Section 5  The title to the commonhold CCS

The Commonhold Community Statement shall describe, besides the building as a whole, each one of the units which shall be serially numbered. The description of the overall property shall set forth the circumstances required by mortgage law, along with the building’s facilities and services. The description of each flat or premises shall express its size, boundaries, the floor on which it is located and any appurtenance part such as garage, space attic or basement.

 

The title shall set the commonhold allocation corresponding to each flat or premises as established either by the sole owner of the building at the beginning of the sale of flats, by agreement of all existing owners, by arbitration award or by court decision. The basis for determining the percentage of the commonhold allocation shall be the usable area of each flat or premises in relation to the building as a whole, its interior or exterior location, its situation and the reasonable foreseeable use of common elements and shared services.

 

The Commonhold Community Statement may also contain rules and regulations concerning the exercise of rights and other provisions not prohibited by law relating to the use and purpose of the building, its various flats or premises, its installations and facilities, expenses, administration and management, insurance, maintenance and repairs, making provisions that shall not prejudice third parties if they have not been registered with the Land Registry.

 

For any amendment of the Commonhold Community Statement, the same requirements shall be observed as for its creation, except as otherwise provided regarding the validity of the commonholders’ agreement.

 

This section remains unamended since the first version of the Act in 1960. It deals with the governing documents of the commonhold; the title or the commonhold community statement and the Articles of the Commonhold Association . Most unit-holders do not have a copy of the title because they presume that everything related to the commonhold is provided by the Articles. Every owner should have a full copy of the title and of the Articles specific to their commonhold, so they understand the rules they will be required to live by.

 

As the registered deed of purchase also contains the allocation and description of the unit and the Articles usually define the common parts as well as the rights and duties of commonholders, the owner usually does not pay attention to the title. Nevertheless it is highly convenient to get a copy of it in order to, for instance, enable them to compare the allocation of their own unit with the others in the commonhold. The title and the Articles are obtainable from the Land Registry by application

 

5.1 Commonhold Community Statement

 

The CCS creates the commonhold and serves as a disclosure statement for potential purchasers and owners. Therefore, it is important that it contain sufficient information for a potential purchaser to decide if he or she wishes to purchase a unit. An owner should be able to read this document and understand his or her ownership interest and the covenants included.

 

5.1.1 Content

 

The title shall make provision at least for a physical description of the commonhold as a whole and for the extent of the units with their allocations.

 

5.1.1.1 Whole physical description Section 9 of the Mortgage Act and s. 51 of its regulations deal in depth with the content of the CCS regarding the physical description of the commonhold as a whole. It shall be expressed:

 

i. Nature of the commonhold land, which could be agricultural or building land.

 

ii. Location, which shall include the town or city, street, number if it had been assigned, name of the commonhold if it is known, its boundaries and the cadastral reference.

The Cadastre is an administrative register dependent on the Treasury Ministry in which urban, rural and special real estate properties are described. The cadastral description of properties comprises their physical, economic and juridical characteristics, including location and cadastral reference, surface area, use or destiny, type of crop or exploitation, classification of structures, graphic representation, cadastral value and registered owner

 

iii. Its area

 

After fulfilling the requirements laid down in the Mortgage Act, the general facilities of the commonhold must also be defined. It will be advisable to describe the common parts which are specified as common, as in the future these may become part of a unit by unanimous agreement of the owners.

 

5.1.1.2 Unit description

 

This section 5 requires the CCS to define the extent of each unit. When defining the extent of a unit, the commonhold community statement must distinguish between:

 

i. Total built area or gross area.

ii. Usable area or floor space in which the structure and walls are excluded from the extent.

 

The title must also delineate the boundaries of the unit, the appurtenances, and the floor in which the unit is located or if the unit has several floors, each one must be defined. It will be essential in any commonhold for the exact physical boundaries of each unit to be drawn accurately in order to indicate the boundaries within which any set of rights and obligations will operate.

 

5.1.1.3 Appurtenances

 

A single commonhold can encompass land on two or more sites which are not contiguous. Appurtenance means the accessory parts of a unit which are physically separated from the principal. It would only be deemed appurtenant if it does not have allocated a percentage, otherwise it would be deemed as an independent unit.

To determine the nature of any parts of a unit that are difficult to define, one should look to the title which contains the specified range of any part of the commonhold. Just a commonhold itself can contain two or more parcels of land which need not to be contiguous, thus a unit within the commonhold may refer to two or more areas of the commonhold.

This will permit a flat and a garage to be defined within the title as a single unit. It will be a matter of choice whether such flats and garages are defined as a single unit or listed and delineated as entirely separate properties within the commonhold. Keeping car parking spaces as independent units means that it will be possible to transfer them separately.

