Exceptional call for funds: the price of a thin reserve

The property manager's (syndic's) letter fits on one page. Subject: exceptional call for funds, roof renewal. Then a four-figure amount, to be paid within thirty days. You reread the minutes of the last general meeting (GM), you find the vote, and the question comes by itself: is it normal to have to find a sum like that all at once?

Normal, yes. Inevitable, no. Our argument fits in one sentence: an exceptional call for funds is rarely an accident, it is the deferred bill of a reserve fund kept at the minimum. The figures show it, and they also tell you what you can still do, whether the call has already landed or is on its way.

An exceptional call always follows a vote

No article of the Civil Code is headed ‘exceptional call for funds’. In practice, the expression refers to the call for fundsGlossaryRequest for payment sent by the syndic to the co-owners to top up the working capital fund or the reserve fund. With each call for funds, the syndic states which portion will go to the reserve fund. See the glossary the syndic sends to finance expenditure that is not covered by the ordinary advance payments: a roof, a communal boiler, a lift that needs replacing.

The syndic does not make it up. Works affecting the common parts are voted at the general meeting by a two-thirds majorityGlossaryMajority required in particular for works affecting the common parts, other than works required by law and protective works, and for amendments to the articles that concern only the enjoyment, use or management of the common parts. See the glossary of the votes, and by an absolute majority when they are required by law or protective (art. 3.88, § 1, 1°, b)). The funding is decided straight afterwards: share taken from the reserve, share called, number of instalments. The page on co-ownership building works sets out this order and advises voting the funding plan at the same time as the job.

One exception. When damage cannot wait for the next meeting, the syndic carries out protective measures on their own initiative, then reports back. A tarpaulin over a leaking roof falls into that category. Replacing the whole roof covering does not.

Once the decision is taken, each unit pays its share according to the allocation key in the co-ownership regulations, usually its shares (quotités).

Does the 5% legal minimum pay for a roof?

No, and a calculator is all it takes to see why.

The Civil Code requires the owners' association (VME/ACP) to build up a reserve fundGlossaryTotal of the periodic contributions intended for non-recurring expenditure, such as replacing the heating system or the lift. It becomes mandatory no later than five years after provisional acceptance, with an annual contribution of at least 5% of the previous financial year's ordinary service charges, unless the general meeting decides otherwise by a four-fifths majority. See the glossary no later than five years after the provisional acceptance of the common parts. The annual contribution may not be less than 5% of all ordinary common chargesGlossaryRecurring costs of the co-ownership, as opposed to non-recurring costs covered by the reserve fund. Their total for the previous financial year is the basis for calculating the minimum 5% contribution to the mandatory reserve fund. See the glossary for the previous financial year, unless the general meeting decides by a four-fifths majority not to build up that fund (art. 3.86, § 3). The text itself lists the expenditure concerned: renewing the heating system, repairing or renewing a lift, laying a new roof covering. The page on the working capital and reserve funds sets out these rules.

Take a typical case, built for the purpose of the example. A twelve-apartment building in Leuven spends €30,000 a year on ordinary common charges. The legal minimum is therefore €1,500 a year for the whole building. Assume a roof quote of €90,000 in ten years' time: the amount is chosen for the calculation, it is not a market price. Here is what four levels of contribution give, for the building and for a unit holding 100/1,000 of the shares.

Three lessons from this table.

At the legal minimum, the reserve covers one sixth of the job after ten years. To build up €90,000 at €1,500 a year would take sixty years, far longer than the lifespan of a roof covering. The 5% floor guarantees that a reserve exists. It does not guarantee that it is enough.

The 100/1,000 unit pays €9,000 in all four scenarios. This is the point general meeting debates most often forget: raising the contribution does not cost a single euro more over the period, it only changes the timing. At the minimum, that unit pays €150 a year for ten years, then €7,500 in one go. At 30%, it pays €900 a year, or €75 a month, and never receives the syndic's letter.

