Specific Aspects of Determining the Share of Expenses in Common Property Maintenance Costs in a Block of Apartments in Russia and European Countries: Comparative Legal Analysis

U.B. Filatova, Candidate of Law, Associate Professor, Head of Civil Law Department, Russian Academy of Justice, Irkutsk, Russia

The article presents the existing procedure for determining owners’ share in expenses for the common property maintenance in a block of apartments, stipulated by the civil and housing legislation in Russia. The analysis of the mechanism of distribution of expenses necessary for common property maintenance, in accordance with the law of Russia and Europe (Germany, Austria, Switzerland and France), allows the author to come to the conclusion that there are different approaches in legal regulation, depending on actual usage of the common property. The general rule is that the owners shall bear the burden of maintaining the property in their ownership, unless otherwise stipulated by the law or by the contract (Art. 210 of the Civil Code of the Russian Federation, hereinafter referred to as the CC of the RF ).

Under Art. 249 of the CC of the RF, every participant in the share ownership shall be obliged to take part, proportionately to his/her share, in the payment of the taxes, collections and other dues by the common property, as well as in the maintenance and storage expenses[1]. The size of the share, therefore, according to the legislation, is calculated by a unique method of distribution of common property maintenance expenses.

Laws regulating certain types of the common ownership contain similar rules of expenses distribution. Art. 39 of the Housing Code of the RF (hereinafter referred to as HC of the RF) envisages that the owners of premises in a block of apartments shall bear expenses towards the maintenance of common property in the block of apartments[2].

The share of compulsory expenses towards the maintenance of common property in the block of apartments borne by the owner of premises in the block of apartments shall be defined by a particular owner's share in the right of common ownership to common property in the block of apartments.

According to Part 1 of Art. 37 of the HC of the RF, the share in the right of common ownership to common property in a block of apartments of the owner of premises in this block of apartments is proportionate to the total area of the premises in question.

Certain judicial acts envisage possibility of using other criteria of expenses distribution.

For example, repair works expenses in a dwelling house shall be distributed by the court among parties with account for the share in their property, as in accordance with Art. 249 of the CC of the RF, every participant in the share ownership shall be obliged to bear the property maintenance expenses proportionately to his/her share. At the same time, in exceptional cases the court may recede from this principle and distribute expenses with due regard to the financial position of the owners, state of health and other important circumstances[3]. When disputes on the share's size are considered, the account must be taken of the essence of the stated terms and corresponding shares in the right of common ownership to common property in a building shall be defined proportionately to the area of the premises in ownership. Another calculation of the size of owner's share in the right of common ownership to common property may be made by the court if the entire volume of the premises per unit area is significantly different from a similar index for other premises in the building[4].

Thus, courts make efforts to find additional criteria of expenses distribution, proceeding from principles of reasonableness and equity that they are guided by. The criterion under which expenses are proportionate to the share in common ownership is evident and formal; it sets aside the issue of the actual amount of use of a particular object of the common property. Aside from that, the rule on the procedure of determining the expenses share is binding and restricts owners’ ability to decide the issue in a different way. Such a formal impersonal approach has been repeatedly a subject of court disputes.

For example, Federal Commercial Court of North-Western District (hereinafter referred to as FCC NWD) examined judicial acts concerning claims of a partnership of owners of the premises to an owner of non-dwelling premises for public electricity bill collection and let them stand dismissing the defendant’s argument that he was not obliged to pay for electricity provided in public places as he had a separate entrance to the premises, and he did not use those services, ruling that this argument is not based on the rules of the current legislation[5].

Situations when owners do not use certain parts of common property but pay on an equal basis with those who actively use them occur not only with the owners of non-residential premises, but also with the owners of dwelling premises[6].

The issue whether the mechanism of expenses distribution via the use of the criterion of proportionality of shares and use of alternative criteria of distribution is acceptable has been raised by several authors. I. D. Kuzmina is of the following opinion:

”The burden which owners bear for the common property should be proportionate to the benefits received from its usage. In the case of qualitatively uniform composition of the premises for individual use (e.g. dwelling premises), this benefit is granted by the opportunity to use the premises for habitation purposes by the owner or other persons. Therefore, the size of such premises in relation to the size of the entire building is a fairly acceptable criterion for determining the amount of benefit and burden. Taking into consideration the type of the premises may serve as an alternative. That is, there are cases when a building, alongside with dwelling premises, includes non-dwelling premises used for shops, dining rooms, hairdressing saloons, renting agencies, banks, post offices, offices, etc. The indicator of “participation share” in common property of owners of such premises may become their value, defined with due regard to the profit gained from their usage”[7].

