Control of the activities of the housing community management board in Poland is a key tool ensuring the proper functioning of the housing community and the protection of its members’ interests. As part of this control, property owners can verify both the compliance of decisions with applicable laws and the effectiveness of the management of common property, including the implementation of resolutions of property owners and the rational management of the housing community’s financial resources.
An integral part of the control of the housing community management board’s work is also the obligation of the management board to make documents related to the functioning of the housing community available to property owners. This allows for the inspection and analysis of financial documentation, contracts, reports and other information necessary to assess the correctness of the management board’s actions.
This publication discusses the practical aspects of controlling the activities of the housing community management board and the obligation to make community documents available, including how to implement them, potential practical problems and the legal consequences of non-compliance with these obligations.
Do flat owners have the right to control the housing community management board?
In Poland the housing community manages the common property through its management board, and the owners of the premises comprising the housing community cooperate in this process on the terms provided for in the Polish Act on the Ownership of Premises. First and foremost, they are entitled to appoint and dismiss the management board of the housing community. However, the Act also provides for the possibility of direct control over the activities of the management board of the housing community by each of the owners of premises (both residential and commercial). Pursuant to Article 29(3) of the Polish Act on the Ownership of Premises, every owner of a premises has the right to control the activities of the management board.
The Polish courts consistently indicate that the statutory concept of ‘control’ should be understood in a functional manner. This means that control consists not only in passive inspection of documents, but above all in comparing the actual state of affairs with the desired state. In practice, therefore, the control of the management board of a housing community requires the following steps to be taken:
- the management board shall enable members to familiarise themselves with information by presenting data and documents concerning the management board’s activities;
- familiarisation of a member (members) of the housing community with the information through access to documents
- assessment of these facts by comparing them with a specific standard of proper conduct resulting from legal regulations (primarily the Polish Act on Ownership of Premises), resolutions of premises owners, regulations related to finance and accounting, etc.,
- drawing conclusions based on the analysis and formulating recommendations by identifying possible shortcomings and corrective measures, e.g. applying for the appointment of a compulsory administrator in accordance with Article 26(1) of the Polish Act on the Ownership of Premises.
What documents of the housing community must the management make available?
The management board of a housing community in Poland is obliged to make available to the owners of premises all documents related to the management of the common property, including financial documentation, agreements, resolutions and documents concerning the current management.
The right of property owners to control the activities of the housing community management board is therefore not limited solely to inspecting accounting documents. It covers a wide range of documents, data and activities related to the management of common property, to the extent necessary for a reliable assessment of the correctness of the actions of the management board or administrator. Adopting a narrow interpretation of this right, i.e. limiting control solely to the financial sphere, would effectively deprive it of its real substance. Such an interpretation would render the right of control illusory and would be contrary to its function, which is to ensure that owners have a real influence on the management of common property and the possibility to verify the actions of the community’s management board.
Scope of control of the activities of the housing community’s management board
Control over the activities of the housing community management board may be broad in scope and is not limited solely to the financial sphere. Its purpose is to enable property owners to effectively verify the correctness, legality and reliability of actions taken on behalf of the community. In particular, control may cover the following areas of the housing community’s functioning:
– resolutions of the housing community,
– agreements concluded on behalf of the community,
– the manner of managing the common property,
– financial control of the management board’s activities,
– court and debt collection proceedings.
The scope of control should be related to the management of common property and must not lead to paralysis of the management board’s work, but it must also not be arbitrarily restricted in any way. The control rights of flat owners are real, not merely formal, and constitute one of the basic mechanisms for supervising the activities of the community’s management board.
Control of housing community resolutions – scope and evaluation criteria
The verification of resolutions adopted by the housing community may primarily cover formal correctness and compliance with Polish law, i.e. verification of whether the community’s resolutions fall within the statutory powers specified in the Polish Act on the Ownership of Premises and other legal provisions, including civil law and construction law.
Furthermore, the control may cover not only the content of the resolutions, but also the procedure for adopting them. As part of such verification, flat owners are entitled to check, among other things, whether notices of owners’ meetings were delivered within the deadlines, whether voting was conducted in accordance with the quorum requirements, and whether the correct form of adopting resolutions was used (e.g. by individual collection of votes or during a meeting).
This audit may also lead to the identification of potentially flawed resolutions, in particular those that may be challenged by property owners. Another important element is the assessment of the possible consequences of their repeal or invalidity for the functioning of the housing community, including the validity of concluded agreements, financial settlements and the ongoing management of the common property.
Review of contracts concluded by the housing community management
The review of contracts concluded by the community may cover a number of contracts, such as contracts with suppliers, service providers or construction contractors.