 

Section 3 (a) prescribes an absolute ownership right over ‘appurtenances specifically laid down in the commonhold community statement.’ Appurtenances as it is stated in s. 396 of the Civil Code must be subject to independent use by virtue of an entrance from either the public thoroughfare or a common part.

 

5.1.1.4 Allocations

 

Several sections of the Act deal with allocations . The title must make provision specifying the percentage of the assessment allocated to each unit, and the total percentages must have an aggregate of one hundred.

Apart from allocating the value and the contribution expenses, allocations shall determine the quorum for calling a meeting by commonholders and the quorum required to convene a meeting on first or second call .

The allocations also forms part of the voting majority system established by the Act.

 

5.1.1.4.1 Criteria to determine allocations

 

Only the first have a numeric basis, the others are rather subjective

 

i. Usable area. Section 4 of Royal Decree 3148/1978 contains a definition of usable area, a widely used concept in Spanish property law.

ii. Its interior or exterior location.

This indicates whether the unit has principal views to main streets or not. Location may refer to where the unit is in relation with the building or with the development.

iii. Situation. The meaning of this criterion is not sufficiently clear and could be included in the above mentioned.

iv. The reasonable foreseeable use of common elements and shared services. This permits the allocation of a lesser percentage for example, to those units which are located in the first floors as they will use the elevator less than the units located in the last floors.

In practice, architects allocate the percentages through mathematic formulas.

 

5.1.1.4.2 Amendment of commonhold allocations

 

Allocations, as expressed in the original title may not be altered except by an amendment to the title unanimously approved by all commonholders.

Section 3 (2) stipulates that improvements or impairments in a unit shall not affect the commonhold allocation, for instance if a terrace has been glazed. It will be necessary to alter the allocations where another floor has been built or if a unit is sub-divided into other units . Those cases require the unanimous consent of all the owners before the commencement of the works, as stated in section 3 and 17 (1).

If the alteration is approved the new percentages must be submitted at the Land Registry. In some cases, the unanimous consent means that every owner must sign the registered deed of modification otherwise the Registrar shall not admit the alteration and could refuse the registration of the amendment. As stated previously, the developer must have the Commonhold Community Statement of the prospective development available, so the buyers can be aware of the allocation before purchase.

 

That does not prevent a challenge to the allocation by the new owner in the extent that it is clearly unfair and or disproportionate. In that case the owner must expose the grounds to the Owners’ Committee and if they refused to pass the alteration, it would then be possible to bring an action in order to change the percentage. Subsequently, the judge may alter the allocations. SC 11-04-1995 13-03-2003 CA ruling in Asturias 2-9-2003, CA ruling in Baleares 16-10-2003, CA ruling in Barcelona 18-11-2002 CA ruling in Vizcaya 16-6-1999 CA ruling in Burgos 10-11-2005

 

5.1.3 Register the Commonhold community statement in the Land Registry

 

Regarding submission of the CCS at the Land Registry, s. 8 (4) of the Mortgage Act states that commonhold land may be registered when ‘building works are finished or at least started’.

 

A building is deemed as started when building permission is granted or/and it has an architectural project, even though the building works have not started.

Even though it is optional to register a CCS and/or its amendments in the Land Registry, it is advantageous to do so in order to acquire protection against third parties like prospective or future buyers.

 

For that purpose a CCS shall become a title deed when it is signed in the presence of a public notary, otherwise it would not be possible to register it.

 

Notaries, by law , must check the planning permission of the prospective commonhold and the mandatory certificate of the architect of the building claiming that the building works are finished in order to go ahead with the title.

Before the commencement of the building works, if the developer wants to register the title, the notary also requires a statement declaring that the project for which the building permission has been granted coincides with the description of the commonhold included in the title.

 

Usually, a deed of new building is signed along with the CCS and at the same time. Both are the constitutional documents of the commonhold. In addition section 4 (6) of Royal Decree 515/89 obliges developers to inform about the Land Registry records of the commonhold or communicate that the CCS is not lodged yet. Once it has been registered, several related and linked entries are to be recorded, firstly, one for the whole commonhold and afterward one for each unit sold.

 

The Housing Act 8/2004 of Valencia requires commonhold community statement and deeds of new buildings for starting selling off- plan. Section 7 (1) (a) of Decree 218/2005 (enforceable only in Andalucía) requires developers to hand over the Articles, the internal rules as well as information about the accounts and suppliers contracts of the commonhold.

 

Section 8 (4) (5) of Mortgage Act 08-02-1946 and s. 107 (11) makes provision with respect to registration of commonhold land setting out the details which the Chief Land Registrar is required to keep in his custody and refer to in the register of the title. In the case of a new building, its description must coincide with the one contained in the ‘deed of the new building’.

