Homeowners Association Management Fees — What Is Legal to Collect

What Are Homeowners Association Management Fees and What Is Legal to Collect

Homeowners association management fees (also known as "management fees" or "common expenses fees") are monthly or annual payments that residents in a shared building must pay to cover the building's common expenses. These expenses include building maintenance, heating, electricity for common areas, cleaning, building insurance, homeowners association and treasurer salaries, and legal or engineering expenses when required. However, not every expense that the committee decides to collect is legal, and there are clear legal limits to what can be collected from residents.

In Israel, the rights and obligations of homeowners associations are primarily regulated by the Apartment Houses Law (Consolidated Version), 1952, the Apartment Houses Regulations, and homeowners association registration. These laws establish what the committee can collect, how it must decide on expenses, and what rights residents have to object to or challenge illegal collection.

Mandelboim, Gor, Witzman-Gor & Co. specializes in real estate and property law, including disputes between residents and homeowners associations. Based on more than 18 years of experience, we help residents understand their rights and communicate with the committee to resolve legal disputes efficiently and cost-effectively.

What Is Legal to Collect — Current Expenses and Maintenance

Legal Common Expenses

According to the Apartment Houses Law, the committee may collect management fees to cover common expenses that are "expenses required for maintenance, administration, and operation of the building." In practice, this includes:

• Routine building maintenance: Urgent repairs to the roof, exterior walls, shared plumbing, drainage systems, and similar infrastructure.
• Common services: Electricity for stairwells, stairwells, and shared storage areas; cleaning of stairs, courtyards, and entrances; exterior lighting.
• Building insurance: Mandatory insurance policy for the entire building, including coverage for fire, flood, and theft damage.
• Administration and management: Treasurer salary, management of minor legal matters, apartment house registration expenses.
• Heating and fuel: If the building is connected to a shared heating system or uses shared fuel for heating.
• Tax and fee payments: Property tax on common areas (if the committee pays it), municipal management fees (if applicable).

All such expenses must be directly related to the maintenance and operation of the shared building. Not every expense the committee decides to make is necessarily legal if it exceeds this scope.

What Is Illegal to Collect — Prohibited Expenses

The Apartment Houses Law and legal precedent establish several expenses that the committee may not collect from residents as management fees:

• Renovation and upgrade expenses that are not mandatory: If the committee decides to perform general renovation, painting, window replacement, or aesthetic upgrades that are not mandatory repairs, this cannot be collected from regular management fees. This requires a separate vote by apartment owners, and each owner can agree or object.
• Legal expenses of individual residents: If residents are in a dispute with each other (for example, noise, smoking, odor), the committee cannot collect from all residents the cost of legal proceedings against individual residents. This must be paid by the suing party.
• Excessive management expenses and inflated management fees: If the committee pays itself unreasonably high salaries or uses the committee budget for personal purposes, residents can challenge this.
• Expenses unrelated to common maintenance: For example, expenses for a community event in the building courtyard, purchase of equipment for purposes unrelated to maintenance, or donations and membership fees.
• Penalty and delay fee expenses: If the committee charges residents fines for non-payment of management fees (beyond statutory interest), this is generally illegal.

When residents object to collection, they are entitled to demand an account and explanation from the committee, receive a detailed account, and audit the budget.

Tenants' Rights Against the Management Committee — How to Oppose Illegal Collection

Right to Demand a Statement of Account

Every tenant in a multi-unit building is entitled to demand from the management committee a statement of account detailing all expenses the committee intends to collect. The committee must present a detailed budget, receipts, invoices, and all relevant documents. If the committee refuses to present documents or refuses to explain a certain expense, this may be considered a violation of tenants' rights.

Right to Challenge an Expense

Tenants are entitled to file a lawsuit in court against the management committee if they believe a certain expense is illegal or excessive. The court may rule that the tenants are not obligated to pay the expense or may order a refund of money paid by mistake.

Right to Participate in Decisions

Apartment owners are entitled to participate in voting on major expenses or renovations. If the committee decides to perform work that costs more than a certain amount (usually approximately 20% of the annual budget), it must present this to a vote by apartment owners.

Right to Appeal in Court

If tenants believe the management committee is acting in violation of the law, they can file a lawsuit in the district court. The court may order the committee to cease illegal collection, return funds, or even replace the committee in extreme cases.

Collection Procedure — How the Committee Must Operate

Advance Notice and Right to Object

The management committee must notify tenants of management fees with sufficient advance notice (usually 30 days before the collection period begins). The notice must include details of the planned expenses and each tenant's share of the payment. Tenants are entitled to object to the planned expenses before collection begins.

Lawful Collection Methods

The management committee may collect management fees through:

• Direct agreement — tenants pay by mutual consent.
• Legal action in court — if tenants refuse to pay, the committee may file a lawsuit in court to recover the debt. The court may rule in favor of the committee and impose legal costs on the tenants who lose.
• Lien on the property — in cases of substantial and prolonged debt, the committee may file a request for a lien on the property (priority rights over the bank and mortgage holders in certain cases).

Interest and Penalties

If tenants do not pay management fees on time, the committee may add statutory interest to the debt. However, the interest must be reasonable and not excessive. Penalties or late fees that are not related to statutory interest are generally not lawful.

Comparative Table — Types of Expenses and Their Legality

How Mandelbaum, Gor, Witzman-Gor & Co. Can Help

Disputes between tenants and condominium committees over management fees are common and can be legally complex. If you are a tenant in a condominium and suspect the committee is charging illegal expenses, or if you have a management fee debt and wish to settle it, we are here to help.

Mandelbaum, Gor, Witzman-Gor & Co. specializes in real estate and property law, including disputes between tenants and condominium committees. Based on more than 18 years of experience, we understand the complexities of condominium law and how to represent tenants effectively and cost-efficiently.

Our services include:

• Personal Legal Consultation: We will review the committee's documents, explain your rights, and provide you with clear advice on the next steps.
• Statement of Account Demand: We will help you request a detailed statement from the committee and verify its legality.
• Negotiation Management: We will mediate between you and the committee to reach a settlement without the need for litigation.
• Litigation: If necessary, we will represent you in court against the committee.

We are located in Ramat Gan and Petah Tikva, and our initial consultation meeting is free of charge. We believe that every tenant deserves to understand their rights and receive quality legal advice.