The analysis should include verification of their compliance with applicable law and the interests of the community, including compliance with legal regulations, principles of economic coexistence and protection of the financial interests of the community.
The review (including the audit) should identify the risks arising from the provisions of the contracts, such as potential financial obligations, long-term commitments or liability for damages.
An important element of the control is also the assessment of contractor selection procedures, including verification that the management board has applied transparent and lawful rules for concluding contracts, while respecting competitiveness and equal treatment of bidders. Our experience shows that it is in this area that abuses to the detriment of the housing community often occur.
Audit of the management of common property
An audit of the management of common property should include an assessment of the correctness of decisions made in relation to day-to-day management, property maintenance and representation of the community vis-à-vis third parties. The audit should also verify the agreement with the administrator or management company for compliance with applicable laws and resolutions of the owners of the premises.
Financial audit of the activities of the housing community management board
The financial audit of the activities of the housing community management board may include, among other things:
– verification of the community’s accounting documentation, i.e. accounting policies, checking the completeness and chronology of records, including an analysis of compliance with accounting policies, checking the formal and substantive correctness of accounting documents (invoices, bills, interest notes);
– analysis of the budget and economic and financial plan, comparison of plans with actual performance in a given year, identification of any deviations and their causes, verification of the compliance of advance payments for utilities to premises with the utility billing regulations;
– control of revenues, verification of the calculation of fees for premises (maintenance, renovation fund, utilities), verification of income from additional sources (rental, advertising), control of the timeliness of payments;
– cost control, assessment of the correctness of cost allocation and classification, analysis of current expenses (utilities, maintenance services, security, cleaning), verification of the correctness of settlements for the maintenance of common areas of the property;
– control of receivables and liabilities, verification of the debt status of premises, verification of debt collection activities, analysis of liabilities to suppliers and timeliness of payments;
– verification of the renovation fund, verification of the correctness of calculations and collection of funds, assessment of the compliance of expenses with community resolutions, analysis of the adequacy of write-offs to renovation plans;
– analysis of reporting, checking the correctness of tax settlements (compliance with accounting records and source documentation), analysis of the compliance of the financial statements with the accounting records as at the balance sheet date;
Control of court and debt collection proceedings conducted by the community
The audit of court and debt collection proceedings should include an analysis of all cases in which the community participates as both the claimant and the defendant. The audit should assess the effectiveness of debt collection activities, including the effectiveness of measures taken against owners in arrears, as well as the timeliness and completeness of enforcement activities. Another important element is the identification of legal risks arising from ongoing disputes and potential future claims by property owners.
Objectives and functions of the control of the activities of the housing community management board
The audit of the activities of the housing community management board should include verification of the actions taken in terms of their compliance with applicable law, the financial interests of the community, the financial consequences for the housing community, and the rationality and effectiveness of the decisions made by the management board. The purpose of the control should be to develop reliable conclusions regarding the functioning of the housing community and to evaluate the work of the management board.
In the event of irregularities, the law provides for corrective measures, including the possibility of applying to the court for the appointment of a compulsory administrator of the common property, or even reporting to the public prosecutor’s office on suspicion of a crime committed by the management board of the housing community. In certain circumstances, if the statutory conditions are met, Article 296 § 1 of the Polish Criminal Code, which penalises abuse of power or failure to fulfil obligations in property matters, may apply to the actions of the housing community’s management board. According to the provision, anyone who, being obliged under a statutory provision, a decision of a competent authority or a contract to deal with the property matters or economic activity of a natural person, legal person or organisational unit without legal personality, causes them significant financial damage by abusing the powers granted to them or failing to fulfil their obligations, shall be subject to imprisonment for a term of between 3 months and 5 years.
It seems that an important element of the analysis should also be the preparation of proposals for corrective measures, such as pursuing claims, terminating or renegotiating contracts, demanding settlement from the administrator, or even changing the management board.
Exercising the right of the owner of the premises to inspect the documents of the housing community
In order to effectively control the activities of the housing community, it is necessary to obtain direct access to the relevant documentation of the housing community. Although the right of the owner of the premises to control the activities of the management board is provided for by law, its practical implementation depends on the possibility of inspecting the community’s documents. In order to reliably assess the activities of the management board, the owner of the premises should have access to, in particular:
- accounting and financial documentation, including records of the costs of managing the common property, advance payments and any other financial settlements,
- non-accounting documents concerning the current functioning of the community,
- resolutions of flat owners and documentation of their implementation,
- agreements concluded by the housing community,
- adopted regulations of the housing community,
- evidence of actions taken by the management board as part of the ordinary management of the common property.
