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reserve fund

LEGISLATIVE IMPROVEMENT OF FUNCTIONS OF THE OWNERS ASSOCIATION (VvE) effective 1 January 2018

On 1 January 2018, the Improvement of the Functioning of Owners’ Associations Act came into force. OA’s (in Dutch “VvE”) do not save enough for maintenance and can hardly borrow money for such maintenance. As the name of the Act indicates, the purpose of the Act is to improve the functioning of associations of owners and to increase the possibilities for the necessary maintenance. We have listed the most important consequences of this law for you.

A mandatory minimum reservation

As of 1 May 2008, it was already mandatory for VVEs to hold a reserve fund, but there was subsequently no minimum amount to be held in cash. At the time, the legislator was of the opinion that there were sufficient incentives for VVEs to maintain a sufficiently high reserve fund, but in practice this turned out to be different. According to research, it still appears that 51% of the VVEs have no or insufficient resources to carry out the necessary maintenance.

Therefore, as of 1 January 2018, a minimum annual reservation of at least 0.5% of the rebuilding value of the building will apply to VVEs. For the time being, this obligation only applies to apartment owners of a building intended for residential use, but also in the event that the building is only partially used for residential purposes, this obligation will apply.

Should the VVEs believe that this will lead to an excessive reservation, they are free to make reservations based on an MYMP (multi-year maintenance plan) in the future, whereby a lower annual reservation than 0.5% can also be chosen, provided that the maintenance plan meets the requirements that are set for it.

It is important to mention that the VVEs have up to three years after the entry into force of this Act at the latest to comply with the new legal requirements.

Enforcement

Incidentally, compliance with this statutory regulation will not be monitored by the government and therefore no enforcement will take place. The government is (once again) counting on the independence of the VVEs. Nevertheless, this standard does make it easier for individual owners to legally enforce the minimum reservation. For example, failing to make sufficient reservations may lead to improper management and directors’ and officers’ liability.

Incidentally, according to a ruling under the old law, an VVEs could also become obliged to increase the reserve fund in order to be able to meet the expected maintenance, but the new law makes it a lot easier to prove that an VVEs does not meet its obligations.

VVEs now authorised to get a loan

On the basis of the model regulations up to 2006, there was previously a great deal of uncertainty as to whether VVEs could get loans for maintenance. Even among lawyers, there were different views on this matter. The main reason for this was that banks were reluctant to grant loans to the VVEs for fear of nullity or annulment of the loan. The new law puts an end to this lack of clarity and stipulates that the VVEs may take out loans for management purposes. Moreover, it can still be stated in the demerger regulations that the relevant entity is not competent to do so.

No joint and several liability for loans

As just mentioned, under the old circumstances, banks were reluctant to lend to VVEs. When they did, they usually did so on a joint and several liability basis. In other words, each member of the VVE could be held individually liable by the bank for the entire loan. It will now need little explanation that in practice only few VVEs members were prepared to do so, so loans were rarely granted. The new law solves this problem by treating the loan from the VvEs as a severable debt. This means that an individual member can only be held liable for his or her share in the community. Incidentally, this severable debt cannot be deviated from contractually.

In addition, the new law contains a provision stating that debts contracted by the VVEs are transferred upon sale to the new owner. The new owner must, of course, be informed of this debt. Incidentally, loans already existing prior to the entry into force of the new law on 1 January 2018 will not automatically be transferred to the new buyer. In that case, the lender of the loan will have to give its consent.

Ginio Beij

 

Does your VVEs have to deal with overdue maintenance or are you looking for more information about the new legislation? M2 lawyers is specialised in UvE cases and can advise you on this.

Attorney at law Ginio Beij (beij@m2advocaten.nl)

 

prohibition sign rolling suitcases

To be or not to Airbnb? Enforcement in Amsterdam

Previous blogs discussed what is enforced when it comes to B&B’s.

But what if you don’t want to start a B&B, but only want to rent out your house when you are on holiday? Through Airbnb, for example.

It is okay, if you follow two rules: no more than 60 days a year, and no more than 4 people can stay in your place. Is everyone following these rules? Definitely not. A 6-person quick-scan on the Airbnb website gives you more than enough choices of apartments/homes to choose from. Which is not allowed, because the maximum is 4 people. The City of Amsterdam wants Airbnb to make it impossible for a house to be rented out if they do not follow to the rules, so it is no longer possible to book for more than four people per house. The municipality also insists on compliance with the 60-day rule. So the municipality wants the website to automatically block a house as soon as it has been rented out for more than 60 days. In addition, the local authority wants Airbnb to provide the host’s address information to the local authority for more targeted monitoring. To date, Airbnb has no plans to provide that information, and Amsterdam is threatening to ban the platform in response.[1] The two parties are still discussing this. The municipality wants this data so that fewer violations are committed, making it easier for the municipality to track down offenders, and thus reducing the risk of nuisance from tourists.

How will this be enforced?

