Practical problems related to contracts for the management and maintenance of common areas within condominiums

The development of major cities, due to the concentration in them of economically active parts of the population, has caused an increase in the number of residential buildings and the gross habitable floor area within such buildings in those urban centers.
At the same time, we are also observing an evolution of the nature, types and manner of use of residential properties. The economic situation has also led to the emergence and market presence of so-termed ‘investment properties’, essentially homes that are not used on a permanent basis by their owners.
More and more homes are available within the so-called gated communities, with landscaping and designated infrastructure, that are in need of management and maintenance.
The sheer volume and specificities of all of these activities make it well-nigh impossible for the homeowners and users to tackle them on their own; this necessitates, as a mass practice, the signing of contracts for maintenance and management of facilities and the common areas of residential properties.

Regulatory framework regarding contracts for the management and maintenance of common areas within condominiums
To date, the regulatory framework concerning specifically management and maintenance contracts for facilities and common areas within condominiums is contained, primarily, in the Condominium Management Act (CMA).
Article 2 of CMA, titled “Special arrangements for management of common areas”, provides that the management of common areas in condominium buildings located within a gated residential community is governed by a written contract between the investor and the owners of individual properties with notarized signatures.
The contract satisfying all of the above requirements is then registered by the investor with the National Registry Agency as part of the case file of each individual property and will remain in full force and effect for any subsequent owners of the property.
In addition, CMA § 1, item 3 provides a legal definition of the term “gated residential community” as a housing estate constituting a separate regulated landed property, within which one or more condominiums have been built as well as other facilities and installations to be used collectively by the homeowners, users and residents, in keeping with the arrangements for controlled access by visitors.
While interpreting that definition, it should be noted that pursuant to CMA article 3, the provisions of the Ownership Act will apply to the management of common areas of buildings with up to three residential units, thus making CMA non-applicable in such cases.

Is it possible to conclude a contract for the management and maintenance of common areas with respect to a condominium other than a “gated residential community”?
It stands to reason that not just gated communities within the meaning as per CMA need management and maintenance. Common areas may also be maintained by the homeowners, users and residents themselves, on the basis of multiple contracts for cleaning, lighting maintenance, commissioning minor repairs, elevator servicing, enforcing access control, etc.
Pursuant to CMA article 11(1), item 11, the General Homeowners’ Assembly may adopt a decision to assign the management of the common areas of the condominium to a professional manager-merchant specialized in condominium management, with such an agreement determining the scope and powers that can be entrusted to such a person, as well as for assigning the maintenance of the common areas of the condominium to a legal entity or an individual.
The current case law of the Supreme Court of Cassation allows the conclusion of management and maintenance contracts by the owner of a separate unit within a building constituting part of a condominium. The condition is that the homeowner must assume responsibilities under the contract exclusively on his/her behalf, without committing the other homeowners in any way. In a case like that, the management activities to be carried out must be formulated in a very specific and indisputable manner. Valid, for instance, are such arrangements concerning the landscaping of the estate, the temporary renting out of properties owned by the contractor/manager, like e.g. a pool, a gym, children’s playgrounds and the like.

Should a contract for the management and maintenance of common areas within a building constituting part of a condominium be notarized as a precondition for its validity?
The requirement of having a written contract for the management and maintenance of the common areas of a gated community-type residential estate with notarized signatures is a precondition for the validity of such an arrangement in the case of a contract as per article 2 of CMA. A fee for the notarization of signatures on the contract is collected in accordance with the Tariff for Notary Fees, part of the Law on Notaries and Notarial Activities.
In order to retain its validity for subsequent homeowners, a contract for the management and maintenance of the common areas must be entered in the case file of the relevant individual property, in accordance with the Rules for Record Keeping. A stamp duty is charged in accordance with the Tarriff for Stamp Duties collected by the Registry Agency.
The application for entry must originate from the investor. The obligations for payment of notarial fees and other duties may be negotiated between the parties but such payments are usually covered by the property owner.
When the management contract is signed with a person other than an investor within the meaning as per the Condominium Act (e.g. a Professional manager/merchant entered in the Register as per CMA article 47а(1), item 1), notarization is not a mandatory condition for its validity.

Should contracts for management and maintenance of common areas within condominiums necessarily be signed with the investor?
As was pointed out above, it is possible for a contract for management and maintenance of common areas to be concluded with a person other than the investor. CMA explicitly allows for a contract for management of common areas in a condominium to be concluded with a professional manager-merchant, whereas a maintenance contract can be signed with an individual (including a sole proprietor of a company), as well as with a duly registered legal entity.

What is the term of validity of a contract for the management and maintenance of common areas?
Typically, contracts for management and maintenance are signed for a period of time; there are, however, also contracts for maintenance and management of common areas that are concluded for an indefinite term of validity and they are a possibility too. On account of the usually longer period of validity of such a contract, it is advisable to include in it a clause for indexation of the contractual fee, e.g., on the basis of the annual inflation rate as determined by the National Statistical Institute.

A contract with a professional manager-merchant concluded by a condominium in accordance with article 19 of CMA has a two-year term of validity.
A contract with a professional manager-merchant, even if concluded for a longer period of time, is considered to have a term of validity of two years, whereas a clause providing for the automatic extension of the contract upon expiry, or its transformation into an indefinite contract, is considered null and void.

Are there other requirements that apply to a contract for the management and maintenance of common areas?
So long as a contract for the management and maintenance of common areas constitutes a complex commitment, its clauses must also reflect the requirements set forth for delegation contracts (regarding the element of management of the common areas) and contracts for specific works (regarding elements constituting the maintenance of common areas). It is therefore also necessary for such a contract to conform to the relevant requirements of the Obligations and Contracts Act with respect to delegation transactions and those for specific works, possibly also for a lease agreement, etc.