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A unit owners’ association does not usually have a trained accountant in its ranks. However, it should be all the more concerned about the accuracy of its accounting. For incorrect accounting or its complete absence, it is subject to relatively high fines. They are threatened by the failure to submit or the submission of incorrect accounts. Similar principles also apply to tenants of flats by landlords.
Responsibility for billing to apartment owners
The HOA, headed by its committee, is accountable not only to the state but also to the unit owners for timely and accurate accounting. They should be the first to receive the timely and correct accounts from the HOA. The HOA is also obliged to allow the recipients of the accounts to inspect the accounting documents. Failure to comply with these obligations may result in the payment of a fine or the right of the unit owners to demand payment of the fine.
Timely delivery of bills
The first legal obligation is that bills must be delivered on time. This is met if it is demonstrably sent within 4 months of the end of the calendar year. In case of doubt, the HOA committee should be able to prove that delivery actually took place. This can be done, for example, at a meeting of the HOA where the delivery is recorded in the minutes or confirmed by the signatures of the apartment owners.
In our law practice, we have dealt with a case where the courts did not accept as evidence the claim of the chairman of the HOA that the bill was dropped in the mailbox. The apartment owner disputed his claim and argued that nothing had been delivered to him. The HOA committee was unable to substantiate its allegations and was therefore obliged to pay the fine. The court concluded that certified mail would be conclusive evidence.
Correctness of the billing
It may have occurred to someone reading the preceding lines that if the SVJ committee had failed to send the bills on time, it could get around this shortcoming by sending out “some numbers” which it would later correct with the correct version.
However, as the Czech courts have also held, in terms of a claim for a fine, even a defective billing is an error to which the homeowner’s claim for payment of a fine is linked. They are viewed essentially as if the HOA had not fulfilled its obligation to bill at all. Moreover, in such a case, any arrears of service are not due.
Consultation of billing documents
Another of the legal obligations associated with a potential penalty is to allow the landlord (and similarly the tenant on the landlord’s side) to check the accuracy of the billing by being allowed to inspect any billing documents.
However, the inspection should be allowed on a realistic basis, not just “pro forma”.
As the court noted in one of the cases we have won, the mere formal offer of a date for inspection of documents is not considered to be compliance with that obligation if the counterparty has no real opportunity to appear for inspection, for example because the dates were set only during working hours and only for part of the documents at any one time. Such conduct was considered to be harassing.
The amount of the fine
Failure to deliver (the correct one) on time entails an obligation to pay a fine to the other party, which is legally 50 CZK per day, but can be agreed at a lower rate.
Liability insurance for the members of the JAC committee
It is definitely worthwhile for the members of the SVJ committee to have liability insurance. Liability for damage or injury caused by a natural or legal person in connection with the performance of the duties of a committee member, chairman or member of the control committee of the community of owners can be insured in this way. This typically covers damage to property, non-pecuniary damage and costs necessary for the insured’s legal defence.
However, members of the HOA committee are usually out of luck in terms of paying any fines in this way. It is necessary to carefully study the exclusions from the insurance claim, which may be slightly different for each insurance company.
Standard ones include:
- damage caused intentionally,
- damage caused by intentional wrongful conduct or damage caused by conduct in connection with which the insured has received a personal benefit or has received remuneration not granted by prior approval of the owners’ meeting,
- damage caused by failure to exercise or late exercise of rights,
- damage in the form of fines or penalties or other contractual administrative or criminal sanctions.
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Tip: We have discussed the general principles of accounting for JVUs in our separate article on the website.