Homeowners Association Fees — What Is Legal to Collect and What Is Not

Introduction: Building Committee Fees and Their Legal Aspects

Building committee fees are one of the most common issues arising in disputes between tenants and building committees. Many tenants ask: What exactly is legal to collect? Are there limits on amounts? What are tenants' rights when they dispute the collection? Answers to these questions are rooted in the Joint Building Law, case law, and legal precedents accumulated over the years.

Our firm, Mandelbaum, Gor, Witzman-Gor & Co., Attorneys at Law, has specialized in real estate and property law since 2008 and advises tenants and building committees on these complex matters. On this page you will find a comprehensive legal guide on building committee fees — what is permitted, what is prohibited, how the collection process works, and what to do if you dispute the fees.

What Are Building Committee Fees and How Are They Defined by Law

Building committee fees (also called "management fees" or "maintenance fees") are sums collected by the building committee from tenants to finance the expenses of managing and maintaining the shared building. These expenses include maintenance of common areas, building insurance, lighting, cleaning, emergency repairs, service payments (shared electricity, water, sewage), and more.

According to the Joint Building Law (5732-1972), the building committee is authorized to collect these fees from all tenants as part of the costs of property ownership. However, the collection must be lawful — meaning it is approved in accordance with the process established by law, based on actual expenses, and consistent with the decisions of tenants (at a general assembly or through established procedures).

What Is Legal to Collect — Permitted Expenses

According to the law and prevailing case law in Israel, a building committee may collect fees for:

• Maintenance expenses: Routine repairs of staircases, roofs, water pipes, shared electrical systems, and other parts of the shared building.
• Shared services: Electricity in stairwells, external lighting, shared water, sewage, and drainage.
• Cleaning: Janitor wages, cleaning materials, cleaning of entrance doors and staircases.
• Building insurance: Premiums for property insurance against fire, theft, third-party liability, and other risks.
• Emergency repairs: Urgent repairs necessary to maintain the safety of the building and its occupants.
• Tax and fee payments: Land registry fees, municipality fees (if relevant to shared maintenance), and property tax on common areas.
• Management expenses: Accountant fees, attorney fees (for legal matters of the building), office management fees, and liability insurance for committee members.
• Depreciation and preventive repairs: Work intended to extend the life of the shared property.

What Is Prohibited to Collect — Prohibited Expenses

There are expenses that a building committee is not authorized to collect from tenants as building fees. These expenses are considered private expenses of apartment owners or are unrelated to shared maintenance:

• Private apartment expenses: Repairs within an apartment, interior painting, internal plumbing repairs, furniture replacement, or private lighting.
• Private improvements and upgrades: New renovations or upgrades to common areas beyond regular maintenance (for example, elevator upgrade or complete roof renovation) — unless approved by a vote of tenants.
• Legal expenses unrelated to the building: Lawsuits between tenants, arguments on private matters, or disputes unrelated to shared management.
• Damage expenses caused by neglect or legal breach: If damage is caused by committee neglect of maintenance, repair expenses cannot be imposed equally on all tenants.
• Bank fees or unnecessary administrative expenses: High bank fees or management expenses that are not reasonable in relation to the building's size cannot be collected.
• Private benefit expenses: For example, purchasing equipment within an apartment or services that specific subscribers receive (such as shared television in a stairwell that few tenants use).

Building Committee Fee Collection Process — The Legal Way

A building committee cannot simply decide to collect fees. There is a defined legal process that must be followed:

Step 1: Approval at a General Tenant Assembly or by Documented Decision

According to the Joint Building Law, building committee fees must be approved by a majority of tenants at a general assembly of the building. If an assembly is not held, fees may be approved by a documented decision (in writing), provided notice of the proposal was sent to all tenants in advance.

Step 2: Budget and Financial Report

The committee must present an annual budget detailing expected expenses and how they will be distributed among tenants. The budget must be reasonable and itemized. Tenants may ask questions and request explanations before approval.

Step 3: Notice to Tenants

Following approval, the committee must notify tenants of how much they owe, in how many installments, and when. The notice must be in writing and clear.

Step 4: Collection and Legal Action

If tenants do not pay, the committee may file a lawsuit in court or take other legal measures (such as enforcement proceedings). However, the court typically examines the legality of the collection before enforcing it.

Tenant Rights Regarding Building Committee Fees

Tenants have several important rights regarding building fees:

• Right to Receive a Financial Report: Every resident is entitled to demand from the committee a detailed report on actual expenses, in order to verify that the fees collected correspond to actual expenses.
• Right to Appeal Decisions: Residents can file an appeal in court against committee decisions if they believe they are unlawful or unreasonable.
• Right to Dispute Expenses: If the committee charges fees for expenses that were not actually incurred, residents can challenge this in court.
• Right to a General Assembly: Residents can request a general assembly to discuss fees if no assembly has been held in the past year.
• Right to Inspect the Books: Under the law, residents are entitled to inspect the committee's books and financial reports in order to verify that there is no misappropriation or misuse of funds.

Common Disputes and How Courts Handle Them

In Israeli case law, there are many precedents regarding committee fees. Generally, courts examine the following issues:

Are the Fees Based on Actual Expenses?

Courts require that committee fees be reasonable and correspond to actual expenses. If the committee charges fees that are significantly higher than actual expenses, the court may order a refund.

Were the Fees Properly Approved?

If the fees were not approved at an assembly or by a documented decision, the collection may be considered unlawful. The court may determine that the fees were not owed.

Are the Fees Distributed Fairly?

Typically, committee fees are distributed according to the apartment's area or another agreed-upon method. If the distribution is unfair, residents can appeal.

