Removing the board of a housing association in Poland – a step-by-step guide

The housing community and the board – basic information

Pursuant to Article 6 of the Polish Act on Ownership of Premises, a housing community consists of all owners whose premises form part of a specific property. The Polish Act also grants the housing community the ability to acquire rights and incur obligations (i.e., legal capacity), as well as the ability to sue and be sued (i.e., capacity to be a party to legal proceedings).

With regard to the above definition, it is important to distinguish between the concept of “unit owner” and the broader term “resident.” The key difference is that a housing community consists exclusively of the unit owners in a given property, that is, the persons who hold title to the unit, and not its residents, such as tenants. These individuals are therefore not members of the housing community in the legal sense and, consequently, do not have the right to dismiss the management board.

Article 20(1) of the Polish Act provides that a housing community must adopt a resolution electing a single-member or multi-member management board when the number of separate and non-separate units exceeds three. In other cases (i.e., when the number of units is fewer than three), the provisions of the Civil Code and the Code of Civil Procedure regarding co-ownership apply mutatis mutandis to the management of the common property.

However, if a housing community management board is not appointed, the penalty may be the appointment of a compulsory administrator for the housing community by the court pursuant to Article 26 of the Polish Act. This mechanism may be initiated upon a request filed by any unit owner. This regulation aims to ensure the efficient management of the common property and to protect the interests of all unit owners, which is particularly important in the case of larger housing communities.

Only a natural person may serve as a member of a housing community’s board of directors. In general, it is recommended that the board consist of community members, that is, individuals familiar with the issues and current needs of both unit owners and other residents. Nevertheless, the law does not preclude the appointment of individuals from outside the group of unit owners to the board, whether for the entire board or for individual members.

The housing community’s board manages the affairs of the housing community and represents it externally as well as in relations between the community and individual unit owners (pursuant to Article 21(1) of the Polish Act). In practice, this means that it manages the common property, and thus acts to maintain the common property in good condition, orders repairs and renovations, and, among other things, exercises control over the housing community’s finances.

Legal basis for the dismissal of a housing community’s board

Pursuant to Article 20(2) of the Polish Act on Ownership of Residential Units, the entire board of a housing community or individual members thereof may be suspended from their duties or removed at any time by virtue of a relevant resolution adopted by the unit owners. In practice, this provision means that the housing community may make changes to the composition of the board by adopting a resolution that clearly specifies the action to be taken against the board or a specific member that is suspension or dismissal.

Importantly for unit owners, in practice there is no legal obligation to have a resolution dismissing the housing community’s board or a board member (a resolution changing the composition) notarized, as is required when changing the established method of managing the common property (Article 18(2a) of the Polish Act on Ownership of Units). Consequently, the resolution may therefore be adopted in ordinary written form, or even by collecting votes individually, without the need for a notarial deed.

A practical example from Polish case law:

“The requirement under Article 18(2a) of the Polish Act on Condominiums for a notary to record a resolution in the minutes applies exclusively to resolutions by unit owners regarding a change in the established method of managing the common property. It does not, however, apply to a resolution on the election of a single-member or multi-member management board, which is a body of the housing community” (Polish Supreme Court judgment of January 14, 2004, case no. I CK 108/03).

Additionally, it should be noted that a housing community may also have internal legal acts regulating in greater detail the conditions and procedures related to the dismissal of the housing community’s management board or its individual members, such as bylaws or regulations. In such cases, an additional legal basis, apart from that explicitly provided for in Article 20(2) of the Housing Communities Act, must be sought in the aforementioned regulations or bylaws, which supplement the statutory provisions.

The most common reasons for dismissing a housing community’s board

There can be many reasons for dismissing a housing community’s board, and these may relate to both the rights and obligations under the Polish Act on Ownership of Premises, as well as to relations with unit owners and the broadly understood transparency of the board’s actions. In practice, it is often the housing community council or a group of the most engaged owners who initiate actions aimed at replacing the board, pointing out irregularities.

