Incorrectly worded resolutions regarding renovation works in a housing association in Poland are one of the most common reasons for challenging such resolutions.
The renovation of common property is one of the most significant and, at the same time, most contentious issues in the functioning of housing communities. A decision by the housing community’s management board in this regard involves not only the need to incur often significant financial expenditure, but also the responsibility for the proper and economical management of the funds belonging to the flat owners. It is precisely at the stage of preparing and adopting a renovation resolution that disputes with flat owners most frequently arise – both regarding the justification for the renovation itself and the choice of contractor or the scope of the planned works.
The aim of this study is to present the key obligations of the housing association’s management board prior to adopting a renovation resolution, as well as to discuss the criteria for selecting a contractor for construction works. We have paid particular attention to the limits of the management board’s discretion, the standards arising from court case law, and the most common errors leading to the effective challenging of resolutions by flat owners.
How do you draft a renovation resolution in a housing association?
Before adopting a renovation resolution, the key role of the housing association’s management board (administrator) is to take the necessary steps to estimate the costs of the renovation and decide how it will be financed. The management board should therefore conduct preliminary market research and collect quotes from construction companies.
There is no set number of companies the management board should approach, but it seems obvious that the more companies involved, the more transparent the process will be. In the case of renovations of a more technically complex nature, such as historic buildings, the housing association’s management board may seek the opinion of a building surveyor, as an expert who can more precisely define the scope of the renovation work and provide a preliminary estimate of its cost. Adopting this type of solution may be particularly beneficial for the management board, as it reduces the risk of passing a resolution based on incomplete or flawed assumptions – both regarding the scope of the work and its costs.
From the perspective of the proper management of the common property, to which the management board is obliged under the Polish Act on Ownership of Premises, the lack of prior technical verification may lead to several significant problems:
- Firstly, the resolution may be challenged in court by the flat owners on the grounds that it is vague and contrary to the financial interests of the housing community. Case law from the ordinary courts has repeatedly emphasised that property owners must have a realistic opportunity to assess the validity of the planned expenditure, and therefore need to be aware of at least the approximate scope of the works and their cost.
- Secondly, there is a risk of underestimating the investment, which in practice leads to the need to adopt further resolutions, increase advance payments or incur higher financial liabilities by the housing community. Such a situation may generate unnecessary internal conflicts and undermine confidence in the management board.
- Thirdly, the lack of expert advice for more complex renovations (e.g. in listed buildings or those with complex structures) may result in the scope of works being defined incorrectly, which in turn leads to problems during the project’s implementation, including claims from contractors or the need for additional works.
Is price the most important criterion for selecting a renovation contractor in a housing association?
The primary criterion for selecting a contractor to carry out building works on behalf of a housing association should be, above all, the price of the service. This appears to stem primarily from the fact that:
- housing associations generally have limited renovation funds, and selecting the cheapest bid may enable the necessary investment – which the association’s management deems essential – to be carried out without simultaneously increasing members’ contributions,
- where the construction works are ‘standard’ (for example: painting a stairwell, replacing doors, repairing installations), the differences between contractors should generally be minimal and essentially boil down mainly to price,
- adopting the price criterion allows for objectivity and easy ‘measurability’ of the choice’s accuracy. In this situation, the housing association’s management board can argue that the choice is the best because the price is the lowest. This also speeds up the decision-making process.
Furthermore, it should be borne in mind that the provisions of the Polish Act on the Ownership of Premises clearly state that it is the responsibility of the housing association’s management board to take actions that are as optimal as possible for the association, which is verified through a vote on a resolution approving the report on the Polish Activities of the housing association’s management board (Section 30(2)(3) of the Polish Act) and a resolution on granting discharge to the housing community’s management board (Section 29(2) and Section 30(2)(3) of the Polish Act).
Can price, then, be the sole criterion for selection? It would appear that in many cases it can.
A practical example from Polish case law:
“The selection of a tender which is not the most economically advantageous clearly violates the principles of proper management of common property” (judgment of the Polish Court of Appeal in Warsaw, 1st Civil Division, dated 16 June 2014, ref. no. I ACa 20/14).
What criteria, other than price, are permissible when selecting a contractor for renovation works?
In certain circumstances, factors other than price may often determine the selection of a particular contractor’s bid; however, three conditions must be met cumulatively:
1) the criteria must be precisely defined,
2) the criteria must be known to all members of the housing community,
3) the criteria must be known to the bidders.
