Building Management and Maintenance Act

On January 1, 2025, the Building Management and Maintenance Act came into force, introducing numerous mechanisms for managing and maintaining buildings, as well as imposing various obligations on co-owners. Below is an overview of the most significant changes.

One of the key novelties is the establishment of a co-owners’ association as a legal entity, which consists of all owners of individual parts of the property. The co-owners’ association is assigned a personal identification number (OIB) and becomes a legal entity with standing to initiate and defend lawsuits. This association also possesses its own assets (reserve fund contributions) and is liable for damages arising from failure or improper execution of building maintenance tasks. The co-owners’ association regulates its internal relations through a co-ownership agreement and is registered in the Co-Owners’ Association Registry, which will be established within six months of the law’s entry into force.

The Act also clarifies what constitutes common parts and installations of buildings and includes provisions regulating various aspects of building work. For instance, it prohibits the installation of air conditioning units on street-facing facades, as well as the extension and enclosure of balconies in existing buildings, except in exceptional cases. The law allows for co-financing the installation of elevators or facade renovations for up to one-third of the total cost, provided certain conditions are met. The Act distinguishes between regular and extraordinary maintenance of common areas, classifying extraordinary maintenance into urgent repairs, necessary repairs, and investment maintenance. Furthermore, it introduces the possibility of charging fees for violations of house rules and mandates that the co-owners’ association must insure the building against basic risks such as fire and storms.

One of the most significant changes concerns the consent required from co-owners for certain activities. Conducting a business activity that is not classified as quiet and non-disruptive requires the consent of a two-thirds majority of co-owners, as well as all co-owners whose walls, ceilings, and floors are adjacent to the business premises. The same rules apply to short-term rentals of up to 30 days and to rentals accommodating more than four unrelated adults. These provisions apply retroactively, meaning that property owners must obtain the required consent within five years for business activities or short-term rentals and within one year for rentals to multiple individuals, starting from the law’s entry into force.

The new legal provisions also regulate the issue of the common reserve fund. The co-ownership agreement may stipulate that owners of commercial premises, apartments used for short-term rentals, and apartments accommodating multiple individuals pay a reserve fund contribution that is twice the amount paid by other apartment owners. Additionally, the Act sets a minimum reserve fund contribution at 0.54% of the benchmark construction price published by the competent Ministry. The reserve fund contribution must be determined by an annual maintenance program for the common parts of the building.

The co-ownership agreement becomes the key document for regulating the rights, obligations, and relationships among co-owners. All co-owners must enter into new co-ownership agreements and building management agreements within two years of the law’s entry into force. Until then, existing agreements remain valid, but only until the deadline expires. Co-owner representatives already appointed will continue their work under the new legal rules. The Act stipulates that co-owner meetings must be held at least once a year, defines how they are convened, how decisions are made, and the required majority for various matters. The co-owner representative has numerous prescribed obligations, and the Act defines what constitutes gross neglect of duty. The co-ownership agreement may also establish a co-owners’ council to provide expert assistance to the representative in fulfilling their duties.

Co-owners are also required to enter into a written contract with a building manager, to whom management responsibilities are delegated. The law precisely defines the contents of this contract and the obligations of the manager. If co-owners fail to appoint a manager, a compulsory manager is designated. The Act also prescribes penalties for managers who fail to fulfill their duties.

It is important to pay attention to the Act’s penalty provisions, which apply not only to building managers but also to co-owners and contractors performing illegal work. Additionally, in ongoing court proceedings at the time the law enters into force, lawsuits may be amended so that, instead of individual co-owners, the co-owners’ association becomes the party to the proceedings after its registration in the Co-Owners’ Association Registry.