What is property – building management and why is it necessary?
Property management is an activity oriented towards preserving and increasing the value of real property. Real property always represents the most valuable part of the property of an individual and a community, and such activity must be performed with greatest care possible due to the way it affects the safety and comfort of living as well as due to its influence on the real property market. Apartments and business premises in a building that is well-managed will have a greater market value than those in derelict and unmaintained buildigns. Immediate stakeholders in the management are the co-owners and the manager. The owners care for and are responsible for their property, and they entrust executive duties regarding their property to the manager. Act on Ownership and Other Real Rights stipulates that every building must have a manager who is registered for the performance of such activity. The manager manages the building, maintains it, collects reserve fees for the building and performs all other duties delegated to him by the co-owners.
What is a co-ownership agreement?
A co-ownership agreement defines the relations between the co-owners of the building with regard to management, maintenance and use of the building. The list of co-owners with their respective co-ownership shares (floor plan area of the apartments and premises they own) and shares in the maintenance costs, as well as the list of common areas and equipment of the building are appended to the co-ownership agreement.
What is a building management agreement?
A building management agreement defines mutual relations between the co-owners and the building manager. Appended to the building management agreement are: building maintenance programme (for the year in which the agreement is being signed) and a record of handover for management of the common areas and equipment of the building.
How is a building management agreeement concluded?
A building management agreement is concluded with the representative of the co-owners. This is preceeded by the signing of a co-ownership agreement which is deemed valid if signed by co-owners who jointly own more than 50% of the building area. Only the owners of apartments and business premises have the right to sign the co-ownership list and therefore to sign the co-ownership agreement.
What services does the manager do?
Co-owners authorise the manager to perform the following duties in their name and on their behalf:
Organise regular maintenance of the common areas and equipment in order to keep them in a functional condition and in the condition as intended at constrcution
Perform occassional and annual inspections of the real property and compile a record thereof
Determine the amount which must be contributed towards the joint reserve fund by each co-owner
Organise the collection of joint reserve funds, including enforcement
Dispose with the funds which the co-owners set aside for covering the maintenance costs of common areas and equipment, including management costs (joint reserve funds), in accordance with the annual programme.
Manage and dispose with the reserve funds held on an account for the purpose of protecting their value
Take out insurance for the common areas and equipment against risks in accordance with the annual programme
Take out loans in order to secure additional funds necessary for covering building maintenance costs, based on a decision of co-owners i.e. of their representative
Rent i.e. lease out and terminate the use of independent premises in building over which there is no separate ownership.
Represent the co-owners in proceedings before the court and other state bodies.
The manager undertakes to organize emergency repairs, namely: rupture of water supply installation, rupture or leakage of the sewarage system and leaks in gas and heating system. For the purpose of performing the aforementioned duties, the manager shall organise 24-hour on-call service, including Sundays, state holidays and non-working days.
At the request and with the approval of all co-owners, the manager shall also perform the duties of extraordinary management of the buildings, which shall be defined by a separate agreement in which the appropriate remuneration for the manager will also be stipulated. The co-owners may also entrust the manager with performance of other duties related to their right of ownership in the building in their name and on their behalf by a separate agreement.
What is a building reserve fund fee and how is it calculated and collected?
The building reserve fund is a cash fund of the building co-owners from which the statutory, necessary and other maintenance of the building is paid. Co-owners are obliged by law to make payments to the fund. The building reserve fund fees are paid in order to enable the co-owners to maintain the building and pay the related costs (emergency interventions, small repairs, cleaning, hall lighting, elevators etc.).
Each owner of a separate part pays the reserve fund fee monthly. Decision on the amount of the fee per square meter is made by the co-owners but it cannot be less than HRK 1.53/m2, which is the statutory minimum. The manager organises the collection of the reserve fund fees which are paid to the building's transfer account, and the managers disburses these funds as needed in accordance with the Act and the decision of the co-owners.
The building reserve fund shall not be used for the maintenace of separate parts of the buildings; it can be used exclusively for the common areas and equipment of the property.
What are the common areas and equipment of the building?
The common areas and equipment of the building are defined by Article 3 of the Building Maintenace Regulation (official gazette “Narodne novine” no. 64/97) and these include in particular:
Load bearing structure of the building
Roof and other metalworks
Fire access points
Common installations for sewerage, gas, water, electricity, heating etc.
Do I really have to pay the reserve fund fee?
According to the co-ownership agreement, all co-owners are required to pay the reserve fund fees regardless of whether they signed the co-ownership agreement or not. If a certain co-owner is not paying the fee, the manager is obliged by law to initiate enforcement proceedings for the unpaid reserve fund fees.
Can the building manager independently dispose with the reserve funds??
The building manager cannot independently dispose with the reserve funds assest or withdraw cash from the building’s transaction account. In accordance with the management contract, the building manager together with the co-owners representative verifies and co-signs payment orders for the building maintenance invoices issued by the contractors. The bank at which the transaction account of the building is held can affect the payment of funds from the account of the building only if the payment order is signed by the authorised person and the manager. At the end of the year, all co-owners shall receive a report with the list of all payments from the transaction account of the building.
What is the procedure for changing the amount of the reserve fund fee?
The reserve fund fee is changed by delivering to the building manager a proof of consent given by the majority of the co-owners to the change of the reserve fund fee. Based on this consent, the manager drafts an annex to the co-ownership agreement and calls on the authorised representative of the co-owners to sign said annex.
What is the amount of remuneration paid to the manager?
For the work performed, the manager is entitled to remuneration which is paid from the building reserve fund. The amount is calculated based on the maintenace coefficient per one square meter of usable area of all apartments and other premises of the building. The building owners shall pay manager’s remuneration based on the management agreeement to the transaction account of the building manager.
Does the building have to be insured?
In accordance with the Act on Ownership and Other Real Rights, every building must be appropriately insured. Insurance is concluded in accordance with the Insurance Act. Co-owners can take out an insurance for the building that covers more than what is prescribed.