Management: Difficulties with Buildings in which the State is a Co-Owner

Written by: Stjepan Lović, attorney, Law Firm Grubišić & Lović & Lalić

According to publicly available data, the Republic of Croatia owns more than 7000 apartments, making it the largest individual owner of residential real estate. Based on the Law on the Management of Real Estate and Movable Property owned by the Republic of Croatia, which came into force in December 2023, the management of state apartments has been entrusted to the State Real Estate Company. The apartments managed by this company vary in purpose and use, and the rental amounts depend on the basis on which the apartment is used. However, the classification of apartments according to certain criteria does not mean that the state has managed to determine and regulate the status of all apartments or commercial spaces in its ownership, as citizens witness daily.

Namely, there are a large number of abandoned spaces that are not used by anyone, which are in quite poor condition due to lack of maintenance, and for which the state as the owner has not yet determined their purpose, making it uncertain when these properties will be put on the market. The same situation applies to state-owned apartments. They are usually abandoned, locked, and unmaintained, and as such, they often become a source of damage to other apartments in that building. This condition of spaces and apartments owned by the state jeopardizes the safety of other apartments and their owners, hinders them in possessing and using their own properties, and ultimately detracts from the appearance of the entire building.

Co-owners are responsible

Can the state as a co-owner of a building be compelled to take active action? Often, the lack of consent or the difficulty in obtaining such consent from the state is the reason buildings are not renovated and modernized. The Law on the Management and Maintenance of Buildings (ZUOZ), which came into force on January 1, 2025, and which contains only 69 articles, regulates the area of building management and maintenance, the relationships between participants in the field of building management, building management itself, and the rights, obligations, and responsibilities of co-owners, representatives of co-owners, and building managers. We witness poorly maintained facades of buildings and frequent situations where parts of the facade fall onto the street, which can cause damage to passersby and vehicles.

The law clearly states that for damage to third parties, all co-owners of the building and the manager are jointly liable, but also that the manager can be relieved of responsibility if they prove that they had previously proposed in writing to the co-owners the necessary works to eliminate the danger, and the co-owners did not accept such a proposal.

Why did the law not relieve from responsibility those co-owners who accepted such a proposal, but due to the inability to achieve the majority of votes required by law, the proposal was not accepted? The fact is that co-owners are responsible for the condition of the buildings, but responsibility should only lie with those co-owners who obstruct the granting of consent for any works, which is why buildings are not maintained and deteriorate even further.

Problems with the majority

It is also a fact that the state rarely responds to co-owner meetings, which makes it difficult, almost impossible, to make a decision that requires a qualified majority of signatures. For example, the law stipulates that a qualified majority is required to make a decision on investment maintenance, which includes activities aimed at improving the designed or achieved properties of the building for which it is necessary to allocate funds exceeding the reserve funds that co-owners are obliged to pay during one year.

According to the law, a qualified majority of co-owners is the majority of those co-owners who own more than eighty percent of the total value area of the building for buildings for which co-ownership parts are not determined, or co-owners who own more than eighty percent of the co-ownership parts registered in the land registry. Given that the reserves are generally low, no serious investment in the building can be made without consent for increasing the reserve. Such consent is difficult to obtain because a small number of co-owners do not want to sign it or do not respond at all to the co-owner meeting.

The law does not contain a solution

Therefore, it would be necessary for the law to regulate that the majority is counted only from the number of co-owners who attend the co-owner meeting, provided that they have been duly and timely invited. Or to submit applications to the municipal inspector to obtain a decision ordering the co-owners to undertake certain works. Then such a decision would replace the prior obtaining of the necessary decision of the co-owners.

For example, Article 7, Paragraph 6 of the Decision on the Municipal Order of the City of Zagreb stipulates that if the external parts of the building are not maintained and orderly, the municipal inspector will order the owner, user, or manager of the building to eliminate the identified deficiencies. It would be interesting to determine how many such orders have been issued by the municipal inspectorate? But it is certainly a fact that the poor condition of buildings is primarily the fault and responsibility of their co-owners.