Table: Examples of Types of Expenses and Their Legality

What to Do If You Dispute Committee Fees

If you believe that the fees charged by the committee are unlawful or unreasonable, you have several options:

Step 1: Request a Detailed Financial Report

Ask the committee for a detailed report on each expense. You have the right to know exactly where the money is going. If the committee refuses, this may be a sign of a legal problem.

Step 2: Written Communication with the Committee

Send a registered letter to the committee with your objections. Explain why you dispute the fees, request explanations, and indicate that you are considering legal action if you do not receive a reasonable response.

Step 3: Court Action

If the committee does not respond or if you are not satisfied with the response, you can file a lawsuit in court. In the lawsuit, you can demand: (a) non-obligation to pay fees collected unlawfully, (b) refund of funds, (c) legal expenses.

Step 4: Request to Appeal Committee Decisions

If a specific committee decision is unlawful, you can file a request to appeal in court. This request will be expedited, especially if there is a risk of irreparable harm (such as eviction proceedings).

Israeli Law and Committee Fees — What Case Law Says

Over the years, Israeli courts have established clear rules regarding committee fees. Generally, courts require that fees be:

• Lawful: Approved in accordance with the Joint Building Law.
• Reasonable: Corresponding to actual expenses and not significantly exceeding them.
• Transparent: The committee must present a clear financial report to residents.
• Fair: Distributed equitably among all residents, according to the apartment's area or another agreed-upon method.

If the fees do not meet these criteria, the court may order a refund or cancel the collection.

Special Cases and Complex Issues in Management Fee Collection

In real-life situations, disputes over housing committee fees often involve more complex scenarios. Here are some situations our lawyers have encountered:

Accumulation of Committee Debts Over Years

Sometimes, a housing committee accumulates debts over several years and then attempts to collect a large sum from residents all at once. Typically, a court requires the committee to present evidence for each and every year — every financial report, every vote, every notice. If the committee cannot prove that the fees were properly approved each year, a court may refuse to enforce collection.

Change in Fee Calculation Method

Sometimes, a housing committee decides to change the method of calculating fees (for example, from "per square meter" to "per number of residents"). Such a change requires special approval at the assembly. If not properly approved, residents can challenge the change.

Large One-Time Expenses (such as Roof Repairs or Elevator Maintenance)

When the committee needs to fix something expensive (such as a new roof or elevator repair), it cannot simply collect the entire amount from residents in one month. Typically, the committee must accumulate funds over one or two years, or take out a loan. If the committee collects a large amount without prior notice, residents may object.

Separation Between Current Management Fees and Reserve Fees

In the Condominium Law, there is a distinction between current management fees (for day-to-day maintenance) and reserve fees (for large repairs in the future). Residents should know which type of fees they are paying. If the committee mixes the two, it could be considered illegal.

Residents Who Do Not Pay — Consequences

If residents do not pay committee fees, the committee may file a lawsuit in court. If a court determines that the fees are legal, it will order residents to pay, plus interest and legal fees. However, if a court determines that the fees are illegal, residents will not have to pay.

Practical Tips: How to Protect Yourself as a Resident

• Keep All Documents: Every notice from the committee, every financial report, every receipt. This will be important evidence if you need to object in court.
• Participate in Assemblies: Attend general meetings of the building. This will give you insight into the decision-making process and allow you to influence decisions.
• Request Explanations: If fees suddenly increase, ask the committee for a detailed explanation. You have the right to know why.
• Cooperate with Other Residents: If several residents dispute the fees, consider cooperating. Collective power can influence the committee more than a single voice.
• Contact a Lawyer Early: If you suspect there is a legal issue, contact a lawyer as soon as possible. This can save you time and money in the future.

Differences Between Housing Committee Fees and Other Payments

It is important to distinguish between housing committee fees and other types of fees or payments that residents may encounter:

• Housing Committee Fees: Fees collected by the building committee for shared maintenance. Legal when properly approved.
• Property Tax: Fees that may be owed to the municipality or another government entity. Not related to the committee.
• Security Fees: Fees for security services in the building. These are separate from committee fees and require separate approval.
• Parking Fees: If there is shared parking, fees for its maintenance. Sometimes part of committee fees, sometimes separate.
• Insurance Fees: Usually included in committee fees, but sometimes charged separately.

Ways to Reduce Housing Committee Fees

If you believe your committee fees are too high, there are several approaches you can try:

Request a Financial Audit

Demand that the committee conduct an external audit of the books. This can expose waste or misuse of funds.

Propose Cost Savings

Suggest to the committee ways to reduce expenses (for example, negotiating with contractors, saving electricity). If the committee agrees, fees may decrease.

Request Elimination of Unnecessary Expenses

If the committee collects fees for unnecessary expenses (such as luxury services), ask the committee to stop or reduce those expenses.

Request a More Fair Distribution

If you believe fees are not distributed fairly among residents, request a change in the distribution method.

When to consult with a lawyer regarding management fees

If you suspect there is a legal issue regarding management fees, it is advisable to consult with a lawyer as soon as possible. A lawyer with experience in real estate and property law can help you understand your rights, verify the legality of the fees, and guide you through the necessary legal steps. Our office, Mandelbaum, Gor, Witzmann-Gor and Co., Advocates, has been providing legal advice on these matters since 2008. We are experts in real estate and property law and can help you protect your rights as a resident.

Summary: Management fees and residents' rights

Management fees are an essential part of apartment ownership in a shared building, but it is important to understand the legal rules associated with them. Fees must be lawful, reasonable, transparent, and fair. Residents are entitled to know how fees are allocated, where the money goes, and to appeal decisions that are not lawful. If you suspect there is a problem, request a financial report, send a registered letter to the committee, and when this does not progress, contact a lawyer. Residents' rights are important and must be protected.