Owners' meeting (UTP): Everything you should know

Proper convening of an owners' meeting

An owners' meeting must be convened once a year by the administrator (Section 24 (1)). The invitation must be sent at least in text form and must be sent within a period of at least three weeks (Section 24 (4) pp. 1-2).

Invitation content

The invitation letter must state the meeting time and place. The agenda must be included in full. The meeting must not be held at an unreasonable time or at an unreasonable distance from the residential complex. An unreasonable time would be, for example, weekday mornings or Sunday mornings at 8:00 am.

Quorum of the meeting

With the reform of 2020, the legislator decided that any meeting without the presence or representation of at least half of the co-ownership shares should have a quorum. Previously, the administrator had to invite to a repeat meeting or invoke a so-called contingent convocation. However, a contingent convocation was fundamentally not permissible unless it had been agreed as permissible in the community rules. A majority resolution was not sufficient in this case.

Agenda

The administrator determines the agenda. An individual condominium owner is entitled to the inclusion of a specific item on the agenda for measures of orderly management. If the administrator refuses, a quarter of the condominium owners may demand the convocation of the condominium owners' meeting with a specific agenda (§ 24 par. 2).

Formulation of the agenda items

The agenda items must be formulated in such a way that everyone involved has an idea of what they are about. A keyword-like description of the topics is sufficient.

‍

Conduct of the meeting/chairing of the meeting

The chairmanship of the owners' meeting:

Pursuant to Section 24 (5), the administrator shall chair the owners' meeting. However, the meeting may also elect another chairman by majority vote.

Welcome and opening of the meeting:

As a rule, the chairman of the meeting or the administrator welcomes the community of owners and opens the meeting.

Establishment of the quorum:

By 30.11.2020, it was necessary to establish the quorum. This was calculated on the basis of the co-ownership shares, but deviating regulations could exist in the community rules. If some condominium owners leave the room during the meeting, the quorum of the meeting may be lost. Resolutions passed, however, can still be challenged. With the 2020 reform, a quorum is no longer required. Nevertheless, it is recommended to record the presence or represented co-ownership shares, as at least one owner must be present or should be present virtually, insofar as this has been decided in accordance with section 23 (1) sentence 2 or a power of attorney is available. Otherwise, the concept of an assembly is lacking.

Eligibility:

Every condominium owner is entitled to participate and this right cannot be taken away from anyone. The admission of third parties to the meeting is controversial. If an owner is expressly represented by a third party due to being unable to attend and authorizes this third party, this is permissible. However, it only does not apply if a group of authorized representatives is expressly named in the community rules. If no regulation exists, the participation of third parties should be approved by resolution. In individual cases, however, there should always be a justified interest in the involvement of a third party, especially in the case of consultants.

The role of the assembly leader:

Pursuant to Section 24 (5), the administrator chairs the meeting, but another meeting chairperson may be elected by majority vote. As a rule, the chairman of the meeting welcomes the community of owners and opens the meeting.

The exercise of voting rights:

The right to vote is a fundamental right of every owner. The chairman of the meeting is responsible for the proper exercise of voting rights. The head principle applies when counting votes, unless the community rules provide otherwise. Alternatively, the value principle or the object principle may be applied if agreed. The chairman of the meeting must also ensure that no owner party continuously outvotes other co-owners in an abusive manner (impermissible majorization).

Conflict of interest in the exercise of voting rights:

If a conflict of interest arises in the exercise of voting rights, for example in the case of a vote on an owner's own behalf, the owner's voting rights must be suspended (Section 25 (5)).

‍

Decision-making and responsibility of the WEG

Resolutions may be adopted in various ways, either unanimously, by all votes, by simple majority or by qualified majority.

The terms "all-unanimous" and "unanimous" are not defined by law and are often used imprecisely. According to common understanding, "unanimous" means the consent of all owners present at the meeting, while "all-voice" requires the consent of all condominium owners entered in the land register.

Single-majority resolutions are passed with the consent of more than half of the owners present or represented. Qualified majority resolutions must be passed in the few cases specified by the legislator (see § 21 [new]), or if the community rules expressly assign certain resolution items to a qualified majority, regularly two-thirds or three-quarters majorities. If the community rules permit other majority ratios for certain resolution items, these are referred to as "opening clauses".

In the past, resolutions that actually had to be adopted or agreed by all votes were often adopted by a simple majority. However, this was no longer possible until November 30, 2020, with the exception of the cases regulated by the 2007 amendment.

