Apartment Co-operatives and the Apartment Co-operatives Act
Author | Herbert Sepp |
Pages | 89-94 |
Herbert Sepp
Apartment Co-operatives and the Apartment Co-operatives Act
Subsection 15 (1) of the Estonian Residential Privatisation Act1 provides that in dwellings where in the course of privatisation there are five or more owners, the owners must found an apartment co-operative for the common management of the dwelling. In a purchase and sale agreement of a dwelling unit concluded on the privatisation of an apartment, the buyer must assume the contractual obligation to become a member of the apartment co-operative.
The foundation and activities of apartment co-operatives are regulated by the Apartment Co-operatives Act2. The following is an overview of the main provisions of this Act with references to the Law of Property Act3 and the Apartment Ownership Act,4 supplemented with commentary.
Pursuant to subsection 2 (1) of the Apartment Co-operatives Act, an apartment co-operative is a non-profit co-operative established by apartment owners, whose purposes are the common management of the legal shares of the buildings and the plot of land that are part of the object of ownership of the apartments, and representation of the common interests of the members of the apartment co-operative. It follows from this legal definition that the members of an apartment co-operative are always the owners of the apartments in their possession. Hence, an apartment co-operative is always an organisation of apartment owners, and consequently their existence is one of the prerequisites for its foundation. In other words, an apartment co-operative cannot be founded in a dwelling with no apartment owners. Apartment owners who found an apartment co-operative may be the owners of apartments as immovables or the owners of apartments that were privatised as movables.
Is membership of an apartment co-operative compulsory or optional?
Part II of the standard articles of association5 of apartment co-operatives approved by the Director General of the State Housing Board by the directive of 6 September 1995 is based on the principle that membership in an apartment co-operative is optional. Clauses 7 and 8 of the standard articles of association provide the procedure for acceptance of new members. An apartment co-operative may refuse to accept an applicant for membership (clause (1) 11), and natural persons may contest such refusal in court (clause (5) 11); the decision of an apartment co-operative to refuse to accept a legal person, however, is final. Consequently, each member of an apartment co-operative has the right to withdraw from the co-operative while still remaining an apartment owner in the dwelling where the apartment co-operative was founded.
Pursuant to § 3 of the Co-operatives Act6 and subsection 1 (1) of the Non-profit Associations Act,7 optional membership in a co-operative is indeed the leading principle on which the activities of a co-operative are based. An apartment co-operative, however, is a non-profit association of a special kind. Its peculiarity consists first and foremost in being a non-profit association which is established by persons, specifically by the co-owners of a dwelling, who already are in a legal relationship with one another. Pursuant to subsection 75 (1) of the Law of Property Act, a co-owner shall bear the expenses relating to maintenance of the shared thing corresponding to the size of the share belonging to him or her. Hence, even if an apartment owner refuses to become a member of an apartment co-operative, he or she is not exempt from participating in bearing expenses relating to the maintenance of the dwelling.
For the same reason, an apartment owner is not exempt from participating in bearing expenses relating to the maintenance of the dwelling, if he or she refuses to conclude a shared activity agreement. Such agreements set out in detail and in writing the obligations imposed on the co-owner by the Law of Property Act.
The specific nature of an apartment co-operative as a non-profit association created the need to enact another law, the Apartment Co-operatives Act.
Pursuant to subsection 3 (1) of the Apartment Co-operatives Act, foundation of an apartment co-operative is effected on the basis of a majority resolution of the apartment owners, if the greater part of the building where the co-operative is founded belongs to that majority through their legal shares of the object of ownership of the apartments. The articles of association of the apartment co-operative must be approved by the foundation meeting.
A foundation agreement need not be concluded in order to found an apartment co-operative (subsection 3 (1) of the Apartment Co-operatives Act).
An application for registration of an apartment co-operative together with the other required documents including the articles of association of the co-operative are to be submitted to the registrar of non-profit associations and foundations working at the registration department of a county or city court (subsection 75 (2) of the Non-profit Associations Act).
Pursuant to subsection 5 (1) of the Apartment Co-operatives Act, all apartment owners in a dwelling where an apartment co-operative is founded will be members of the apartment co-operative. Therefore, part II of the standard articles of association of apartment co-operatives is not in full conformity with the Apartment Co-operatives Act.
The Apartment Co-operatives Act does not provide for exclusion of a member from a co-operative or acceptance of a new member. If a member of an apartment co-operative transfers the ownership of his or her apartment, the acquirer will be considered a member of the apartment co-operative as of the date of transfer of ownership (subsection 5 (2) of the Apartment Co-operatives Act). The date of death of a bequeather is considered the time that an heir who has accepted an inheritance becomes a member of an apartment co-operative (subsection 5 (3) of the Apartment Co-operatives Act). Upon transfer or inheritance of apartment ownership, all the rights and obligations of a member of the apartment co-operative belonging to the transferor or bequeather transfer to the acquirer of the apartment from the moment of transfer of ownership of the apartment (subsection 8 (4) of the Apartment Ownership Act). The transferor’s contribution must not be returned to the transferor of ownership. Subsection 7 (2) of the Apartment Co-operatives Act provides that upon transfer or inheritance of apartment ownership, its value must be assessed together with the contribution and obligations of the member of the apartment co-operative with respect to the assets of the apartment co-operative.
If not all apartments in a dwelling are privatised, both the owners of the privatised apartments as well as the obligated subject with regard to the unprivatised dwelling units will be members of the...
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