Sharing International Practices for Improving Management and Capacity Building of Homeowners’ Associations in Georgia

30 October 2017   /   Georgia, Tbilisi

 

The Law of Georgia on Homeowner Association was enacted in 2007. This law regulates the maintenance of common property of the members of a homeowners' association. A homeowners' association is a union of owners of residential or non-residential spaces, including the space used for commercial purposes, located in an apartment building (the Law of Georgia on Homeowner Association, 2007).

 

It is noteworthy that the mentioned law and the related information campaign have resulted in the increased registration of homeowners' associations that was a sharp growth compared to the initial indicator. According to the law, a homeowner association (HOA) is considered as formed in a multi-dwelling house - a house with more than two apartments. The mentioned principle is derived from the German legislation, but a HOA by the latter is considered as established even in case when there are 2 homeowners, which is valid with the property division and the sale of the first apartment.

 

In Georgia, a HOA can have its statute and other required requisites such as a stamp, bank account, etc. Being registered in Gamgeoba (the local self-government) allows HOAs to participate in the co-financing programme that covers partially the residential building refurbishment.

 

This Law regulates relationships concerning the administration of common property of members of a homeowners' association ('HOA'), determines the forms of HOAs and the forms of ownership of members of an HOA, as well as basic legal conditions for the origination, establishment, operation and liquidation of HOAs.

 

It should be noted that the role of the local self-government in the field of housing as established by the organic law of Georgia  - local self-government code, set out in its Article 16 (u) is: “provision of a shelter for and registration of the homeless.” In addition, some of the responsibilities related to housing stems from other powers such as -  creation of the environment that is safe to human health,  development of appropriate infrastructure in local facilities for disabled persons, children and the elderly, including, proper adaptation and equipment of public areas and of municipal transportin; implementing measures for social aid and public education (Article 16).

 

The Chapter 5 of Tbilisi city budget for  2017 is dedicated to the priority "Homeowner Associations' Development", and its sub-programme is "Facilitating Homeowner Association' Development". So far it is translated into the co-financing projects. There are also separate initiatives - pilot projects. For instance, the website monitoring.org.ge facilitated by Didube Gamgeoba and the pilot project of Saburtalo Gamgeoba “Govern Your City” (finished in December 2016). 

 

In the framework of the project “The way forward for reforms in the housing sector: empowering grass root homeowners' associations in Azerbaijan, Belarus, Georgia, Moldova and Ukraine”, the legal and technical assistance centres were established in the three most densely-populated cities in Georgia, including the capital. Tbilisi Technical Advisory Centre (TAC) was formed in cooperation with Saburtalo Gamgeoba.  The TAC provides legal and technical assistance to HOAs and conducts training for  HOA Chairpersons on the topics of common property management and energy efficiency. The beneficiary HOAs have been provided with the information about legal, management, energy efficiency etc., issues. All these initiatives have contributed to their capacity building. The new HOAs have been registered, the members of HOAs receive counseling, and the Association of Saburtalo Homeowner Associations has been formed with 25 members. All these are positive steps but the challenges are still large-scale. The burning issues are: the need of raising awareness about the responsibility regarding common property management and the need of the professional facility management, the challenge of gathering membership fees, degraded housing stock, maintaining neatness and order, energy efficiency, the difficulty of the creation of barrier-free environment, effectiveness of HOA management, etc.

 

In order to respond to existing problems and resolve them, a consistent approach is needed. In this regard, steps should be taken in different directions to reach tangible results. First of all, the priority should be the protection of the interests of the population, the maintenance and development of the housing stock. On the other hand, existing restrictions should be taken into consideration, which is an acute socio-economic background, degraded and damaged housing stock, and the lack of effective management. Nevertheless, it is necessary to discuss the possibilities that derive by the existing situation, or in case of a change. In this regard, it is interesting to pay attention to the international experience and whether it would be promising to introduce the best international practices in Georgia.

 

We believe that the Law on Homeowner Association of Georgia should be amended to introduce modern methods and principles of real estate management in Georgia. In order to introduce modern methods and principles of real estate management in Georgia, it is necessary to introduce amendments to the Law of Georgia on Homeowner Association.

 

In Georgia, in most cases Homeowners' Associations are managed by the chairpersons that become elected between the HOA members (owners of apartments and of commercial / noncomercial spaces), and in rare cases the invited manager. In the example of most HOAs in Georgia, management of multidwelling houses is not a paid activity since the law does not require such, and such habit has not been formed in practice either. From 2007 the separate cases of HOA chairpersons involved in the election campaign with the budgetary support have been identified that became the basis for the abolition of this practice in 2013.

It is noteworthy that multidwelling houses in the EU countries are predominantly managed by professional managers- natural or legal persons. In the case of the multidwelling house with a small number of apartments, the chairperson elected among the homeowners is the main manager. In some countries this issue is regulated by legislation, and in some cases it is based on the customary practice.

 

The owner of a multidwelling house can be both natural and legal persons. The Homeowner Association (joint ownership) in Germany is automatically generated in multidwelling houses where there are at least two owners. There is no separate law on the Homeowner Associations. Common property management is governed by various laws.

