In practice, it regularly happens that a director of an Owners‘ Association is appointed informally, for example, if the person who first registers the Owners’ Association at the Chamber of Commerce registers himself as a director or if the buyer of a director's flat is registered as a successive director. Is this allowed and can something be done about it? The subdistrict court in Rotterdam had to rule on this recently.
What was at stake here?
The following was at issue within the owner's association of an apartment building in Rotterdam. The association was formed by the owner of two shops on the ground floor and the owners of seven flats above the shops. Two of the flats above the shops were owned by the son of the owner of the shops. Father and son together had 18 out of 28 votes in the Owners‘ Association. The owners of the remaining five flats together had the remaining 10 votes.
A meeting was held in May 2023 at which the budget for the year 2023 was discussed. The owners of the five remaining flats had asked for underlying financial documents prior to the meeting, but they did not receive them. A vote was then taken at the meeting. They voted against agreeing to the budget and also against the proposal to quadruple the contribution. However, father and son, who thus had a majority of votes, voted in favour. With that, the Owners‘ Association had thus taken the proposed decisions.
The procedure
The five other owners felt sidelined, as they had no insight into the finances and no influence on the decision-making process due to the voting proportions. As a result, they claimed, the decisions violated reasonableness and fairness. Moreover, father and son would not be authorised to act as directors and/or chairmen of the Owners‘ Association. In proceedings, they therefore requested, among other things, that the decisions to agree to the budget and quadruple the contribution be annulled; that the Owners‘ Association be ordered to hand over the administration within four weeks on pain of a penalty payment; that the appointment of father and son as chairman and director be declared null and void; and that substitute authorisation be granted to appoint a new director and chairman.
What does Dutch law say?
Among other things, the subdistrict court can annul decisions of the Owners‘ Association if those decisions are contrary to reasonableness and fairness (Sections 5:130, 2:15 and 2:8 of the Civil Code). In terms of content, a resolution may be contrary to reasonableness and fairness if, upon proper consideration of all the interests involved, the Owners‘ Association could not have reasonably and fairly reached that resolution. A resolution may also be contrary to reasonableness and fairness due to the manner in which it was reached. This may be the case if the Owners‘ Association has taken a decision without the members having had sufficient opportunity to participate in the decision-making process.
Judgment of the Subdistrict Court
Against the background of this legal framework, the subdistrict court ruled as follows:
“"On 12 May 2023, the Owners‘ Association decided to agree to the 2023 budget and to quadruple the contribution. The applicants want those decisions overturned because, despite requests, they have not been provided with the corresponding financial records. The applicants are all not long-time owners and therefore want to be able to verify where the amounts in the budget come from and whether that budget and the increase are reasonable and real.
In response to this request, the Owners‘ Association referred to the MJOP. According to it, it follows that maintenance costs should be reserved. The Subdistrict Court did not decide whether this could be concluded from the MJOP. Even if that were the case, the applicants have no idea what reserves there currently are, how they were created and what accrual they can foresee. There is no dispute that the applicants have asked for this information on several occasions and have not received it until today. With that state of affairs, the Owners‘ Association could not have decided to approve the budget and quadruple the contribution. Those decisions are therefore set aside.
Under the subdivision regulations, the Owners‘ Association administrator must allow each owner to inspect the financial records (Article 40(6)). The administrator thus wrongly refused to do so. According to the Owners‘ Association, this right of inspection is not unlimited and members must specify which documents they want to see. The subdistrict court agreed with the Owners‘ Association, but the applicants did the same in their petition. The Owners‘ Association has not argued that providing those specific documents is not reasonably possible, given the time, cost or effort involved. Therefore, this does not preclude adjudication.
Father and son have acted as chairman and/or director of the Owners‘ Association in the past. However, according to the applicants, the meeting of owners never took a decision to do so. They therefore argued that the appointment as chairman and/or director was null and void.
The Subdistrict Court noted that it follows from the subdivision regulations that only the meeting of owners can appoint a chairman (Article 32 paragraph 5) and director (Article 40 paragraph 1). It should therefore have been up to the Owners‘ Association to state (and substantiate) when the owners' meeting decided that father and son should be appointed as directors and/or chairmen. It did not do so. As a result, it cannot be established that both gentlemen were validly appointed, so that the subdistrict court will therefore rule that their appointment is null and void (Article 5:129 and Article 2:14(2) of the DCC).
Another meeting was held on 11 May 2024. It was initially scheduled for Easter Monday at a pool café. The applicants informed that both this day and the venue were not an option for them. They proposed to circulate a date picker and change the venue to an office nearby. The Owners‘ Association has not responded to these requests. It only moved the meeting to Saturday, May 11, 2024. The applicants have again asked for it to be moved, at least to a weekday. The reason is that most of the owners have transferred management to a professional organisation and the applicants' authorised representative was also keen to attend. The Owners‘ Association did not respond to these objections and allowed the meeting to go ahead. None of the applicants appeared at the meeting.
The subdistrict court put first and foremost that all decisions taken at this meeting were contrary to reasonableness and fairness, if only because of the manner in which they came about. Indeed, due to the way the meeting was scheduled, the applicants did not have sufficient opportunity to participate in the decision-making process. The decisions were also contrary to reasonableness and fairness for (more) substantive reasons.
At the meeting, Ms H was appointed as the new director. The applicants were not informed in advance of the proposed new director. Moreover, the applicants have argued uncontested that Ms H is not a professional director. She only has a hotmail address, is untraceable online, has no online management portal, and no Chamber of Commerce registration. No justification has been provided by the Owners‘ Association as to why Ms H is a suitable director. This appointment decision is therefore set aside.
It follows from the above that the appointment of father and son as chairman and director is null and void, and Ms H's appointment is annulled. This means that the Owners‘ Association now effectively has no chairman and director. The applicants therefore sought substitute authorisation to appoint Muneris Vastgoeddiensten as director and Mr [person I] (director of the applicant [applicant 5] ) as chairman.
In principle, the meeting of owners decides on the appointment of the director and chairman. If the meeting refuses to do so without reasonable cause, cooperation can be replaced by a substitute authorisation from the subdistrict court (Article 5:121 of the Civil Code).
The applicants have undisputedly claimed that at the meeting on 12 May 2023, they proposed the appointment of an external director, but the Owners‘ Association refused to do so. The VvE did not argue what reasonable grounds it had for doing so. The subdistrict court ruled that, on the contrary, there was ample reason to do appoint an external director. These two proceedings and the course of events surrounding them have sufficiently shown that relations within the Owners‘ Association have been seriously disrupted. The Owners‘ Association and the applicants cannot reach agreements and seem to be able to reach decisions only through litigation. Moreover, the Owners‘ Association is currently effectively ungoverned. In these circumstances, the subdistrict court saw reason to grant the requests.
As requested, the subdistrict court appointed [person I] (the director of one of the applicants) as chairman. Indeed, this also prevents both the majority of the votes and the chairmanship from resting with the same owner(s). As these proceedings have shown, this does not contribute to the support of the decisions and the confidence of all members in the Owners‘ Association. Possibly this appointment balances things out more."
Conclusion
The ruling of the subdistrict court shows, that the appointment of the board of a Owners‘ Association must always go through the meeting. Appointing a board informally, i.e. without a meeting, is null and void.
Would you like to know more or do you have questions about your position as flat owner? If so, please feel free to contact one of our lawyers without any obligation. We will be happy to assist you!