A practical example from Polish case law:
“Joint control over the activities of the management board includes, among other things, the obligation of the management board to provide the owner of the premises with information on matters relating to the common property and on the current activities of the management board in relation to such property, because it is difficult for an owner who lacks information to determine whether the management board is performing its duties properly. The management board should be assessed on the basis of complete and reliable information. This means that the management board should provide owners of premises with information on matters related to the management of the common property both on an annual basis and at other times if the owner of the premises requests such information. (judgment of the Polish Court of Appeal in Gdańsk, 5th Civil Division, of 15 January 2016, ref. no. V ACa 517/15).
Form of making housing community documents available to owners of premises
Case law consistently indicates that the right to control the activities of a housing community only includes the obligation to make housing community documents available for inspection, and not, for example, to send them in the form of photocopies. The courts argue that a hypothetical obligation to deliver photocopies of documents could be economically unjustified, as it would generate significant costs for the entire community and require additional work to prepare the documents.
In practice, this means that the owner of the premises may demand:
- personal inspection of documents at the headquarters of the housing community,
- inspection of documents at the management office or at the accountant handling the financial affairs of the housing community,
- access to documents in electronic form (sending scans), if technically possible.
Practical example from Polish case law:
“The right of inspection referred to in Article 29(3) of the Polish Act on the Ownership of Premises does not include the right to request that copies of the housing community’s accounting documents be delivered to the owner of the premises. Pursuant to this provision, they may only request that such documents be made available, which consists in presenting them for inspection. Demanding that copies of all documents be delivered to the owner of the premises is economically unjustified, as it involves costs that would be borne by the entire community and would require additional time to prepare the appropriate number of copies. If the members of the community have not provided for a different procedure for making financial documents available than that specified in the Act, the claimant has no grounds to demand the performance of actions going beyond the provisions of Article 29(3) of the aforementioned Act (judgment of the Polish Court of Appeal in Szczecin, 1st Civil Division, of 24 May 2016, ref. no. I ACa 99/16).
Summary
The right to inspect the activities of the housing community management board, which every property owner has under the Polish Act on Ownership of Premises, is real and not illusory. It includes not only access to financial documentation, but also all activities undertaken by the management board in connection with the management of the common property, including resolutions, agreements, the manner of management, court and debt collection proceedings, and the performance of statutory obligations. A key element of effective control is the obligation of the management board to make the association’s documents available, which enables owners to reliably assess the legality, purposefulness and effectiveness of the decisions taken.
This control serves to protect the financial interests of the community and its members, and in the event of irregularities, it may lead to far-reaching legal consequences – from corrective measures and organisational changes, through civil liability, to criminal liability of management board members. A properly conducted audit or control is therefore not only a supervisory tool, but also an important preventive mechanism that promotes transparency, proper management and stable functioning of the housing community.
If the management board of a housing community refuses to disclose documents or there are doubts as to the correctness of its actions, it is worth consulting a solicitor specialising in housing communities.
Can the concealment of housing association documents by the management board constitute a criminal offence?
In principle, yes, but each situation requires individual analysis. Pursuant to Article 276 of the Criminal Code, anyone who destroys, damages, renders useless, conceals or removes a document which they do not have the right to dispose of is subject to a fine, restriction of liberty or imprisonment for up to 2 years. Whether the act constitutes a criminal offence depends on a number of circumstances, including the type of document, the manner in which it was concealed and the perpetrator’s intentions.
Does an audit of a housing community require a resolution to be passed by the housing community?
No, an audit does not require a formal resolution to be passed by the housing community. Each owner of a flat has the right to inspect the association’s documents, which allows them to commission an inspection or audit without passing a resolution. In practice, however, when an audit is commissioned to a specialist external entity, associations often pass a resolution to consent to its performance and to determine the rules for financing the audit from the association’s funds.
Should the housing community conduct a ‘tender’ when selecting a contractor?
Yes, the housing community should announce a tender for the performance of works, services or supplies. A tender is, in fact, a simplified procedure for selecting contractors. In practice, this means that the community’s management board may invite contractors to submit bids within a specified time limit and under specified conditions. Any criteria for evaluating tenders (e.g. price, warranty period, references) may be adopted, provided that they do not violate the provisions of the owners’ resolution. However, if the resolution of the owners specifies specific criteria for selecting a contractor, the management board of the housing community is bound by them and cannot change them unilaterally. Any deviation from these arrangements may be considered a violation of the principles of proper management of common property, which creates grounds for challenging the resolution or decision of the management board in court.
