What is a Homeowners' Association — Complete Legal Guide

Definition of a Homeowners' Association — What Exactly Is It?

A homeowners' association is a legal entity established under the Law of Shared Housing, and its function is to manage the common property in a building or residential project. When you purchase an apartment in a multi-unit building (whether in new construction, urban renewal project, or an existing property), you automatically become a member of this association — the homeowners' association. This is not optional, but rather a legal obligation. The homeowners' association is responsible for maintenance, repair, and management of everything that is common to the residents: roof, stairways, mechanical room, ground floor shops, shared parking lots, and any other property that does not belong to your private apartment.

In urban renewal projects (TAMA 38) and building and vacating operations, the homeowners' association becomes an especially important focal point — it mediates between the residents and the managing company (the company that manages the project), and through it payments are made for shared services, maintenance, and management expenses.

Structure and Organization of a Homeowners' Association

The homeowners' association consists of several key components:

• General Assembly: This is the assembly of all residents of the building. Important decisions are made here, such as electing a board of directors, approving an annual budget, decisions regarding major repairs (RMI — repair, mortgage, insurance), and setting management fees.
• Board of Directors: The governing body of the homeowners' association on a day-to-day basis. The board elects a chairman, treasurer, and manager (or manageress), and is responsible for implementing the decisions of the general assembly.
• Building Manager (or Manageress): An employee of the homeowners' association, responsible for daily maintenance, handling complaints, shared area cleaning, and communication with residents.
• Separate Bank Account: The homeowners' association is required to maintain its own bank account, into which management fees from residents are deposited and from which shared expenses are paid.

Rights of Residents in the Managing Company and Homeowners' Association

As residents in a building with a homeowners' association, you have important legal rights:

• Right to Participate in Decisions: All residents who own an apartment in the building are entitled to participate in the general assembly and vote on any decision. One apartment = one vote, in principle.
• Right to Information: You have the right to know what is happening in the building's management, to receive copies of meeting minutes, budgets, annual accounts, and reports from the board of directors.
• Right to Repair and Maintenance: The homeowners' association is required to invest in ongoing maintenance and RMI (repair, mortgage, insurance) to preserve the property. If this is not done, residents may file a lawsuit.
• Right to Object: If a decision made by the board of directors or the general assembly appears to you unlawful or unfair, you have the right to file an appeal or lawsuit in court.

Management Fees and Financial Obligations of Residents

All residents in a housing company are required to pay monthly management fees (or administrative fees). These fees cover shared expenses: electricity for stairwells, water for the courtyard, shared cleaning, routine repairs, building insurance, building manager salary, and more. The amount is determined by the board of directors and is usually approved at the general assembly. It varies from building to building and depends on the building's size, maintenance costs, and services.

In addition to ongoing management fees, there may be additional payments:

• RMI fees (Repair, Mortgage, Insurance): Additional payments for major repairs, renovations, or building insurance. These are not part of ongoing management fees, but are determined as needed.
• Renovation or construction clearance fees: In TAMA 38 projects, residents pay the housing company for its services, in addition to management fees to the property owners' association.
• Legal costs: If there is a dispute, the property owners' association or residents may pay for legal representation in court.

Residents' Obligations toward the Property Owners' Association

Apartment owners in a housing company must meet certain legal obligations:

• Payment of management fees on time: This is a legal obligation. If not paid, the property owners' association may file a lawsuit in court, and interest and penalties will be added.
• Preservation of shared property: It is prohibited to damage common areas (for example, you cannot alter the building's envelope, add an air conditioner or antenna to the building's facade without approval).
• Maintaining building peace: Residents must not disturb neighbors, must not create excessive noise, and must not use shared areas in a manner that harms neighbors.
• Compliance with lawful decisions: All residents must comply with decisions of the general assembly and the board of directors, as long as they are lawful and fair.

Common Disputes within the Property Owners' Association

Within each building, disputes occasionally arise between residents and the board of directors, or among residents themselves:

• Disputes over management fees: Residents claim the fees are too high, or they don't know where the money goes. The board argues that expenses have increased and fees must be raised.
• Disputes over RMI: A decision on a major repair (such as roof replacement or seismic reinforcement) may divide residents. Some want to invest, some do not.
• Disputes over management: Residents are dissatisfied with the building manager's work, or suspect a lack of transparency in management.
• Disputes over use of shared areas: For example, whether residents are allowed to use a shared parking lot for other purposes, or to make changes to the building's facade.

Property Association and Management Company — What's the Difference?

This is a question that confuses many residents. It is important to clarify: a property association and a management company are two completely different legal entities.

A property association is a legal body that represents all residents of the building. It is owned jointly by all residents. The property association is responsible for common property in the building (roof, stairwells, machine room, shared parking) and for the day-to-day management of the building.

A management company (or property management company) is a private company hired by the property association (or sometimes by the developer during the construction period) to manage the building. In urban renewal projects (TAMA 38), the management company is often the company that initiated the project, and it manages it until completion and beyond. Residents pay the management company for its services (management, repairs, insurance, etc.).

In other words: Property association = joint ownership by residents; Management company = a contractor hired to manage. Sometimes, the property association itself manages the building (without a management company), but in large and new projects, it is almost always with a management company.

Property Association in TAMA 38 and Urban Renewal Projects

In urban renewal projects (TAMA 38), the property association plays a special role. During the construction period, the developer/management company manages everything. After construction is completed and apartments are handed over to residents, the property association begins to function as an independent legal entity. From this point on, residents become members of this company.

At this stage, there may be disputes between residents and the management company on several issues:

• The cost of services charged by the management company
• The quality of repairs and services
• Transparency in management and accounting
• Incomplete work in the building (residents complain about defects that have not been repaired)

If such a dispute arises, residents can file a lawsuit against the management company in court, or try to replace the management company with another one (under certain conditions).

Process of Establishing a Property Association

A property association is typically established when a building is completed or is at an advanced stage of construction. The process includes:

1. Registration with the Companies Registry: The property association must be registered with the Companies Registry (similar to a regular company), and founding documents, articles of association (a document that defines the rules), and details of the first board of directors must be filed.
2. Election of the First Board of Directors: Usually, the developer or project manager proposes a first board of directors, but ultimately, the residents must approve this at a general assembly.
3. Setting Initial Management Fees: The board proposes a budget and sets initial management fees.
4. Opening a Bank Account: The property association opens its own bank account, through which management fees from residents are received.

Comparative Table — Common Scenarios in Real Estate Association Disputes

General Legal Information — Important to Understand

The content displayed on this page is general legal information only and does not constitute personalized legal advice. Every property owners' association dispute is unique and depends on its specific circumstances. Before you take any legal steps, it is important to consult with personalized legal advice from an attorney specializing in this field.

Additionally, laws and regulations regarding property owners' associations change from time to time, and some of our information may be updated in the future. We update our content regularly, but we recommend you consult with an attorney regarding the specific details of your case.