The criteria should be precisely defined in a resolution of the housing association. For example, the association may decide that, given the historic nature of the building, in addition to the price criterion, the contractor’s experience in conservation work and the use of materials approved for historic buildings will be equally important. In principle, having such references from previously completed construction works on historic buildings should minimise the risk of workmanship errors and the need for subsequent repairs.
Another example might be the short deadline for completing construction works in the event of an emergency failure in a communal area, or the adoption of a construction plan designed to minimise disruption to residents. Factors such as warranties and the availability of after-sales service may also be decisive when selecting a contractor for electrical, plumbing or heating systems.
The second prerequisite is that, before selecting a tenderer, all members of the housing community should have the opportunity to familiarise themselves with the criteria and rules according to which the contractor will be selected. This ensures the transparency of the process and enables community members to assess whether the decision taken by the management board is reasonable and in the financial interest of the community. In practice, it is recommended that the resolution of the housing community should include a detailed description of which aspects will be taken into account.
The management board of the housing community may also rely on a technical condition assessment prepared by a person with the relevant expertise, such as a civil engineer. Members of the housing community should also be given sufficient time to familiarise themselves with the criteria before the contractor selection procedure begins, so that they may submit any comments they may have.
The third condition is that the criteria must be known in advance to all tenderers who may submit a tender for the performance of construction works for the housing association. The association’s management board should therefore provide potential contractors with clear information on the criteria for evaluating tenders, for example in the invitation to tender. Should any changes to the criteria arise during the procedure, they must be communicated immediately to all tenderers so that none of them is treated unequally.
A practical example from Polish case law:
“The defendant is correct in stating that various considerations may have influenced the selection of the tender, but these must be precisely defined, rational and known to all members of the Association” (judgment of the Polish Court of Appeal in Szczecin, 1st Civil Division, of 19 March 2015, ref. no. I ACa 927/14).
What criteria must not be taken into account when selecting a contractor?
As indicated above, in certain situations, price should not be the sole criterion for selecting a contractor to carry out construction works for a housing association; however, the management board is entitled to base its decision on other factors. However, there are criteria which must not influence the management board’s decision, as they are unrelated to the financial and economic interests of the housing community, nor to making a fair choice in the community’s best interests. These criteria include, above all:
- personal considerations regarding the contractor, i.e. likes, dislikes, an unfounded sense of ‘trust’ in a person, or previous private relationships. In other words, the personal, arbitrary feelings of the housing association’s management board (or individual members of the board) are irrelevant to the selection process,
- subjective and unsubstantiated opinions lacking any factual basis, i.e. considering, for example, that a particular contractor “seems better”, “seems likeable”, “inspires trust”,
- preferences resulting from external pressure, for example from a member of the housing association, the housing association council, or a group of housing association members, particularly where these individuals have links to the contractor in question,
- the potential for personal gain by members of the housing association’s management board, i.e. situations where a particular contractor is favoured because they offer gifts, discounts on other construction work for board members, or any other financial benefits. In such situations, in addition to civil liability, one should also bear in mind potential criminal liability, which we have described in more detail in this publication.
A practical example from Polish case law:
“A personal attitude towards the bidder in the form of respect, sympathy or trust cannot be taken into account here, because the management of common property is understood in an economic sense as the duty to ensure the proper condition of the property and consists of sound economic and financial management” (judgment of the Polish Court of Appeal in Szczecin, 1st Civil Division, dated 19 March 2015, ref. no. I ACa 927/14).
Must the resolution contain all the terms of the contract with the contractor?
A common complaint raised by members of a housing association is that the resolution has been worded too broadly and does not contain all the details regarding the association’s cooperation with the contractor, which should justify the resolution’s repeal. However, this reasoning is not always correct. The resolution does not need to describe in detail all matters relating to the contract, as it would then effectively become a draft contract. Instead, it should contain elements that are key for the association, in particular regarding the price of the service and the criteria for selecting the contractor.
A practical example from Polish case law:
‘In the opinion of the Regional Court, the plaintiffs’ allegations that the resolution did not include matters concerning the details of the contract were unfounded, as any subsequent refinement of various details is left to the discretion of the management board, which concludes such a contract. Provisions of this kind may be included in the resolution; however, the resolution should contain the most important – fundamental – issues concerning the selection of the tenderer and the purchase price (judgment of the Polish Court of Appeal in Warsaw, 1st Civil Division, of 16 June 2014, ref. no. I ACa 20/14).”
What steps can a member of a housing community take if they consider that a resolution favours a particular entity or is contrary to the interests of the community?