The developer is entitled to draft and register the title up until the time that any of the units are sold. Problems arise where there are buyer’s off-plan with a purchase agreement but with no completion yet. In that case, courts hold that there is no necessity to obtain the consent of those buyers in order to register the title because they are neither proprietors nor commonholders in strictu sensu.

 

5.1.4 Amendment to the commonhold community statement

 

Section 17 requires a special decision (unanimous) for the amendment of the commonhold community statement.

Problems arise when the developers are selling off the plan and amend the title or/and the Articles between the signing of the off-plan purchase agreement and the completion. Developers are entitled to amend the CCS until the first completion of any property, for this reason they usually include in the purchase agreements a covenant in which the buyer enables the developer to amend the CCS or the Articles until completion .

The granting of such right is intended to allow the developer some continued freedom and flexibility in completing the development. These powers give the developer greater freedom to develop the site and market the sale of units after the establishment of the commonhold. However, some courts tend to protect these buyers submitting that even though there is no completion yet, prospective buyers’ rights must be recognised .

The need for flexibility must be balanced with the owners’ right to have the commonhold remain as represented at the time of purchase. On the one hand, the purchasers of the first commonhold units to be completed and offered for sale need some protection against alteration of the conception or facilities of a commonhold from that presented to them when they purchased. On the other hand, the commercial developer must be able to react reasonably to commercial pressures during construction. Where a developer is selling off-plan, if there is already any unit sold through private purchase agreement during the building period, the developer needs the consent of those ‘provisional’ buyers in order to draft and register the CCS or the Articles .

 

The above mentioned approach is not held by the majority of courts, which hold that only after completion commonholders are entitled to participate in drafting and registering commonhold land.CA ruling Madrid 21-06-2011

 

5.1.5 Commonholds without title

 

It should always be remembered that the CCS is not mandatory in Spanish law; therefore the Act shall be applied to commonholds fulfilling the factual requirements of the Act even without CCS or Articles. CA in Zaragoza 17-09-2010 and 22-12-2011. SC 17-07-2006 and 23-10-2007

 

Nevertheless, every owner is entitled to require drafting and registration of the commonhold community statement. SC 09-05-1991 and CA ruling in Cuenca 24-12-93

 

In this respect subsection 2 (b) deals with these ‘de facto commonholds’.

 

The Act does not make provision for who must draft and submit the CCS but it does provide who may set the commonhold allocations:

 

i. A sole owner at the commencement of the unit sales (developer)

ii. All of the existent proprietors

iii. An arbitrator

iv. A judge

 

The CCS may be drafted at any time, even before the commencement of the building works. If a developer were the unique owner he must be aware about the rules of the Royal Decree 515/1989 in relation with the compulsory information to give to prospective buyers of the future commonhold. Among other documents the developer must have available the CCS so that potential buyers may be made aware of the provisions which will create legally binding rights and duties.

 

5.2 Articles of commonhold association

 

The Articles control the way in which the commonhold is run and how the Owners’ Committee must operate.

 

They will provide for the rights and duties of the owners and of the Committee, as well as the use and maintenance of the common parts and the units.

 

5.2.1 Not mandatory

 

Articles of commonhold are regulations governing the running of the commonhold which are not mandatory and must not be confused with the CCS or title although may be incorporated together at the same time or subsequently. As was stated by the Supreme Court in its decision of 29-10-2001 the Articles are part of the title.

Thus, there are no Articles without title but there are titles without Articles.

Although neither is compulsory, the Registrar will not admit any articles of commonhold if the CCS has not previously been registered.

 

5.2.2 Registering articles of commonhold in the Land Registry

 

As well as commonhold community statement, the Articles may be registered in the Land Registry to ensure that prospective buyers are enabled to make a fully informed decision, by making them aware of the regulations of the desired commonhold. Where there are articles but those are not registered, prospective buyers will not bound by them.

Once the Articles have been drafted, the notary has to check the legality of them, and then the deed will have access to the Land Registry. Section 8 (4) of the Mortgage Act deals with the registration of the Articles with the Land Registry.

If they are not registered then they will not have effect on third parties and they shall be binding only on those future owners who had been informed by other means or those who had agreed in a tacit or express way.

 

5.2.3 Consent

 

As it is provided for in the CCS, the Articles also requires the unanimous consent of all the proprietors in accordance with sections 14, 15 and 16 of the Act.

The Supreme Court holds that only those titles drafted exclusively by the developer, which contain covenants imposing unfair burdens or deprivation of commonholders’ rights, are of no effect.

 

Affected commonholders could claim adequation of titles to their purchase agreements. Some judgements of the SC hold that a covenant included in the Articles drafted unilaterally by the developer, in which he reserves himself the right to use roofs for the installation of adverts, are lawful because these buyers could have known of such reservation included in their purchase agreement and therefore it could have been challenged before signing the contract.

