the building managers to provide them with a copy of the management services agreement. This way, they can check whether or not the contract contains an agreement on the reserve fund management amount. If the apartment owner believes that the building manager unjustifiably charges the reserve fund management fee, he or she may reject the invoice in this part and following the building manager’s enforcement application and the objection to the enforcement decision by the apartment owner, the matter will be decided upon by the court in civil proceedings. In addition, apartment owners with a majority of more than 50 % may terminate the agreement with the building manager and conclude an agreement with a new one. An important corrective measure to the aforementioned remedies could present the Collective Actions Act.

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