Cologne Higher Regional Court, 23 October 2013, Ref.: 11 U 109/13
A condominium owners' association is the association of all owners of a condominium complex that is created when at least two owners have been entered in the land register at the land registry.
The rights and obligations of the condominium owners are regulated in the German Condominium Owners Act (WEG). Pursuant to Section 10 (6) sentences 2 and 3 WEG, the community is the holder of the rights and obligations established by law as a community and acquired through legal transactions.
The homeowners' association thus exercises the community-related rights of the homeowners and fulfils the community-related obligations insofar as these can be asserted jointly or are to be fulfilled.
As a result, this means that the interests of the community generally take precedence over the interests of an individual tenant. This can mean that a co-owner cannot assert the rights to which they are entitled if the interests of all other flat owners are impaired as a result.
In the above-mentioned judgement, the Cologne Higher Regional Court had to decide on appeal whether the individual purchaser was entitled to a right of retention despite a settlement concluded by the homeowners' association with the property developer.
Facts and cause of action
The plaintiff demanded payment of the last outstanding purchase price instalment in the amount of € 20,996.48 and reimbursement of out-of-court legal fees in the amount of € 1,023.16. This claim resulted from a property development contract dated 1 April 1998 for the purchase of a condominium. According to the contract, the last instalment of the purchase price was not due until the flat was fully completed, which included, among other things, the rectification of all defects recorded in the acceptance report.
Various defects were documented during the acceptance of the common property on 4 November 1999, whereupon the defendant refused to pay the last instalment of the purchase price. He cited defects in both the common and the separate property. In 2003, the condominium owners' association initiated an evidentiary procedure to clarify the existing defects.
Transfer of condominium ownership and agreement
In 2008, the defendant transferred his residential property to his wife, who was entered in the land register in 2009. On 31 January 2011, the plaintiff reached a settlement with the homeowners' association. This agreement concerned all defects in the common property and provided for financial compensation for remaining defects in addition to specific defect rectification work.
The defendant opposed the judgement of the first instance and continued to request that the claim be dismissed. He argued that the limitation period had expired and that he was entitled to rights of retention due to the existing defects.
Decision of the Cologne Higher Regional Court
The Cologne Higher Regional Court (OLG) dismissed the defendant's appeal and confirmed the decision of the lower court. The OLG ruled that the residual purchase price claim in accordance with the property development contract only became due when the defects recorded in the acceptance protocol were rectified in the course of the 2011 agreement. Therefore, the limitation period had not yet expired at the time the action was filed.
Furthermore, the OLG clarified that the defendant had lost its rights of retention due to the comprehensive agreement between the homeowners' association and the plaintiff. The homeowners' association could represent the rights of the owners within the framework of the proper administration of the common property and had acted here in a legal representative capacity.
Significance of the legal representative action
The OLG explained that the homeowners' association was authorised to enforce legal claims relating to the common property on behalf of all owners. Individual owners, even retired owners such as the defendant, were bound by such agreements. The defendant therefore no longer had a right of retention, as the homeowners' association had conclusively settled the claims for defects through the settlement of 31 January 2011. Accordingly, the plaintiff's purchase price claim is now justified.
Source: Higher Regional Court of Cologne
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