- Condominium Issues in the Purchase of an Apartment in Malta - What to look out for.
- November 8, 2012 | Author: David Grech
- Law Firm: Mamo TCV Advocates - Valletta Office
Although this note refers to ‘apartments’, it is worth noting that the Condominium Act uses the term ‘units’ ( or ‘tenements’) and not apartments. A condominium might include a shop or an office. On the other hand, a building in which there is only very limited sharing ( such as sharing only of drains or common outer staircase) is not a condominium.
The Condominium Act also refers to unit owners as ‘condomini’ and this note does the same. A condominus thus owns his/her apartment and also co- owns or has the right to co-use areas and services that are common.
If the apartment is part of a condominium, the Condominium Act applies. Certain provisions of this law containing the more fundamental aspects are mandatory, while other provisions apply so long as deed of title or set of rules approved by the condomini do not provide differently.
In contemplating a purchase, you will be looking primarily at a draft promise of sale and purchase agreement, which is a binding mutual promise that you and the seller will sign if you decide to go for the purchase. There are also other documents and matters to check. Some of them can be checked in the period between the promise agreement and the final contract, and the exercise in that case is to verify that the seller will indeed deliver what he has promised in the promise agreement. Some matters should, however, be checked before you sign the promise agreement, because if you don’t, you may be signing your way into problems for which you may not have adequate recourse against the seller.
Is it clear what you are buying? This seems an obvious question but the answer might be difficult to establish, or might not be to your liking. It is far better to have the answer before, rather than after, signing the promise agreement. Most likely there will be no doubt about the apartment itself, but what about, for example, a basement, the foundations of the building and the underlying ground , a staircase or lift or outside area that perhaps you have access to but are not in the immediate vicinity, a satellite dish, the roof, the airspace? If the ownership or the use of these and similar matters are not clear, you may find that you have no right to something that you thought you had, or that you have to contribute to the maintenance and replacement of something that you do not care for and did not realise that you had to contribute to.
How you check these matters depends on circumstances. For example, if the apartment is being sold by the developer who built it, the primary source of your rights and obligations will be the promise agreement itself, a draft of which will most likely be prepared by the seller/development company itself. It is likely to refer to the common parts and how their ownership or use is shared. If, on the other hand, the apartment is being sold on, you will need to check also the seller’s deed of acquisition, and compare it with the promise agreement. In either case, beware of ambiguity or (harder to spot) omission. Where the deeds of title are silent about certain important matters, the Condominium Act sometimes gives the answer, but the Act will not solve every omission and ambiguity.
How is the administration dealt with in the condominium that you propose to buy into ?
If the apartment block was built after 1997 ( the year that the Condominium Act was proposed in Malta ) , it tends to be more likely that the purchase deeds of the apartments will contain an adequate set of condominium rules, sometimes integrated into the sale deeds by the developer-seller, and so it is more likely that the condominium administration rules have been properly dovetailed with the apartment owners’ rights of ownership.
There are some apartment blocks built before 1997 that have long-established owners’ associations and association rules, but if the apartment block was built before 1997, the probability is that a set of condominium rules have been adopted by the various owners after 1997. It is worth paying extra attention in such cases. Preparing a good set of rules suited to the circumstances of a particular block requires some thought and expertise. Unfortunately, this does not always happen, with the result that the rules that are in operation can be inadequate or inconsistent. They are sometimes a do-it-yourself affair of very variable quality. Another matter that should be checked, particularly in the case of these older blocks, is consistency in matters of common relevance between the transfer deeds of the various apartments in the block. It is not unheard of, for example, for some right that is given in the deeds relating to one apartment to clash with the rights given to other persons in the deeds of another apartment.
The Condominium Act refers to condomini and to the administrator of the condominium. Every condominium that has four or more condomini is required to have an administrator. The administrator must ensure the observance of the condominium rules, and generally must administer the condominium. The administrator answers to the condomini as a whole. The condomini should hold a condominium meeting at least once a year, and the administrator is required to execute the decisions taken by the condomini in these meetings.