If a member of a housing association believes that a resolution of the housing association favours a specific contractor or is contrary to the interests of the association, they may, first and foremost, bring an action to have it set aside. This is because, pursuant to Article 25 of the Polish Act on the Ownership of Premises, a premises owner may challenge a resolution in court on the grounds that it is inconsistent with the law or the agreement between the premises owners, or if it breaches the principles of proper management of the common property or otherwise infringes upon their interests.
It appears that in such situations, the basis for challenging the owners’ resolution will be a breach of the principles of proper management of the common property. Legal doctrine indicates that a breach of these principles “occurs when a resolution leads to the wasteful expenditure of the housing community’s funds” (B. Lackoroński (ed.), The Polish Act on the Ownership of Premises. Commentary, 13th ed., 2024). In conducting its analysis, “the Polish Court will verify the validity of the claim by assessing the appropriateness, economy and soundness of the community’s decision as expressed in the contested resolution” (A. Doliwa, Ownership of Premises. Commentary [in:] Housing Law. Commentary, 6th ed., 2021)
An action to set aside a resolution of a housing community may be brought against the housing community within six weeks of the date on which the resolution was adopted at a general meeting of owners, or from the date on which the claimant was notified of the content of the resolution adopted by way of individual voting. It must be assumed that, for effective notification of the content of the resolution, it is not sufficient to display it on the notice board; rather, it is necessary to serve a written notice on each owner of a flat (see: B. Janczewska, J. Wyszkowski, New Housing Acts, p. 176).
It remains of paramount importance to flat owners that, pursuant to Article 25(2) of the Polish Act on Flat Ownership, the contested resolution is enforceable unless the Polish Court suspends its enforcement until the conclusion of the case. In practice, this means that when filing a claim to set aside the resolution, one must also apply for interim relief by suspending the enforceability of the resolution. Naturally, the flat owner should substantiate their claim for the resolution’s annulment and demonstrate that the lack of security could deprive them of satisfaction (Article 730(1) and Article 732 of the Polish Code of Civil Procedure).
Summary
The proper preparation and adoption of a renovation resolution by a housing association requires the management board to act in a cost-effective, transparent manner, based on reliable data. It may be crucial to identify the housing association’s needs, conduct an early, even preliminary, market survey, gather competitive quotes, and often seek expert advice.
Although price is, in principle, the primary and most objective criterion for selecting a contractor, it should not always be the sole deciding factor. It seems acceptable to take additional criteria from contractors into account, provided that these are clearly defined and known to all members of the association and to the bidders. However, it is not permissible to be guided by subjective, personal considerations or private interests.
The housing association’s resolution itself does not necessarily have to regulate all the details of the contract with the contractor a priori, but it should contain its key elements, in particular the price and the rules for selecting the bid.
Taking these steps by the housing community’s management board reduces the risk of erroneous decisions and subsequent disputes in the form of legal action to overturn the housing community’s resolution, which in practice could bring renovation works to a standstill.
Can a housing association pass a resolution regarding the renovation of a common area without specifying the scope and costs of the work?
No. Any so-called ‘blanket’ resolutions, which grant the housing association’s management board unlimited discretion, may be challenged. Case law indicates that flat owners must be able to make a realistic assessment of the investment and its financial consequences for the association at the very stage of the resolution’s adoption. This means that a renovation resolution should at least specify: the scope of the building works, the type of works, and the estimated costs.
Even if the renovation is carried out correctly, this does not remedy a flawed resolution that was too general and did not allow owners to make an informed decision.
Can the community’s management board negotiate with only one tenderer or accept their bid conditionally, when other tenderers do not have this opportunity?
No, because such conduct is not in line with the principles of fair competition. Allowing a single tenderer to submit a low bid on the condition that they may increase it if other tenderers submit higher bids violates the principle of equal treatment of all participants in the tender. It is equally unacceptable to conduct negotiations exclusively with a single bidder in a situation where other potential bidders could have submitted more favourable proposals but, in practice, were not given the opportunity to do so. Accepting a single bidder’s offer, as it were, ‘automatically’, without a transparent comparison of all bids, cannot be regarded as an action beneficial to the housing community; on the contrary, it constitutes an action that violates the principles of the rational management of the housing community’s financial resources.
Can giving preference to a single bidder be considered contrary to the interests of the housing community?
Yes. Favouring a single contractor (in any way) without a transparent comparison of bids will be contrary to the interests of the housing community, as it may lead to higher costs or the selection of a less favourable bid.
