The initiative for topping up often comes from the owners themselves. Topping up creates a cash flow within the VvE with which, for example, sustainability measures can be financed without owners having to make substantial additional contributions. This can therefore bring the necessary benefits.
Rules within the association
As a retailer, you are always dealing with real estate because a built space is needed to operate your business in. Usually, that space is either leased or owned. In the latter case, you may find that the space is part of an association of owners. In that case, you are the owner of an apartment right and therefore a member of the CoE by right. Apartment owners are bound by the rules in the subdivision deed with subdivision drawing, the household regulations and the decisions taken at the meeting of owners. In addition, rules are also contained in the law (Civil Code 5, Articles 106 to 147). If a VvE intends to opt up, it is of course bound by these rules.
Most importantly, topping up is not just possible because the apartment building is part of a division into apartment rights. Both the land and the building with everything that goes with it are fused into one legal object, so to speak. That object may not simply be enlarged, because then the data in the division deed and the division drawing no longer correspond to the actual situation.
Modifying the subdivision deed
According to the legislature, the following three categories can be distinguished when amending the subdivision deed:
- Enlarging or reducing what is involved in the division;
Enlarging involves adding something to the division, such as a piece of land.
- Change in the construction or layout of the building itself;
If there is a change in the construction or layout of the building, the subdivision deed must be amended if it affects the property law situation.[1] This means that it is not necessary to amend the subdivision deed if only the boundaries of an apartment change and this does not affect the property law situation.
This category generates the most discussion in practice. Judges do not always agree on the answer to the question of when there is such a change in the construction or layout of the building itself. This is also evidenced by two recent conflicting rulings on whether or not the subdivision deed must be amended in the case of placing a dormer on an apartment.[2]
If a private part is actually enlarged at the expense of the common part, then the boundaries of the apartment change in such a way that it affects the property law situation. In that case, the division deed must be amended accordingly. The Supreme Court recently ruled that such an amendment is only possible with the cooperation of all apartment owners (Article 5:139 paragraph 1 of the Civil Code).[3]
- Amendment of subdivision regulations intended by the joint owners.
This last category refers only to an amendment to the bylaws or regulations intended by the meeting of owners, such as a change in the name of the CoE or an adjustment for cost sharing.
Process subdivision deed amendment
Opting up always involves category (2) as described above, so amending the subdivision deed must be done with the cooperation of all owners. Because of the involvement of various property owners and the necessary consents from the mortgage holders, amending a subdivision deed is a laborious process. In addition, topping up in the context of preservation is another (additional) legal implication, with which little experience has so far been gained in the Netherlands. Therefore, a legal expert in this field will be necessary who can assist in the entire process of amending the division deed.
The entire process can be broadly divided into the following steps.
Step 1: advising on desired structure.
Step 2: discussing the desired structure with the board and parties involved.
Step 3: taking stock of other points of interest/wishes with regard to the division deed(s).
Step 4: making a preparatory decision and possibly appointing a committee.
Step 5: drawing up drawings, draft deeds and coordinating them.
Step 6: collecting powers of attorney and arranging permissions.
Step 7: settling matters.
It is also important to involve a notary and a tax expert in this process. Ultimately, the notary will need to approve the content of the amended subdivision deed by verifying that all requirements have been met, such as having a permit and the consent of all owners. In addition, the tax consequences of the changes to the subdivision deed must also be clear.
For the process of topping up itself, the VvE will do well to use a financial advisor who will outline the possible financing structures. An architect will also be necessary for the design, any specifications and obtaining the necessary permits.
In short, for topping up, the VvE will need to engage the necessary specialists. It is most practical to engage a party that has many of these specializations, so that the VvE does not have to work with all these separate parties. After all, the process of topping up is already complex enough.
Housing shortage and sustainability
Capping will solve a (small) part of the housing shortage. In addition, 'topping up' enables further sustainability measures within the CoE. The extra apartments created by adding one or more floors to an existing building will create a surplus value when it is sold. The owner-occupier association can use this surplus value to have the sustainability measures implemented.
Note that it is important to keep the raising and preservation measures parallel. Both activities require extensive construction work. In addition, there is a chance that the division deed will also need to be amended for the preservation measures. It goes without saying that it is cost-effective to have the construction work carried out at the same time and by the same contractor, and to make the changes to the deed at the same time.
Conclusion
Optopping is a complex but promising initiative within apartment law. It requires a multidisciplinary approach and expertise in several areas is required. It can be practical and cost-effective to consult a party that offers multiple disciplines. As a retailer, you can contribute to reducing the housing shortage and making your building more sustainable by being the initiator of the top-up at your CoE. It is wise to be legally supported in the process from the beginning, so that no mistakes are made that cause a lot of costs afterwards. Let opting up be a success!
[1] HR April 7, 2000 (ECLI:NL:HR:2000:AA5405).
[2] By the Court of Appeal of The Hague June 30, 2020 (ECLI:NL:GHDHA:2020:1050) it was determined that the subdivision deed had to be amended, while by the Subdistrict Court of Amsterdam March 29, 2023 (ECLI:NL:RBAMS:2023:1648) on the contrary, it was determined that this was not necessary. In our opinion, a connection should be made with the ruling of the Amsterdam subdistrict court.
[3] HR Feb. 24, 2023 (ECLI:NL:HR:2023:286).
