In its judgment Rev 10830/24 dated 10 October 2024, the Supreme court of Serbia adopted a position that may have significant implications for the day-to-day practice of professional management of homeowners’ associations in the Republic of Serbia.

The essence of this position concerns whether a professional building manager may independently initiate court proceedings on behalf of a homeowners’ association against third parties or owners of individual units, or whether a prior resolution of the homeowners’ assembly is required.

The Supreme court took the position that an assembly resolution is required to file a lawsuit, except where another appropriate legal basis exists that reflects the will of the homeowners’ association.

At first glance, this appears to be a procedural issue. However, the consequences of this interpretation extend far beyond the scope of procedural law.

Previous Approach in Judicial Practice

The Law on housing and building maintenance (”Law”) regulates the scope of duties of a manager and a professional manager (“manager”) of a homeowners’ association. Among other things, the Law provides that the manager represents and acts on behalf of the homeowners’ association, while it doesn’t prescribe the adoption of a special assembly resolution as a prerequisite for filing a lawsuit. In other words, the Law grants the manager the authority to represent the homeowners’ association in the broadest sense, and nowhere expressly provides that a special assembly resolution is required to initiate court proceedings.

Because of this statutory framework, judicial practice has so far generally taken the view that the manager’s standing to act in court derives directly from the Law.

The New Position of the Supreme Court

Relying on the provisions of the Law and the Civil procedure Act, the Supreme court held that the manager is the executive body of the homeowners’ association and isn’t independent in the performance of its duties, but the body responsible for implementing assembly decisions. On the other hand, the assembly is the body that adopts decisions, while the manager’s role is to implement those decisions. Therefore, although the Law grants the manager the authority to represent and act on behalf of the homeowners’ association, those procedural powers aren’t unlimited.

The Court considers that filing a lawsuit on behalf of a homeowners’ association constitutes an action that must be based on the will of the homeowners’ association, i.e., the owners of individual units, expressed through an assembly resolution, except where:

• such authority derives from the building maintenance program, which provides funds for that purpose;
• the matter is regulated by the rules governing the mutual relations of unit owners within the homeowners’ association;
• the dispute concerns the homeowners’ association’s right to reimburse maintenance or repair costs relating to the common parts of the building.

In such cases, a separate assembly resolution authorizing the filing of a lawsuit is not required.

In other words, the manager must obtain an assembly resolution before initiating court proceedings, regardless of whether the dispute is against a third party or the owner of an individual unit. The same applies to other procedural actions in proceedings where the homeowners’ association is a defendant, including granting the power of attorney to an attorney at law.

Why is This Decision Important for Professional Building Managers?

The practical significance of this decision extends far beyond the issue of procedural representation.

In many homeowners’ associations, debt collection proceedings against owners of individual units are the primary mechanism for protecting common property and ensuring the regular financing of building maintenance.

If judicial practice continues to develop in line with the Supreme court’s position, managers will need to ensure that, before initiating proceedings, they have either an appropriate assembly resolution or another legal basis recognized by the Court as sufficient.

Otherwise, defendants may raise procedural objections that could result in the dismissal of the claim or prolongation of the proceedings.

Issues Raised by the Supreme Court’s Position

A particularly important issue arising from this position concerns situations that are very common in practice, that is the inability to hold assembly meetings due to the lack of a quorum.

The experience of managers shows that a significant number of homeowners’ associations fail to hold assembly meetings because owners of individual units do not attend them. In such circumstances, it’s often impossible to adopt even the basic decisions necessary for the regular functioning of the building.

It is precisely in these homeowners’ associations that situations requiring judicial protection most frequently arise, such as non-payment of common expenses, unauthorized use of common areas, or other breaches of obligations by owners of individual units.

If the position that a prior assembly resolution is required before filing a lawsuit were to be applied consistently, an important practical question arises: what happens when such a resolution can’t be adopted? Does the homeowners’ association effectively lose the ability to seek judicial protection of its rights? Can the passivity of the majority of unit owners result in a procedural inability to protect common property?

These are questions to which the Supreme court’s position provides no direct answer.

Representation as an Instrument of Efficiency Rather Than Formality

It may be argued that this is precisely why the legislature entrusted managers with the authority to represent homeowners’ associations, to ensure the functioning of the system even in situations where the assembly can’t adopt decisions within a reasonable period of time.

From that perspective, representation isn’t merely a formal function but rather an instrument for ensuring the effective protection of the interests of the homeowners’ association.

Viewed from this angle, one may ask whether strictly conditioning the initiation of court proceedings upon an assembly resolution always serves the purpose and objectives that the legislature intended to achieve.

Legal Certainty Through Clearly Defined Powers

From the perspective of legal certainty and the efficient work of professional building managers, one possible solution is to address this issue proactively through the general acts of the homeowners’ association.

This may include:

• adopting an assembly resolution authorizing the manager to initiate and conduct court proceedings for the collection of claims and the protection of the homeowners’ association’s property;
• clearly defining such powers in the rules governing the mutual relations of unit owners within the homeowners’ association;
• planning litigation costs through the building maintenance program.

In this way, the risk of procedural objections can be significantly reduced and greater legal certainty can be ensured in the actions of professional building managers.

Between Formal Requirements and Practical Problems

The Supreme court’s judgment raises an important question regarding the relationship between management, representation and decision-making within homeowners’ associations.

Although it’s understandable that the decision to initiate a dispute should reflect the will of the owners of individual units, the question remains how such a model functions in practice when the assembly is unable to adopt decisions due to the lack of a quorum.

Paradoxically, the homeowners’ associations that have the greatest need for judicial protection, those characterized by passive unit owners and chronic decision-making difficulties, may simultaneously be those that face the greatest obstacles in obtaining such protection.

The coming period will show whether judicial practice develops a more flexible approach capable of reconciling formal decision-making requirements with the realities of how homeowners’ associations function, or whether courts will continue to insist on a stricter model requiring prior authorization by the assembly.

Until then, professional building managers should proceed on the assumption that courts will increasingly examine not only whether the manager has the authority to represent the homeowners’ association, but also whether the homeowners’ association previously adopted a resolution authorizing the initiation of the dispute.

This article is for informational purposes only and does not constitute legal advice. If you require any additional information, please feel free to contact us.