Dec 12

The law reform of condominium has been approved, but it is not a revolution

Some of the most interesting changes did not come. However, the reform has brought many small variations related to single problems of the life in condominium. It has been shelved the idea of giving a legal capacity at the condominium. It is still defined a "management entity", thus remaining in contradiction with the current debate about the assets of the condominium. In addition, a lot of parts of the reform appear to be limited to transform into law principles that have already been widely confirmed by law itself. One of the main objectives of the reform, i.e. the decrease of litigations, does not seem to have been achieved. For example, the reform does not clarify several problems associated with the purchase and sale of common parts.

The role of condominium managers has instead been significantly modified, but also in this case to a lesser extent than what expected. Managers will need to possess stronger integrity requirements. They will also have to take out a special insurance policy for the condominium, in order to provide protection from risks arising from their profession. The insurance will have to be taken out only after the formal request of the assembly and its costs will be directly incurred by homeowners. Condominium’s balance sheet will be more akin to that of a real company. The reform imposes also the obligation to keep a register of accounts, a summary of the financial statement, as well as a short explanatory note of the management, with an indication of both ongoing and pending relationships. Condominium managers will have to provide a list of incomes and expenses, the balance sheet, funds and / or reserves, in order to allow immediate verifications. The assembly will have the right at any time to appoint an auditor, also with reference to several previous years. Accounting records should always be viewable by homeowners and must be stored for at least ten years. The assembly may also require the creation of a website, whose development will be in charge of the condominium manager and its cost will be incurred by homeowners. Through the website, homeowners will  be able to view and print in digital format monthly statements and other documents approved by the assembly. The access to the website will be protected by a password. The reform has also introduced the obligation of a specific current account, either postal or bank, in condominium’s name.

The amendments relating to the role and obligations of the condominium manager are sufficient to confirm many scenarios that we anticipated in our last newsletter: condominium management will become a more structured business, no longer manageable by either single professionals or even neighbors, as it still happens in small Italian towns. Condominiums management will become an interesting business for many actors, both new and neighboring, due to several reasons: condominium managers will no longer be entitled to any earnings in addition to their annual fee, i.e. they will no longer derive economic benefits from, for example, works of emergency maintenance; the reform concerns both public and private housing; new obligations regard both economic and insurance aspects. Prospective new players could be represented by facility managers, securities brokers and also banks, as it already happens in France. The business is interesting: just remember that it concern 12 million families and that the overall expenses of around 930,000 Italian condominiums worth about 1% of national GDP.

The challenge is to manage condominiums in a new regulatory environment, without increasing costs incurred by homeowners. According to the different associations of homeowners, this fear is a certainty in the light of the new reform, at least in the short term. However, in the medium-long term, administrative costs could decrease, if companies will develop new business models, able to exploit economies of scale and synergies with some of the other activities and expenditure aspects of condominiums.