BGH decision against the "trembling decision

In 2000, the Federal Court of Justice put an end to the so-called "trembling resolution". Many administrators had often decided by majority vote on matters that should actually have been decided or agreed unanimously, without taking into account the declarations of partition, community regulations and the law. This caused a great deal of legal uncertainty, especially for purchasers. Many communities had no longer administered themselves in accordance with the principles laid down in the land register, but on the basis of countless resolutions that had in themselves been passed incorrectly and had become effective in the absence of a challenge.

Amendment 2007 and exceptional cases

In addition to the 2007 amendment, there are still exceptional cases in which resolution items can be decided by a simple majority.

Summary

In summary, it can be stated that the administrator is obliged to point out the inadmissibility of simple majority decisions if qualified majorities or an agreement are required, which otherwise leads to the nullity of the resolution.

There are different types of resolutions that must meet different requirements:

Typical inadmissible resolutions

• In the case of a resolution that is contrary to the declaration of division, the provisions of the declaration of division are infringed. Such resolutions are not void from the outset, but can initially only be challenged. If they are not overturned in court, they become valid.
• If the community wishes to intervene in core areas of the declaration of division or the community rules, such as the establishment of special rights of use or the introduction of procedures that contradict the law, an unopposed majority resolution is not sufficient. In this case, a notarized resolution declaring partition or amending the law is required, which must be signed by all owners and entered in the land register. Majority resolutions on issues that are already regulated in the declaration of division or community regulations and are to be supplemented by additional items are also null and void and inadmissible, as they require an all-vote decision.
• All other resolutions, in particular relating to proper management, are subject to the decision-making authority of the community and can be decided by majority vote. Since December 1, 2020, this has also applied to structural changes.
• Before the amendment of the WEG in 2007 and the reform in 2020, "trembling resolutions" were common in the area of structural changes. Such resolutions became valid if they were not challenged in court.
• The appointment of more or less than three advisory board members was still possible under the aspect of the trembling resolution until around 2010. However, this has no longer been the case since November 30, 2020.
• If majority resolutions interfere with the core areas of property rights, such as the award or withdrawal of co-ownership shares, the owners' meeting is not competent and has no decision-making authority.
• In the past, there was a view that the owners' association could not discharge an administrator by majority resolution, as this would deprive the individual owner of the opportunity to assert any claims for damages for the past and affected administrator period. However, this view is no longer held today.

The administrator is obliged to announce the result of the resolution.

Minutes of results and proceedings at meetings

According to the law, after a meeting the administrator must prepare a results protocol documenting the resolutions passed. The creation of a progress protocol, which contains the course of the discussion, is optional and not mandatory. However, the determination of the result of the resolution has an important meaning and must be recorded.

When counting the votes in favor and against, abstentions may not be counted. The administrator must also take into account the exclusions of votes and the votes duly represented. The subtraction method is permitted if the proportions of votes are clear.

Contestation of a resolution

Since a negative resolution also has the quality of a resolution, it can be challenged within one month. In this case, an action to replace the resolution can be filed in accordance with section 44, which obliges the owner to implement the content of the resolution sought.

Resolutions, insofar as they are not void from the outset for lack of competence of the community to pass resolutions, shall initially also be valid as resolutions which have been passed incorrectly. They shall only become invalid if an owner challenges such a resolution within one month (section 45 [new]) of the passing of the resolution by filing an application with the competent court, requests that it be declared invalid and the court pronounces such invalidation in its decision on the resolution (section 23(4) in conjunction with section 44).

Previously, in condominium matters, a decision was made by the competent district court, the "resolution". An appeal against this decision was permitted to the district court within two weeks. This second instance is referred to as "appeal proceedings". Again, an order was issued. This decision was then appealed to the third instance, the "immediate further appeal," which went to the Higher Regional Court.

The protocol

The minutes of the owners' meeting shall be signed by the administrator, the chairman of the advisory board and one other owner (§ 24 subsection 6).

Although the law does not stipulate any obligation to send out the minutes, this regularly arises from the administrator contracts usually used. It is expected that the minutes are sent out in good time so that an owner still has a week to review them before the expiry of the one-month contestation period.

