New standard rules when a property is split into apartments
The notarial deed of division into apartment rights must include division rules. The division rules set out, for example, what debts and costs are payable by the joint apartment owners and how the common areas are to be used, managed, and maintained. It is common practice for these rules to be based on the latest standard rules drawn up by the Royal Dutch Association of Civil-Law Notaries (Koninklijke Notariële Beroepsorganisatie; KNB). On 19 December 2017, a new set of standard rules (MR 2017, only available in Dutch) was introduced, factoring in recent case law, legislation, and societal trends. The old rules date back to 2006 (MR 2006).
The four most noteworthy changes are the following:
1. Reserve Fund and Multi-Year Maintenance Plan (Clause 14 MR 2017/Clause 15.3 MR 2017)
Clause 10 MR 2006 made it compulsory to establish a reserve fund but did not include any requirements for the fund’s size. With the introduction of the Dutch Act on the Improved Functioning of Owners’ Associations on 1 January 2018, a minimum annual addition must now be made to the reserve fund, provided that the building is (fully or partly) intended for residential use. Clause 14 MR 2017 is in line with the new legislation, adding that this minimum annual reservation of funds must also be made for buildings that are not fully or partly intended for residential use. However, the owners’ meeting has the final say where these buildings are concerned.
MR 2017 also provides the option of issuing a bank guarantee as security for the advance payment to be made into the reserve fund.
2. Interpretation of Deed of Division and Partitioning Drawing (Clause 22 MR 2017)
In order to determine whether any particular areas and/or items in a building are privately owned, third parties may safely rely on the information available from the public registers held by the Land Registry. Accordingly, in case of conflict between the Deed of Division and the Partitioning Drawing, the argument that the drawing or the deed prevails is of no use.
This case law is reflected in a comprehensive Clause 22 MR 2017, which explains how the deed of division must be interpreted in case of doubt. Clause 18 MR 2006 previously stipulated that in case of doubt the owners’ meeting was to decide on the precise extent of the common areas and privately owned space. The old clause is now no longer consistent with the case law.
3. Loans taken out by the Owners’ Association (Clause 47.7 MR 2017)
The new Section 5:126 (4) of the Dutch Civil Code specifically provides that the Owners’ Association is authorised to take out loans, unless expressly stated otherwise in the division rules. MR 2017 is consistent with this, but adds that the Owners’ Association may borrow money for purposes of managing the common areas/items. Clause 56.5 MR 2017 requires that the decision to purchase a loan must be adopted by a majority of at least two thirds of the number of votes cast at a meeting where at least two thirds of the total number of voting owners are present or represented.
4. Allowing use of property by third parties (Clause 27.2 MR 2017)
Around the time when MR 2006 was drafted, renting out your property (or part of your property) to tourists through a website (Airbnb) was fast becoming popular, and the lack of specific provisions in the division rules became a hot topic of debate for many owners’ associations. Was an owner actually allowed to do so when the division rules stated that privately owned space must be used as a residence or residential space or for private residential use? Did these rentals constitute a business activity? Light has now been shed on the situation. The guiding principle of MR 2017 is that any form of allowing privately owned space to be used for one or more nights for payment is prohibited. This prohibition can be circumvented only if such use is expressly permitted under the deed of division or authorised by the owners’ meeting.
Moreover, authorisation may be given only if such use is not in violation of prevailing regulations (such as municipal regulations) or any obligations towards third parties. MR 2017 also includes a variety of other new or amended provisions, covering such matters as charging points for electric cars, the amounts of fines, and the costs of any extensions added by an owner after the division.
The new standard set of rules does not automatically apply to existing divisions into apartment rights. For this to be the case, the old deed of division will have to be amended before a civil-law notary. The main rule is that such amendment can take place only with the cooperation of all owners, but there are exceptions to this rule. In some cases, permission from a third party may also be required. This may, for example, be the mortgagee or - in the case of a municipal ground lease – the municipal authorities.