Finally, the 5% is calculated on ordinary charges, not on the value of the building or the condition of its equipment. A thrifty building with low charges therefore builds its reserve more slowly than another, even though its roof will cost no less.

Our view: treating the legal minimum as a target amounts to scheduling an exceptional call. The right basis for the calculation is not a percentage, it is the list of the building's major items, their age and a rough idea of the cost of replacing them. The syndic must in any case include foreseeable extraordinary costs in the budget each year (art. 3.89, § 5, 16°), which gives the general meeting a chance to discuss them: see the page on the co-ownership budget.

The objection: why tie up money in the building?

It is a serious objection, and it often comes from co-owners who plan to sell.

A unit's share of the reserve fund remains the property of the association when the unit changes hands (art. 3.94, § 5). The seller gets nothing back from the syndic. Belgium's notaries point this out: without a specific clause in the preliminary sale agreement, that sum is lost to them. Seen this way, every euro paid into the reserve is a euro that a departing co-owner gives to their successor. Why contribute to a roof you will never see?

Second argument: money held in the association's account earns the co-owner nothing, whereas they could have saved it themselves and drawn on it when the time came.

Both arguments hold up on paper. In practice, they stand up less well.

Seller and buyer can agree in the preliminary sale agreement that the buyer reimburses the seller's share of the reserve. The buyer and their notary receive the amount of the fund before the sale in any case (art. 3.94, § 1): a well-stocked reserve is a price argument, an empty one signals calls to come. As for personal saving, it assumes that the twelve co-owners in our typical case have all put €7,500 aside. It only takes one of them being unable to pay for the job to be delayed or for the others to advance their share, for as long as the recovery process described in the page on a co-owner not paying takes.

So the objection makes us qualify our view, not back down. A strong reserve only makes sense if the building knows what it is saving for. Without a list of works or a time horizon, a high contribution looks like a kitty, and it is understandable that it gets voted down.

The call has landed: can you refuse, spread or challenge it?

Refuse, no. A decision taken in due form binds everyone, including those who voted against it. Not paying exposes you to the late payment interest provided for in the co-ownership regulations, and the syndic can take recovery action without going back to the general meeting (art. 3.86, § 3).

Challenging it remains possible, within narrow limits. An action for annulmentGlossaryLegal action by which a co-owner asks the court to annul or amend an irregular, fraudulent or abusive decision of the general meeting that causes them personal harm. It must be brought within four months of the date of the meeting. See the glossary targets an irregular, fraudulent or abusive decision that causes you personal harm, and it must be brought before the justice of the peace within four months of the general meeting (art. 3.92, § 3). Finding the amount too high is not a ground. And until the court has annulled the decision, the call remains payable.

Spreading the payments is the most realistic route. Before paying or negotiating, check these points, minutes in hand:

• the item was indeed on the agenda and the required majority was reached;
• the amount called matches your shares or the key in the regulations, applied to the amount voted;
• the decision states the share taken from the reserve fund and the share being called;
• the instalments announced by the syndic are the ones the general meeting voted;
• the date of the general meeting, from which the four-month period runs.

If the general meeting provided for a single instalment and the sum puts you in difficulty, write to the syndic before the deadline, not after. Propose a precise timetable. They are not obliged to accept it, but a written payment plan costs everyone less than legal proceedings.

Selling between the vote and the call

A borderline case, and a common one. The works are voted in March, the deed of sale is signed in June, the syndic calls the funds in September. Expenditure decided before the transfer of ownership, but for which payment is requested afterwards, is borne by the buyer (art. 3.94, § 2). The parties can agree otherwise between themselves: that is settled in the preliminary sale agreement, not with the syndic.

Our position

An exceptional call for funds is neither an abuse nor a fatality. If you have just received one, check the vote, pay or negotiate a timetable in writing, and keep the four-month deadline in mind. Then, at the next general meeting, ask for an item to be added to the agenda: raising the contribution to the reserve fund, backed by the list of major works. The syndic's next letter depends on it.