It is worth noting that, pursuant to Article 29(3) of the Polish Act on Condominiums, every unit owner has the right to oversee the Activities of the board of directors; therefore, it is possible to take steps to review and evaluate the ongoing work of the board members. Furthermore, the actions taken by the housing community’s board are “evaluated” annually by the unit owners, who adopt a resolution on granting discharge to the board (pursuant to Article 29(2) of the Housing Community Act).

Among the most common reasons for changes in the composition of the board or the dismissal of a housing community’s board are:

• failure to fulfill duties, such as a lack of action regarding necessary repairs, lack of control over expenses, or failure to comply with safety rules;

• acting to the detriment of the association, for example: making decisions without residents’ consent, exposing the association to additional costs or conflicts of interest, or improperly drafting resolutions regarding renovations in the housing association,

• suspicion that the housing community’s board has committed a crime, for example by entering into contracts regarding the operation of the housing community without conducting a competitive bidding process, often with entities having personal or financial ties to board members,

• lack of transparency and communication with residents, such as ignoring residents’ needs, lack of information regarding expenses or resolutions, and failure to fulfill promises.

One of the most common reasons for the dismissal of a housing association’s board is when the board undertakes actions that go beyond the scope of ordinary management without the required consent of the unit owners. Under its authority, the housing association’s board is authorized to act within the scope of ordinary management; whereas to perform acts exceeding the scope of ordinary management, it is necessary to obtain the consent of the unit owners in the form of a resolution granting the board the authority to enter into agreements constituting acts exceeding the scope of ordinary management in the form prescribed by law.

The open-ended list of acts exceeding ordinary management has been specified by the legislature in Article 22(3) of the Polish Act on Condominiums and includes such acts as:

• determining the management board’s remuneration,
• adopting the annual economic plan,
• setting the amount of fees to cover management costs,
• granting consent for the superstructure or reconstruction of common property,
• dividing common property,
• purchasing real estate,
• filing a lawsuit related to the forced sale of a unit in a housing community when the unit owner is in long-term arrears on fees owed or grossly or persistently violates the applicable house rules, or whose improper behavior makes the use of other units or the common property burdensome.

Any action taken by the board of a housing community that exceeds the scope of ordinary management without the required resolution of the unit owners therefore constitutes not only a violation of the provisions of the Polish Act on Ownership of Units, but also one of the most common grounds for the loss of trust in the board by the owners, which may lead to its dismissal.

Does a resolution to dismiss the housing community’s board of directors have to include a statement of reasons?

Under the current provisions of the Polish Act on Condominium Ownership, there is no requirement to specify the reasons for dismissing the housing community’s board in the resolution of the unit owners. This means that a resolution to dismiss the board or a board member does not need to include a justification or refer to specific breaches of duty by the board. This approach stems from the very structure of the statutory rights of apartment owners.

However, the absence of an obligation to justify the reasons does not, of course, mean that these reasons are irrelevant. In a situation where members of the housing community anticipate that the resolution will be challenged in court or are considering taking further action against members of the board (such as claims for damages), stating the factual grounds for the dismissal may be of significant evidentiary importance. In practice, therefore, despite the lack of a statutory requirement, providing a justification is often advisable from the perspective of the housing community’s legal security.

Procedure for dismissing the housing community’s board of directors – step by step

In order to remove the housing community’s board of directors, unit owners must take specific steps to adopt the relevant resolution.

Pursuant to Article 23(1) of the Polish Act, resolutions of unit owners are adopted at a meeting or through the board’s collection of individual votes. In practice, it often happens that the board may not be interested in adopting a resolution to dismiss itself; therefore, it can be assumed that adopting a resolution through an individual collection of votes by the board will pose many problems. In such a case, the resolution may be adopted at a community meeting. As a general rule, a community meeting may be convened by the board, but also by the owners themselves holding at least 10% of the shares in the common property.

The condition for convening a community meeting by owners holding at least 10% of the shares in the common property is the submission of such a request in writing and signed by those owners. In addition to submitting the request, in order to convene the meeting, it is also necessary to notify all unit owners at least 7 days prior to the scheduled date of the meeting (unless the community’s bylaws or articles of association provide for a longer period). The notice should include:

• the location, date, and time of the meeting,
• the proposed agenda.