It appears to be very difficult to establish the real value of property with due regard to its profitability. Besides, this method of calculation again imposes some kind of “punishment” on the owners of non-dwelling premises , as it is them who gain profit from the premises use. However, economists speak about “conventionality and abstractedness of any unit of measurement, as none of them is connected with the amount or type of benefits that are necessary, useful and actually received in a block of apartments”[8]. Economically correct calculation is the one that correlates the burden of expenses with the amount and type of necessary, useful and actually received benefits in the share of common ownership. In this respect, the experience of legal regulation in European legislation is of interest.

In France, relationships among the participants of the common share ownership in a block of apartments are regulated by the Law of July 18, 1965 “On Co-ownership of Constructed Buildings”[9]. According to Art. 5 of the Law, every co-owner of a block of apartments possesses an exclusive right to his/her individual property (apartment, basement premises, garage) and a certain share in the right of common ownership of public places. ”Common ownership is, therefore. a legal regime that unites, within one and the same building. individual ownership and collective ownership”.

Having bought an apartment in a block of apartments, its owner automatically becomes a co-owner of a part of public places. The size of his/her share in the right of common ownership is proportionate to the value of the apartment and other subsidiary premises that are in his/her exclusive ownership.

This abstract part (number of shares in the right of common share ownership) is, therefore, a theoretical share of every co-owner of a block of apartments in the right of ownership of public places. It does not give him/her the right to use entrance, staircase or yard in a greater or lesser degree. It means for him/her a definite number of voices in a general meeting of residents and some share in the amount of expenses involved in the maintenance and repair of the building[10].

This criterion is not unique. Thus, for example, ”expenses for the lift operation shall be necessarily distributed in compliance with the degree of its utilization by the residents of the dwelling apartments of different floors, as stated in Part 1 of Art. 10 of the present Law that concerns engineering equipment of the house. Therefore, the owner of the apartment on the 5^th floor pays a larger share of expenses involved in the lift operation than the owner of the apartment on the 2^nd floor. Residents of the 1^st floor do not pay anything for the lift, but they pay for the collective heating on a common basis, as they use it alongside with the other owners of the house”[11].

Swiss legislation has an identical rule of expenses distribution. The terms of the common share ownership in general and of the common property in a block of apartments in particular are regulated by the Civil Code of Switzerland, Art. 712h of which determines types of expenses and burdens as well as criteria for such expenses distribution among the owners.

The common principle of expenses distribution is on the basis of the size of the share. This criterion is not binding, and co-owners may deviate in the agreement from the direction stated by legislators.

“Though, in the whole, encumbrance of the owner proportionately to the size of his/her share corresponds to the principles of the established share ownership and equality before the law, cases when a certain property is used in a different amount or cannot be used at all are not rare. If certain common parts of a structure, equipment or devices are not used or used in toto, it shall be taken into consideration in expenses distribution. This prescription shall be binding, any agreements that limit or exclude this rule shall be null and void” (Par. 3 Art. 712 h of the CC of Switzerland).

If the distribution of expenses proportionately to a share is objectively wrong, owners may deviate from the statutory criterion and adopt a decision concerning expenses distribution. This is acceptable if certain common parts or devices, such as staircases, lifts or antennas, are unevenly used by the owners. In these cases, the amount of expenses is determined by the amount of use. Sometimes the amount of use depends on a subjective criterion which can also be taken into consideration in distribution of certain expenses. The decision concerning the change of the expenses calculation procedure shall be adopted by a majority vote at a general meeting and shall be stipulated by the rules of the house. If the decision concerning the change of the expenses calculation procedure has already been adopted in the rules, it can be changed only by a qualified majority of votes (by the number of shares and persons).

If a general meeting fails to change statutory or general meeting prescriptions (for lack of quorum or lack of votes), the owner concerned has the right to file a lawsuit in court of law[12].

§ 16 of Apartment Ownership Act of Germany[13] stipulates that every owner shall be entitled to use common ownership consistently with his/her share, which is registered in a cadastre. Every owner shall bear the burden of common ownership on an equal basis with other participants, and shall also bear technical maintenance, repair and management expenses proportionately to his/her share. However, owners, by a majority vote, may decide that expenses involved in common property maintenance and management shall be calculated in correspondence with the actual use if the amount of property use is limited or the property cannot be used at all and if this decision does not impede the proper common property management. The right of the owner to demand the revision of expenses distribution criteria, depending on the possibility of the property use, cannot be excluded or limited by the agreement among owners.