 

5.2.4 Developer’s rights on the Articles

 

Where the Articles are originally drafted and submitted by the developer he could reserve in them some rights which could be clearly detrimental for the commonholders and which could impose a perpetual burden.

Royal Legislative Decree 1/2007 on Consumers provides defence mechanisms against unfair terms which could also be applied to those contained in these Articles. In this respect courts again disagrees in their approaches. Even the Supreme Court recognizes, for example, the right provided in the Articles in which the developer is free to use the roof of a block of flats in order to put neon signs.  SC 21-03-2007 and 22-09-2005

 

5.2.5 Content

 

Among other important regulations the Articles may contain limits on the use of the units.

 

These must be expressed clearly and the interpretation should be restrictive in order to preserve ownership rights. For instance, clauses prohibiting lease units in general would not be permitted. Regarding prohibitions of lease established in the Articles, as a general rule the Articles may not set forth any general prohibition to lease units but it is legal to specify limits to that right in the Articles.

It is important to consider here section 7 (2) which deals with ‘activities which are not permitted by the Articles’. The Act is making provision for the inclusion of these ‘forbidden activities’ in the Articles. The third subsection of this section does not contain a closed list regarding matters which may be regulated by the Articles.

 

In practice, articles of commonhold refer to:

 

• Use of units

• Use of common parts

• Distribution of expense

• Provisions governing commonhold

• Banned activities

 

Regulations on articles of commonhold cannot include any covenants against law, the morals or public order, and neither can they create any discrimination banned by law. If its content is discriminatory or against law, they could be annulled.

 

5.2.5.1 Use of units

 

A description of a unit in the title as residential does not involve ‘per se’ any prohibition to run some kind of businesses.

There must be a specific prohibition. SC 05-03-1990, 21-12-1993

 

At this point it is necessary to consider whether a commonholder is entitled to alter the prescribed use of his unit where there is no specific provision in the title banning that proposed use.

 

Some courts have held that this change requires unanimous consent. However, in some cases alterations should be admitted provided that it does not ´diminish or alter the safety of the building, its general structure, its external image or condition, or prejudice the rights of another proprietor´. The CA in Murcia ruling 31-01-2006 among others admitted alteration of units’ use from residential to commercial offices. The CA in Madrid ruling 03-06-1998 and 18-03-.2005, inter alia held the validity of the use’s alteration of units from commercial to residential.

Through several judgements the Supreme Court has provided requirements for the validity of these sorts of alterations:

 

i. The general rule is freedom unless the Articles stipulates to the contrary.

ii. Where the title or the Articles provides any limit, it shall be construed restrictively.

iii. Granting or rejection of planning permission is not a matter that affects commonhold to authorize the alteration, or to compel commonhold to consent on the ground of having planning permission.

iv. Alteration must not affect common parts or facilities.

v. Alteration is not allowed where the title has to be changed, for example changing allocations, as unanimous consent is required in these circumstances.

 

5.2.5.2 Use of common parts

 

The common elements may only be used for the purposes for which they were intended and are subject to mutual rights of enjoyment by all unit-holders.

 

The Act gives the OC the power to regulate the use, maintenance, repair, replacement and modification of common elements. The OC is entitled to include restrictions on the use as may be deemed proper respecting the general and limited common elements as are designated to prevent unreasonable interference with the use and occupancy.

 

The Supreme Court in its ruling of 02-02-2006 allowed the validity of a title, in which the use of the swimming pool to a garage-holder, who does not hold any other property, was prohibited.

 

5.2.5.3 Use of premises

 

Use of premises is also a source of disputes because the inaccuracy of the titles.

 

5.2.5.4 Distribution of expense

 

The Articles may establish other different coefficient than the standard CCS quota, in order to calculate contribution for unit-holders. For instance, the Articles may provide that premises-holders will be exonerated from the expense of the swimming pool or lifts as they will not be entitled to use them.

 

5.2.6 Amendment

 

Section 14 (d) specifies that the Owners’ Committee is the only governing body which could ‘approve or amend the Articles’. Section 17 establishes the required quorum, being unanimity the basic rule.SC 20-02-2010 and 30-04-2010.

The amendment must be submitted to the Land Registry by the President

 

5.2.7 Action for annulment of Articles

 

If the court determines that a provision of the Articles is invalid, that provision is severed from the Articles and the rest of them shall be valid. The challenge must be made within four years of the time when the Articles were registered at the Land Registry.

 

5.2.8 Articles’ boundaries

 

The articles can’t change the imperative provisions of the Act as for instance the majorities system provided by s. 17 or the quorum for calling a meeting established in s. 16