 

The legislative base that regulates the relations between the homeowners:

• The German law on residential property (Wohnungseigentumsgesetz);

• Declaration of partition of property  (Teilungserklärung);

• House rules (Hausordnung).

There is no shared construction practice in Germany. The constructed house has one owner (mainly, the investor). Before selling the first apartment, the construction company, as a rule, requests the "certificate of the division of the common and equitable ownership" from the regional administration, and then, with the notary declares "a declaration of the partition of the common property in the house". As a result, the house is divided into private apartments. The homeowners' association is considered to be formed after the first apartment is sold (e.g., when there are two owners). The new owner of the apartment automatically becomes a member of the HOA and conforms to its statute.

 

A HOA in Germany is established on the basis of:

•     the agreement between the owners of the apartments;

•    the division of the property by the solitary owner.

 

The governing body of the HOA in Germany is the General Meeting of its members.  Members of the HOA have the possibility of forming the managing board (two members and a chairperson). In Germany, it is a common practice to have the multi-dwelling houses administered by professional facility managers (a natural person or company).

Utility costs in Germany are covered in advance. The average annual cost is calculated and is distributed over 12 months. At the end of the year, based on the calculation of the actual spending, some amount of money is added or returned back.

 

For the purpose of professional management, homeowners pay a monthly membership fee that is distributed to each of them. Verwalter is the professional real estate facility manager/property manager. The professional facility managers are prepared in the framework of the dual vocational education and training during three years. Different educational institutions offer the opportunity of the parallel learning and work practice. The German Chamber of Industry organises the certification exam. The exam consists of the following components:

1. Real estate management (written), 180 minutes

2. Accounting (written), 90 minutes

3. The general legislative knowledge (written), 90 minutes

4. Oral presentation and simulation of customer negotiation, 45 minutes. (www.jildom.com).

 

Overall, professional management is reflected in the good condition of the housing stock, in maintenance and its development. The concept of "proper management" according to the law "WEG" includes the following components:

 

1. The development of house rules;

2. Maintaining in a proper condition the joint property and repairing it;

3. Fire insurance is within the limits of its total value, as well as the liability waiver insurance in accordance with the shares of the landowners and homeowners in the joint property;

4. Collection of fees in accordance with the shares in joint property to keep the property in a proper condition;

5. Drafting the economic plan;

6. All activities that are necessary for a phone connection, radio connection or power supply, if it is in the interest of one or more of the homeowners. (WEG, Article 21).

 

According to the Law of Latvia on "Residential Homes", a joint stock company, limited liability company, co-operative society, association or another type of legal or natural person may be invited as a manager of the homeowners' association. If the residential area exceeds 1500 square meters, the professional real estate management and a manager with the relevant education is required. The Ministry of Economy administers the Registry of Housing Administrators (https://bis.gov.lv/bisp/), where all natural and legal entities involved in housing management are registered.  As of September 1, 2016, 644 managers (Ineta Geipele, 2016) have been registered.

 

The fourth level of the Latvian Education Qualification Framework and at least fifth level of the European Qualification Framework is required for managing a multi-dwelling house in Latvia (G. Beirkman, 2011; Juris Vigis, 2015). The Riga Technical University has developed a Bachelor, Master, and Ph.D. programs for real estate management. Various private educational institutions have developed professional education programs. If the Chairperson of the Homeowner Association will not be elected, the housing manager shall be appointed by the local self-government.

 

The Act on Apartment Ownership 1994 is the basis for the creation of Homeowner Associations. The membership of HOAs is automatic and obligatory. The HOAs are governed by elected boards and frequently hire professional property managers.  The houses with up to 7 apartments can be governed by the homeowners themselves, or a professional manager. By 2010, there were 18,000 licensed housing managers which as natural or legal persons could be involved in housing management. On average, a licensed manager can serve 10*20 buildings. The licenses were issued by the Ministry of infrastructure and construction. In 2014, this was changed with the internal certification organised by the real estate federation.

 

The draft law on condominiums has been elaborated. The separate article of the draft law deals with the rights and responsibilities of the professional management of housing (Article 25) and it is noted that the governmental decree is needed to conduct the attestation that will be implemented by the central sector policy body that governs housing issues. To the date, this is the Ministry of Construction and Regional Development.  

 

The Homeowner Association is a legal person. In the multi-dwelling houses, where the residents fail to establish the form of governance, the local self-government bodies appoint the managers on the basis of the competition.

 

The introduction of the professional management is underway. The NGO "Interdisciplinary Association of Experts of Ukraine" has developed training modules in partnership with higher education institutions and professional colleges. At this stage, independent assessment methods are being designed.

 

Nowadays, the law on housing and utility services of 2014 («ЖКУ») is in force. The new draft law has been already designed and adopted by the first hearing by the Supreme Rada (its contents and basic part is adopted as a basis), but the second reading has not been held yet. The new law (Ukrainian Law on Housing and Utilities "HUL" № 1581-d) intends to define the notions of the "house management" and "manager".

