Why a Homeowners' Association?

1 July 2020

You may have been surprised yourself when you first moved into a complex with an active Owners' Association. As often becomes clear from questions raised during Owners' Association meetings, the purpose of an Owners' Association is not always equally clear to everyone. Hence a brief explanation.

In simple terms, the aim of an Owners' Association is to take care of shared property. In essence, this refers to things that are not owned by one specific owner but are used by multiple owners. The reason for this is also quite straightforward, and to clarify, we'll use roof maintenance as an example. If a roof is poorly maintained, damage can occur, such as leaks or falling roof tiles. To prevent such damage, the government has stipulated that these things must be maintained. However, since the roof is often structurally connected along the entire length and breadth of the complex, it often doesn't make sense for each owner to only maintain their own section of the roof. A perfectly maintained section of roof connected to a poorly maintained section is, as a whole, still not well maintained.

The easiest way to then ensure that everyone jointly takes care of the maintenance is by setting up an association. The Owners' Association.

But of course, it doesn't stop there. To carry out this maintenance of the common areas, money is of course also needed. For this reason, an Owners' Association saves money in a reserve fund. This naturally leads to the question: how does an Owners' Association know how much they need to save? The answer to this is also simple. A Multi-Year Maintenance Plan, or MJOP for short, is often used for this. It details when maintenance will be required for all items that fall under common ownership and what the expected costs will be. By looking at how much money is needed annually to carry out the maintenance, it can also be calculated how much needs to be saved per year. This is then called capitalisation.

In addition to saving for maintenance, it is also important that the owners agree on how the saved money will be spent. For this reason, an Owners' Meeting must be held every year. At this meeting, it is decided, among other things, what will be spent on maintenance matters in the coming year. However, the meeting is also given the opportunity to check whether the expenses from the past year have been correct. As you may already know, there are other matters on the agenda for the Owners' Meeting; unfortunately, this article is not large enough to cover everything. The next newsletter will go into more detail on the content of the Owners' Meeting.