Blog series apartments and renovations / Part 3: updating the regulations and the contingency fund
If the division is amended for a renovation it is a good idea to check whether the regulations are still up to date. Perhaps they can benefit from being updated too.
Take the savings fund for maintenance into account
Since 2005 apartment owners are legally obliged to have a savings fund for the maintenance of the building. This is also called ‘contingency fund’ or ‘maintenance fund’.
A stricter policy for residential buildings
Since the first of January 2018 stricter rules apply to residential buildings.
The amount of the maintenance fund must be at least:
– an amount based on the pluriannual maintenance plan or
– 0.5% of the reinstatement value of the building.
For Homeowners Associations (HOAs) of residential buildings which were founded before the first of January 2018 the deadline for complying with this minimum requirement was the first of January 2021.
Checking what the regulations mention about this savings fund is a good idea. Perhaps the regulations state: “It is possible to maintain a savings fund”. However, by law, this should be described as mandatory as it has been an obligation for some time. In the case of residential buildings there is even a minimum amount.
In that event the regulations are obsolete. In such cases the law applies automatically, but if the regulations are amended it makes sense to update them in this respect.
The possibility of a bank guarantee
Instead of paying monetary contributions the owners can issue a bank guarantee in name of the Homeowners Association. This can be particularly convenient for commercial parties.
Please feel free to contact me for more information on this topic.
This is part 3 of four blog posts about apartments and renovations.
Click here for part 1.
Click here for part 2.
Click here for part 4.
(Picture: Bernhard Hermant, Unsplash)