What I have learned being Chairman of the SJH condominium since my election last week — and why I offered my resignation
If you do not want this rather lengthy article: Based on advise of my legal counsel I have decided not to take the significant personal risk being a chairman of a non-compliant condominium.
Read on for the full background of this decision.
Since December I live at St. John Hill (SJH), a beautiful apartment complex in Bansko. The story of how I ended up there is described here.
When I moved in, I was welcomed by a friendly community of owners: “The OA”, which is a group of owners, holding about 30% shares. They took matters in their own hands before the current condominium structure was established and got a lot of stuff done, sometimes with heroic effort of individual owners.
I also learned of some conflict with other individual owners that do not pay their maintenance fees, sometimes do not even contribute to the repair fund and generally offer a diverging opinion on a lot of things happening at SJH. I met some of them personally or exchanged/messaged and had a feeling that maybe there is another side to the story.
I also personally noticed that the level of services that the maintenance company is providing diverges from the contractual obligation as described here, especially highly visibility activities like cleaning my staircase weekly or incidental damage to tiles. Other owners noticed too and they discussed replacing the maintenance company after the current period. They felt that even though the company is perceived as expensive for a lot of tasks, it generally did a good job before the condominium. However now a different solution is required.
I don’t know how much complex technical repairs cost, but looking at quotes like this that list painting walls for €8.50 (16.63 Lev) per m2 when I paid only 4–5 lev with other contractors to get my own walls painted is only one of the aspects where we need to improve.
Since I have started a Coworking Space in Bansko in December and got into contact with a lot of contractors for a variety of construction and maintenance works with the help of our Bulgarian partner Irina. Plus living full-time in Bansko, I met a lot of people that provide property management services for all the other ~200 complexes around the area.
So I thought: Sure, I can help the condominium find some maintenance alternatives and get repairs done for less. Civic duty and all.
Living full-time at SJH, of course I have a personal interest as well that the complex is clean, everything is working, including my fireplace and intercom where the operation affects common areas like the chimney and entrance door locks. And that there is a healthy reserve when we need to fix the roof or do other major repairs in a few years time. I was told, there are challenges with collections as currently only 70% of the owners pay, but overall I thought: “How difficult can this be?”
Boy, was I wrong.
The biggest challenge at SJH that I see is that the interests of the biggest owner (“the bank”, about 30% of the shares, but since not all owners attend the general assembly meetings they have the majority of the quorum in the general assembly) does NOT align with the interests of individual owners, even though the impression was created that “the bank” votes along “the OA” in the general assembly.
The way how a condominium should operate is outlined in the COMA law. Here is an English translation of it.
In general a condominium is supposed to operate as follows:
1) The general assembly votes on all activities, timelines and budgets. There are two types of budgets, one for “repairs” and one for “maintenance”. The law provides some guidance on how to prioritize activities. The general assembly also approves major decisions, especially in relationship with contracting with non-owners like maintenance companies, repairs and legal representation.
2) The condo board prepares the implementation of the decisions in any way they deem fit, unless instructed specifically by the general assembly. If during the year, there is a budget shortfall then the condo board is required to immediately convene the general assembly to vote a new budget. Only time critical emergency expenses can be authorized before the general assembly can vote on a new budget.
3) Once the condo board votes on a motion, the chairman is instructed to carry out the decision like signing a contract or making a payment. The law puts some specific limitations on how the chairman can spend money. Very important is to not mix funds between “repair” and “maintenance” and to contract works in the priority categories provided by COMA. Especially then it comes to measures that bring the building into compliance with the “technical certificate”.
If the chairman has doubts about personal liability or legality, then it is his decision to either sign the contract/payment or not. Unless specifically instructed by the general assembly or unless there might be criminal liability for the action/inaction.
What is the problem?
A lot of decisions in the past period have been made on the condo board and not in the general assembly. So the way how the previous board operated is not in compliance with COMA. Mind you that nothing happened (nobody was crushed by a broken chimney) and the non-compliant decisions of the general assembly were not challenged within the time limit, so the previous board members are in the clear. But in my opinion the chairman took a massive personal risk. A risk that I am not willing to take, so I retained private counsel and also asked BS&T about their professional opinion of condominium compliance as well as who they represent. You can see my email and their answer that these questions have to be referred to a senior partner here — so far I didn’t get a response on what I thought is a pretty straight forward question.
My private counsel has advised me that there are significant compliance risks in the position of the chairman and I have shared this with the other board members — so far I didn’t receive a response from UBB if they want to revote the chair. You can see my email to the board here.
I have also invited all condo board members last Monday to have a call on this Monday to discuss how we want to divide responsibilities on the condo board and what topics seem most urgent. You can see this email here — so far I didn’t receive confirmation that UBB will be on the call.
So who benefits from a non-compliant condominium?
I shared my concerns about some decisions of the AGM and the past board in respect to the interests of individual owners compared to interests to UBB. You can see my detailed list here.
Overall UBB is now in a position where:
- it is very easy for them to legally reduce their financial contributions if they choose to do so in the future (low voted repair fund proportion, legally not required to pay maintenance unless used, non-compliance with COMA as legal exit strategy).
- they prevented that the repair budget is set in accordance with the buildings needs which might be higher than their internal budgets for the complex.
- they managed to get their contributions for some areas reduced (see empty cells in spreadsheet, especially in S block)
- they managed to prevent a control board (which would enforce accountability) and the general assembly didn’t elect an owner to report on financials
- they managed to prevent that the general assembly votes on how much commercial users of the building should pay, even though hotel operations clearly have a higher maintenance effort than a building where most owners come only once per year for a week.
- they hold a veto on the board level, even though they hold only 33% of all shares in the condominium
- most decisions are made on the condo board level and often favor UBB’s interests more than individual owners
- there is conflict between individual owners that prevents them from reaching a voting of more than 33% of shares to potentially vote against UBB’s interest in the general assembly
- they manged to convince a lot of owners that “the bank votes with the owners in the general assembly”
- and most important they do not take any risk as the chair is held by someone else
UBB is a major bank with professional expertise in real estate and a massive legal team. Not a big surprise that they are looking for their own interests first.
So, sorry, but Matthias is getting out of the chair.
I have already clearly offered my resignation and hope that the condo boards votes a new chair in a way that I get out of any legal responsibility as quickly as possible.
Until this happens I have notified the board that I will not sign any payments which will stop the operation of the complex after the termination of the current maintenance contract first of July.
In case it doesn’t happen on the board level, the general assembly has the right to remove any board member for non-performance. Please do so if there is no new chair soon.
I know that some owners might believe that if no one wants the chair, this will be the end of the complex. No utilities in common areas, no cleaning, the roof will collapse and barbarians breaking down apartment doors.
After hearing some stories of the pre-condo days I really don’t believe this is the end of the complex, maybe it is a new beginning and we can rally owners to over vote UBB in the general assembly. Or in the worst case operate as a voluntary initiative between engaged owners and neighbors in the complex. And I will share with you how I keep the lights on in my apartment if the worst case scenario happens.
However 20% of all shares can convene a general assembly meeting, even if the board doesn’t want to. Even though I don’t want to be your condo chair, I am prepared to offer all my help to ensure a bright future for SJH — it’s my home too!