The condominium, the administrator, and the condominium rules, must all be registered at the Land Registry in order to have legal effect. It is therefore important to check that these have been registered. Any condominium document that is registered at the Land Registry is open to inspection by any member of the public.
When one thinks of condominium, the term ‘Owners’ Association’ often springs to mind, and indeed many deeds of purchase, especially pre-1997 contracts, refer to this term. It is perhaps curious that the Condominum Act does not mention this term at all. In effect, in the eyes of the Act, the owners’ association is the condomini collectively , and the decisions of the condominium meetings are the decisions of the owners’ association. A word of caution, however, should be said. When the condominium rules of an apartment block do contain such terms as “Owners’ Association” or “Committee” ( another term sometimes used but not contemplated in the Condominium Act) or suchlike, you should take care to verify that the administrative structure is clear, workable, consistent and compatible with the concept of administration in the Condominium Act that centres around the condominium meetings and in particular around the administrator.
Important items that should be verified in the condominium rules of the block include the following:
(i) The apportionment of the condominium expenses. Do the rules clearly provide for the apportionment of condominium expenses? Unless the approved rules say otherwise, the condominium expenses are to be divided between the condomini in proportion to the value of the property of each condominus. Value could be a rather ambiguous criterion that could easily give rise to debate. Approved rules tend to prefer other, clearer, criteria. In the case of apartment blocks with different sized apartments, a common criterion is size ( area), where the size of the contribution is related to the square meterage of the apartment. In the case of garages or garage spaces, the division tends to be per car space. In larger or more complicated developments, the apportionment of the cost of certain shared areas or services might be at the discretion of the administrator.
Another point to verify, in the case of a new block where some apartments are not yet sold, is whether the developer-seller enjoys a right of discount, for example so long as an apartment remains unsold and unused.
(ii) Check the administration fee. The rules are likely to provide for the administrator’s remuneration, especially in larger blocks. If not, there may be a specific administration agreement between the condomini and the administrator that provides for a fee. Check on what basis the fee is charged, for example whether it is a flat fee, or a percentage of the costs, and assess whether this appears acceptable to you.
(iii) Check the procedures for meetings and the majorities required for decisions to be valid. The Condominium Act provides for these matters. If the rules make some provision for these matters, see that they are clear and consistent. The Act provides that each condominus has one vote for each unit held, although approved rules may provide differently. The Act also provides for different majority requirements for different categories of decisions, and most of these are of mandatory application . Note that certain decisions require unanimity. It is worth noting that unless the approved rules say otherwise, insurance of the condominium against damage or destruction requires unanimity. It should also be kept in mind that if an apartment is not occupied by its owner but by a tenant, the tenant has the right to attend the condominium meetings but does not have any right to vote.
You should also check that the person selling to you has paid all pending condominium costs due by him and that there are no arrears.
It is a good idea to look at the minutes of past condominium meetings. This will give valuable insight about many things. Indeed you may find that there are no minutes at all, which itself is a warning that the administration of the condominium might not be what it should be.
What if there are no condominium rules for the block? In such case, the Act allows any of the condomini to take the initiative to prepare a set of condominium rules and to submit them to a meeting of the condomini for their approval.
You might find that there is no administrator, and you might be asked to take up the position. It might be a modest sized block and you may be tempted to take on the challenge. It may be a good idea, but you will need to understand what you will be letting yourself in for before taking this step. One should first of all be clear about the involvement : if you are to be administrator it should be done with the necessary formality, that is, with the required approval of the condomini, and the appointment should then be registered at the Land Registry. It is not advisable to take it upon yourself to carry out this role unofficially, as you will be taking on additional risks.
Once an administrator is appointed, s/he has a number of rights, and also many obligations. It is not the purpose of this note to discuss this matter in any detail, but two things can be briefly mentioned : Firstly, an administrator who does not carry out his functions and duties, or does not carry them out competently, is liable in damages. This applies even if you are not being paid for your troubles. Secondly, once you have been appointed administrator, the law obliges you to continue in office until a replacement administrator is appointed, and this may well take some time.
This note is intended as general information. It is not a substitute for specific professional advice. This note addresses only some aspects of condominium, it is not intended to be comprehensive, nor does it deal with purchase in general.