 

This Law will also define the requirements for the professional training and qualifications of the housing manager. It is also planned to regulate the issues of the minimal basic education of the Homeowner Association’s Chairpersons. In this case, it is not considered to draft a separate law. However, after the new law on “Housing services” will be adopted, the attestation requirements and the rules of its implementation shall be regulated by the decree of the Cabinet of Ministers of Ukraine. Such a decree has been drafted at present.

 

It is planned to design and adopt the professional standard for the profession “Multi-dwelling House (group of the house) manager”, by which it is possible to define the qualification levels of the manager. Exactly in this direction Ukrainian Regional Development, Construction and Housing Utilities Ministry and Social Policy Ministry have been cooperating with the fields and expert organisations, including the public union “Ukrainian Expert Interdisciplinary Association. 

 

Academic competences or the qualifications by this specialization can be acquired in the formal education system (Bachelor, Master degree, training, if the candidate already has the higher education). Those who have not received the higher education will have the opportunity of attending the training courses by the same programme. The same programme will be offered by the training centre of Ukrainian employment centre. In total, 11 centers in the country. Despite the fact the form and place of learning, they will have the opportunity of recognition for the future with the qualifications certificate perspective in case of passing the exam in the voluntary certification system. 

 

Usually, a certificate of qualifications for such a difficult and complex profession is issued by an independent certification body that is accredited to the Ukrainian National Accreditation Agency (NAAU). 

 

International Association for Real Estate Management (IVIM) established in 2010 with the purpose of supporting the development of professional skills in housing stock management, operates in Belarus. The association unites the national associations of the property managers and guilds, as well as associations of homeowner associations, private service and construction companies, educational institutions, etc., from its member countries. The association is engaged in dialogue and advocates for the establishment of the professional real estate manager; it prepares new staff and conducts the retraining courses. 

 

Based on the examples above, it is evident that all of the mentioned countries favour the professional real estate management. In Georgia, it is necessary to develop the profession of the real estate manager at the level of the National Qualifications Framework for education. It is necessary to develop the methods of the recognition of the acquired experience and skills/education by the aspirants for this profession (certification, exam). Apart from that Georgian law on Homeowner Association should clearly include the article about the professional management of HOAs. For the introducing changes and improvement of the law on Homeowner Association of Georgia, it is necessary to conduct public discussions with the participation of the non-governmental sector and citizens.

 

Apart from the professional management, the most important novelties that should be implemented in the management of multi-dwelling houses (and the houses in general) are: 

•    house insurance

•    creating deposit and refurbishment funds

•    periodic monitoring of the technical conditions of the house

•    raising legitimacy of decision-making (appointing two witnesses “trustees” to confirm the decisions by the Chairperson)

•    energy efficiency (legal base and its implementation) 

•    providing the barrier-free environment

 

Legislation and related documents

1. Law of Georgia on Homeowner Association, 2007

https://matsne.gov.ge/ka/document/view/19798

2. Organic Law of Georgia, Local Self Government Code, 2014 (consolidated, 2017) https://matsne.gov.ge/ka/document/view/2244429

3. Tbilisi Budget, plan for 2017: http://www.tbilisi.gov.ge/page/43

4. The German law on residential property (Wohnungseigentumsgesetz)

 (Wohnungseigentumsgesetz – WEG. In German language: https://www.gesetze-im-internet.de/woeigg/WEG.pdf, In Russian language: http://faq.germany.ru/wohnung.db/items/14.html?op=

5. Declaration of partition of property  (Teilungserklärung)

(Teilungserklärung),  the declaration drafted by the Notarius Berndom Senger on 19 May 1998, the project internal document.

Management of residential real estates:

6. German experience: http://jildom.com/konsultant/stranicza/nemeczkij-opyit-upravleniya-zhilyom.html 

7. Latvian experience: http://jildom.com/konsultant/stranicza/латвийский-опыт-управления-жильём.htm (June 2016)

8. Polish experience: http://jildom.com/konsultant/stranicza/polskij-opyit-upravleniya-zhilyom.html (June 2016 2016)

9. Ukrainian experience: http://jildom.com/konsultant/stranicza/управление-жильём-в-украине.html (June 2016)

10. Moldovan draft law on condominiums: http://www.particip.gov.md/public/documente/134/ro_1899_Proiect-lege-ru.pdf

11. Housing management register under the Latvian Ministry of Economics: https://bis.gov.lv/bisp/

12. Information gathered in the framework of  “HOME” project

13. Information about Ukraine provided by Ms Olga Maksimenko, the Interdisciplinary Expert Association of Ukraine, project partner

14. Project webpage: www.jildom.com

 

This article has been developed in the framework of the EU-supported project “The way forward in the housing sector: empowering grass root homeowners' associations in Azerbaijan, Belarus, Georgia, Moldova and Ukraine” by Charity Humanitarian Centre “Abkhazeti”. The project has been implemented since 2015 by the German NGO "Housing Initiative for Eastern Europe (IWO)" in cooperation with the partner NGOs in 5 Eastern Partnership countries.The document does not reflect the official opinion of the European Union.