Art. 32 of Apartment Ownership Act of Austria stipulates that expenses involved in common property maintenance are distributed proportionately to owners’ shares. Any of the owners is entitled to speak for changing the method of expenses distribution. In the case when the expenses distribution criteria are changed, the weight of the vote in a general meeting is also changed, but only concerning the issues of expenses burden.

These agreements must be concluded in writing and will enter into force from the next accounting period.

Part of the expenses that is be added to those related to the use of common parts of the real estate is distributed in accordance with the method stated by a legislator.

Changing the expenses distribution procedure may also be appealed in court. If, under the agreement of co-owners, there is a significant change or difference in the possibility of common property use, the court may establish a different method of expenses distribution, taking into account a proposal of an apartment owner guided by the principle of equity. The procedure established by the court decision will enter into force at the beginning of the accounting period that follows the filing of the application.

The transfer of the right of ownership to the common ownership share does not entail the change of expenses distribution method, calculation unit and voting unit.

Methods of expenses distribution, established in a co-owners agreement or court decision, other than envisaged by the law shall be introduced to a cadastre[14].

Thus, Russian legislation and legislation of European states have essentially different approaches that underlie the distribution of common property maintenance expenses in a block of apartments. European legislation is guided by the principle of equity in expenses distribution, and though the criterion of proportionality of shares is taken as a general rule if the common property cannot be used or can be used unequally, this method may be changed either by the decision of co-owners or court decision (if the decision cannot be adopted at a general meeting). In addition, the right to claim the change of the expenses distribution mechanism cannot be changed or abolished by an agreement among co-owners, despite a fair degree of autonomy of the will of the parties in the relations concerned. The Russian law and judicial practice proceed from a unique formal criterion despite evident injustice of its application in a number of cases. At present, Russia in going through a profound reform of civil legislation in general and the law of property in particular. Art. 273 “Expenses Involved in the Maintenance of the Property in Common Ownership” is formulated as follows:

”Every participant in the common ownership shall be obliged to take part proportionately to his/her share or in the case of co-ownership on the account of common property, if the property proves to be insufficient – in equal shares, in the payment of the expenses involved in its maintenance and storage, including those connected with the payment of taxes and collections, unless otherwise stipulated by an agreement among owners”[15]. As opposed to the rule contained in Art. 249 of the current Civil Code, Art. 273 of the Draft of the CC of the RF represents a dispositive legal norm that allows owners to negotiate. Nevertheless, from our point of view, it is necessary to formalize the right of the co-owner to demand the revision of expenses distribution with due regard to the amount and possibility of the common property use. From our point of view, the legal norm of Art. 249 of the CC of the RF (Art. 273 of the Draft of the CC of the RF) should be complemented with the following rule:

”If by virtue of design features of the property in common share ownership the owner cannot use any of its parts or the amount of its use is insignificant in comparison with other owners, the degree of his/her participation in the payment of maintenance and storage expenses, including those connected with the payment of taxes and collections, shall be reduced”.

 The change of the general distribution procedure for common property maintenance and storage expenses will inevitably affect the provisions of special legislation that regulate certain types of common ownership, including the Housing Code of the RF.

Bibliography:

1. H. Rey. Schweizerisches Stockwerkeigentum. Zuerich: ZB Verlags-Bucharchiv. 2009, p. 237.
2. I.D. Kuzmina. Pravovoi’ rezhim zdanii’ I sooruzhenii’ kak ob’’ektov nedvizhimosti // Doctoral thesis in law. [Legal Regime of Buildings and Structures as Real Estate Objects. Thesis Abstract]. Tomsk, 2004. p. 352.
3. А.N. Ryakhovskaya, F.G. Тagi-Zale. Stoimost’ v zavisimosti ot tsen I varavnivaniia oplaty kommunal’nykh uslug [Cost Based Price and Leveling of Municipal Services Payment] // Zhilishchno-kommunal’nye khoziai’stva [Municipal Housing Economy]. 2002. № 12. p. 11.
4. М. Salyuden. Vvedenie v Zakon Frantsii ob obshchei’ sobstvennosti. Pravovaia I sudebnaia praktika vo Frantsii [Introduction to French Law of the Common Ownership. Legal and Judicial Practice in France: Environmental Law, Real Estate Law, Civil and Criminal Proceedings] // Russko-frantsuzskaia seriia informatsionno-obrazovatel’nykh resursov [Russian-French Series of Informational and Educational Resources]. 1999. p. 204–206.