Detecting illegal activities is done in a number of ways: through reporting of neighbours or police, previous violations, mystery guests, and ‘scraping’ (by means of a computer program collecting data from a website)[2].  Sometimes this is done in an area-specific way: for example, if a neighbourhood receives a relatively large number of reports from the police and local residents, the entire neighbourhood is examined. Sometimes also in response to a report from a resident. Reporting by local residents is promoted from the municipality; a Summer Hotline was active last summer, and an online hotline Searchlight is still available.[3]

The municipality acknowledges that they do not have enough capacity to respond on all accusations from local residents, but promises to keep the reporters informed. The city centre, for example, has a total of 2.75 FTEs available for detecting and dealing with so-called illegal hotels, plus a couple indirectly from the Fire Safety department. [4]

Who is the offender?

In general, the law is executed in common cases where the property is only used for renting out to tourists and is not (or no longer) inhabited. This is then housing withdrawal and a violation of the Housing Act and the Regional Housing Ordinance. Or when a owner rent its house to too many tourists at the same time, which is not only a violation of the Housing Act and the Regional Housing Ordinance, but also a violation of fire safety.

A remarkable case has recently been heard by the District Court of Amsterdam. Father owns the floor on the ground floor, and used it as a pied-à-terre, so he is registered with another municipality. Daughter lives in the apartment above, and owns 1/100th of the pied-à-terre. Father is three to four days a week on the ground floor, the other days he rents it out to tourists. He arranges the Airbnb reservations, cleaning, and receives the rentals. Daughter receives the tourists and her number is given to them for questions; she receives no compensation for this. Unfortunately, this is not legal. It’s not allowed to rent a second home to tourists during periods when you’re not there. It is only allowed to keep a second home in Amsterdam if the second home is used by the tenant/owner him/herself, so you are never allowed to rent a second home to tourists in Amsterdam. On top of that, they rent out more than 60 days a year. The municipality therefore sees this as a withdrawal of the house from the housing market, for which they did not have a permit, and therefore a violation of the Housing Act and the Regional Housing Ordinance. Father will therefore receive the full fine of €12000. Daughter in the first instance as well. The Court ruled that this is not proportional; although she is complicit in the violation, she helps, but receives no compensation. The District Court is also of the opinion that if father had not rented the apartment, it would not have been plausible that she had committed the offence. She therefore received a reduced fine of €3000.[5]

Recently it has also been possible for the municipality to enforce the same rules in houseboats, but this was not possible because houseboats were subject to other laws and regulations.[6]

Airbnb at rental property and HOA

For rental properties, it may be that the contract states whether (sub) letting is allowed, or that permission must first be requested from the landlord. In some cases the landlord even has the right to dissolve the rental contract and to vacate the property.[7]

If the property belongs to an HOA, it may be regulated whether or not renting through Airbnb is allowed, or permission must be requested first. Sometimes, however, this is a gray area and short rentals are not explicitly prohibited, as this is a relatively new phenomenon. For additional information on this topic, read on in this blog.

Would you like to know more? Please feel free to contact us.

Lawyer Ginio Beij

Can a VvE ban AirBnB or Short Stay?

A previous blog has already extensively discussed the requirements to start a bed-and-breakfast (read this blog here).

A situation that also regularly occurs is that within an apartment building properties are used for AirBnB or short stay. Especially during short stays this can be a nuisance. A group of tourists spending a long weekend in Amsterdam can usually be a bit noisier than the average resident. For example, we are aware of cases where the common areas (corridors, elevator, stairwell) have been damaged.

The question is whether the VvE can prevent such use and how. Most split certificates (based on the model regulations) state that the owner may only use the apartment according to the purpose stated in the deed. If the apartment’s purpose is living, then the question is whether renting for AirBnB or Short Stay is contrary to that purpose.

Case law shows that especially with regular short stay rentals this is contrary to the purpose of living. In several judgments it has been determined that living is a matter of ‘permanent residence’ and that a short stay does not fit in with this. See, for example, this judgment.

For an VVE, it is advisable to explicitly include the ban on renting out for AirBnB or Short Stay in the demerger deed or the internal regulations (the latter is easier to achieve in practice than amending the demerger deed). In this way, there is clarity for all apartment owners. The VVE often also has the possibility to impose fines in case of violation of this prohibition, in order for an extra means of pressure to prevent unwanted rentals. These fines must also be recorded.

However, it is not always the case that a rental on the grounds of AirBnB or short stay is in conflict with the purpose of living. If, for example, an apartment owner is abroad once for 3 months and rents out once for that period, this does not have to detract from the sustainable use as a home. In that case, such an occasional rental does not conflict with the purpose of living. An example of this in this ruling.

It must therefore always be taken into consideration whether a rental for short stay or AirBnB purposes is prohibited. Usually, this rental will be in conflict with the living purpose, so that the VVE can prohibit this use and even impose fines. If it is an occasional rental, it may be different in some cases, but that is an exceptional situation.

Does this situation look familiar to you or would you like to discuss the situation in your home office? Feel free to contact us.

Lawyer Ginio Beij (beij@m2advocaten.nl)