Collection of resolutions

With the entry into force of the WEG amendment 2007, the administrator had to keep a so-called collection of resolutions according to § 24 para. 7. This is not limited to a list of the minutes of the resolutions. It is to contain the wording of the resolutions announced in the meeting of the owners with indication of place and date of the meeting. If a resolution was passed in writing, the place and date of the pronouncement shall also be stated and, if applicable, the formulas of the court decision in a legal dispute with the date, court and parties. The resolutions and court decisions are to be entered consecutively numbered.

The collection of resolutions shall make it possible to note contested or annulled or amended resolutions accordingly and also to delete entries. Corresponding notes, entries and deletions are to be settled by the administrator immediately and to be provided with date. Background of this very detailed representation of a resolution collection were the original suggestions to register resolutions in the land register. The land registry offices have successfully resisted this, among other things also with reference to the extraordinary management effort. Precisely with the opposite argument, namely that the collection of resolutions would not cause the administrator any particular effort, this task was now assigned to him. With the 2020 reform, there was a return to the idea of registering resolutions in the land register.

Return to registration of resolutions in the land register

With the 2020 reform, there was a return to the registration of resolutions in the land register. This applies in particular if, on the basis of an opening clause in the declaration of division with community rules, a resolution was allowed to be passed that affects the relationship between the condominium owners. This is regulated in Section 5 (4) in conjunction with Section 7 (2). In such a case, the resolution protocol must be provided with publicly certified signatures and the application for registration is made by the WEG represented by the administrator.

The purpose of entering resolutions in the land register is to improve the information possibilities for the owners, a new administrator or also third parties who are authorized to do so. For example, purchasers can be informed in this way about previous resolutions. It is clear from the official explanatory memorandum (BT- Drucksache 16/887, p. 33 ff.) that the choice of words used in the legislation continues to be clearly oriented towards the language of the land register. Entries, notations and deletions are also made there and marked with a date and a hand sign.

Importance of the timeliness of the collection of decisions

The legislator also attaches particular importance to the up-to-dateness of the collection of resolutions, as can be seen from Section 24 (7) sentence 7. Prompt entry of resolutions in the land register enables owners to view the current status of the collection of resolutions and to find out about decisions taken.

Challenging a resolution explained easily

Validity and contestation of resolutions

Resolutions in condominium owners' associations are initially valid, even if they were passed incorrectly, provided that the association had resolution authority. Such resolutions must be observed and implemented. However, they become invalid if an owner challenges them within one month of the resolution being passed and the competent court determines that they are invalid. Errors in the content and form of the resolution can lead to a successful challenge.

Contestation proceedings before vs. after the WEG amendment 2007

Until 2007, the competent district court ruled on condominium matters in the first instance. An appeal against this decision could be lodged with the regional court within two weeks. Here, a decision was again issued against which the third instance, the "immediate further appeal", was possible at the Higher Regional Court.

Since the amendment to the German Condominium Act (WEG) came into force in 2007, the following applies: the judgment of the district court is the first instance, and the appeal to the regional court is the second instance. The appeal period is one month. Appeals are now only possible in accordance with the relevant provisions of §§ 543 ff. ZPO are possible.

Successful challenges to resolutions

Challenges to resolutions may be successful if formal or substantive errors have been committed in the adoption of the resolution. In particular, substantive errors that contradict proper administrative regulations may lead to the resolution being declared invalid.

A challenge is also possible if an owner initially gave his consent at the meeting but later decides otherwise. If a resolution is void from the outset, it does not have to be challenged. In the event of a dispute, however, the nullity can be established by a court. Since 2007, the allocation of costs in court proceedings has been governed by the Court Costs Act. The unsuccessful party must bear not only the court costs but also the out-of-court costs of the other party.

 Between 2007 and 2020, it was possible that the administrator had to bear the costs of the legal dispute directly if he had acted with gross negligence. This provision has been dropped, but the administrator is still liable for his administrator duties. Since December 1, 2020, actions for rescission are no longer directed against the other owners, but against the condominium owners' association as a whole, which is represented by the administrator.

Overall, it should therefore be noted that resolutions in condominium owners' associations are not automatically valid, but can be challenged. The allocation of costs and the liability of the administrator have also changed over time.

Do you already know Ralph?

Ralph is finally bringing a breath of fresh air to the industry with an innovative model. Ralph is significantly more cost-effective, transparent and efficient than conventional property managers. As an owner, you have complete insight into all issues online and can also reach us via WhatsApp. Discover now how your WEG can benefit from Ralph and request your free offer here. If you have any questions, please do not hesitate to contact us.