Co-owners risk acquiring new debts and fines: the housing fund bill criticized

Ukraine is preparing a reform regarding the management of the housing stock. Relevant changes are outlined in the draft Law of Ukraine "On the Management of the Housing Stock." Currently, the bill has not yet been registered in parliament but is already at the stage of review and collection of proposals and comments. The document is positioned as one of the key elements of housing reform, aimed at solving a number of long-standing problems in the management of apartment buildings.

As previously reported by the "Judicial and Legal Newspaper", the key changes are aimed at a comprehensive update of housing management rules in Ukraine. In particular, it is proposed to:

• introduce clear management rules for any housing, regardless of its legal status;
• create a legal entity for each apartment building (if there is no Association of co-owners of an apartment building) to represent the interests of co-owners;
• form a unified register of apartment building management and a management system that will become part of the Unified Information-Analytical Housing System;
• create a complete database of the housing stock of each community with information about all buildings;
• regulate the status of OSBB and managers as consumers of communal services for the needs of the building;
• establish clear professional requirements for managers;
• clearly delineate responsibility between co-owners, the Association of co-owners of an apartment building, and managers.

However, the bill has already received a number of comments. The Verkhovna Rada noted that the document requires significant revision due to legal inconsistencies, an unclear status of new forms of apartment building management, and potential risks for co-owners.

One of the key comments concerns the so-called "simple partnership of co-owners of an apartment building." The draft defines it as a form of joint activity without creating a legal entity. At the same time, other legislative changes propose that such a partnership be established as a legal entity. The authors of the conclusion point out that this contradiction creates legal uncertainty. Furthermore, the relationship between the partnership and the manager is unclear, and the sources of acquisition of property and funds by this partnership are not defined, which creates risks for its operation as a legal entity.

The bill provides that co-owners as founders of the simple partnership may bear joint liability but does not specify particular cases of its application. Because of this, co-owners will not be able to assess possible risks and consequences for themselves in advance.

A problematic provision of the bill concerns the distribution of court costs to each co-owner, which are imposed on the simple partnership of co-owners of an apartment building by court decision. This complicates the procedure since it is necessary to distribute costs among co-owners, notify them of payment, and ensure funds are deposited into the partnership's account, which acts as the defendant and makes the payment. In the case of a large number of co-owners and untimely payment, there may be problems covering costs because the partnership has no own funds. A similar situation applies to administrative fines imposed on the partnership. If a co-owner fails to pay their share, difficulties in collecting funds will arise, as court procedures for small amounts are complicated, costly, and lengthy.

In this regard, it is proposed to introduce a simplified mechanism for collecting funds through enforcement proceedings upon the application of the simple partnership, provided there is a court decision and supporting documents regarding the distribution of responsibility among co-owners.

Comments also concern the term "self-provision," which the bill uses in various meanings. The authors of the conclusion remind that after the expiration of the Commercial Code, this term has effectively remained unregulated. In practice, this already creates problems for the Association of co-owners of an apartment building: boards often do not understand which works can be considered self-provision, how to document them, and how to distinguish them from economic activities.

The bill proposes notifying co-owners about meetings through electronic cabinets in the apartment building management system no later than 10 days before the meeting. This may lead to situations where co-owners miss important decisions simply because they did not check the cabinet. Therefore, it is proposed to duplicate notifications by email.

Experts also noted insufficient control powers of the state and local self-government bodies regarding activities of the Association of co-owners of an apartment building. This may lead to conflicts, non-transparent decisions by boards of the Association of co-owners of an apartment building, and the imposition of internal fines without proper legal grounds.

Additionally, comments from co-owners of the Association have been received. In an appeal to the Verkhovna Rada, it is stated that the draft Law "On the Management of the Housing Stock" is not supported and it is proposed not to register it in parliament and to conclude the discussion with a conclusion on its inadvisability. Since the bill not only fails to introduce clear housing management rules but creates everything for the destruction of the activities of the Association of co-owners of an apartment building and the impossibility of self-management by co-owners of apartment buildings.

Comments also mention risks of shifting financial responsibility onto co-owners, including for decisions and obligations made within the building management.

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