It is worth noting that when convening a homeowners’ association meeting, owners holding at least 10% of the shares in the common property should have a draft resolution to remove the board of directors prepared in advance. In such cases, the draft resolution will serve as an attachment to the proposed agenda, which should be included in the notice sent to the other unit owners regarding the convening of the meeting.

A necessary condition for the proper adoption of a resolution to dismiss the housing community’s board is also obtaining the required majority of votes. The Property Act (Article 23(2)) establishes the principle that owners’ resolutions are adopted by a simple majority of votes calculated according to shares, unless the agreement or a resolution adopted in this manner provides that each owner has one vote on a specific matter. The legislature has thus established a voting rule whereby the weight of a vote is linked to the size of the share in the common property, which in turn is naturally correlated with the size of the unit.

This principle implies that the larger the size of a unit and, at the same time, the greater the owner’s contribution to the maintenance of the common property, the greater the influence that owner has on the management of the community. Owners may also decide to deviate from the above rule by stipulating in an agreement or a resolution adopted by a vote based on shares that a special voting procedure is possible for specific categories of matters, based on the principle that each owner is entitled to one vote, regardless of the number of shares held.

Consequences of dismissing the board and appointing a new one

On the agenda of the community meeting, alongside the item regarding the dismissal of the board, it is advisable to immediately include the appointment of a new board composition. This has practical significance, as it prevents a situation where the community is left without an efficiently functioning executive body.

The mere dismissal of individual board members and the lack of their immediate replacement should not, in principle, cause problems, provided that the community’s internal regulations permit the board to operate with a reduced membership. The situation is different, however, in the case of the dismissal of the entire board; in such a case, the failure to simultaneously appoint new members may lead to a de facto paralysis of the community’s operations and hinder the making of day-to-day decisions.

Failure to fill any of the vacant positions on the community’s management board opens the possibility of filing a petition with the court to appoint a compulsory administrator, due to non-compliance with the requirement set forth in Article 20(1) of the Polish Act; therefore, unit owners initiating the procedure to remove the board should bear in mind the need to hold elections for the community’s executive body.

The procedure for appointing new board members will be very similar to the procedure for dismissing the housing community’s board, with the exception that unit owners will first have to select a suitable candidate or candidates. In this regard, it remains relevant that members of the housing community’s board may include both unit owners and individuals from outside this group, such as those possessing professional knowledge and skills in managing common property.

The selection of professionals is particularly justified and desirable in the case of large communities comprising many unit owners, which is becoming increasingly common. It should be emphasized that the proper selection of board members is crucial for the efficient management of the common property and the protection of all owners’ interests.

Selecting a new housing association board in an efficient manner can not only eliminate the risk of the court appointing a court-appointed administrator, but also help ensure a smooth transition of responsibilities, organize the documentation, and verify the association’s financial status following the previous board’s tenure.

The transition period may also be significant in terms of the possibility of holding former board members financially liable for actions they took while in office, as the dismissal of the housing community’s board opens the door for the community to file such a claim under civil law.

Practical guidance for unit owners

From the perspective of unit owners, the most important thing is to ensure that they act in accordance with the provisions of the Polish Act on Ownership of Units and conduct the procedure for dismissing the housing community’s board in a transparent and proper manner. Otherwise, they risk the resolution being challenged in court.

Those initiating the removal of the board should familiarize themselves not only with the provisions of the law, but also with the rules and bylaws of their housing community, if any, and analyze these legal documents in terms of any procedures and obligations related to the removal of the housing community’s board. Undoubtedly, it is also necessary for the housing community to take appropriate steps to prepare the necessary documentation, draft resolutions on the dismissal of the old board and the appointment of a new board, the agenda for the community meeting, as well as proper notice of its convening.

One of the key issues the association should address is safeguarding itself against adverse future situations, such as protracted change processes caused by various factors. Such safeguards can be established by drafting appropriate regulations within the framework of the housing community’s bylaws, which can specify, in greater detail than the law, the procedures for handling most matters that the housing community must address.