Legal protection for communities

I wonder if anyone can help me. I have been asked to stand as vice president. In the UK I am a director of a management company which I presume to be similar. We have directors and officers liability insurance which protects me and our agent, who I presume is the same as your administrators. Does this same type of insurance exist in Spain?

Also in the UK if there is more than one director we take a vote and go with the majority, how does it work for a President and Vice President?

Thanks in advance,

Ant

ant

as far as I am aware there is no requirment for a community to have a VP it is optional and carries very little if anything in the way of legal obligations ect. the only obligation is to have a president

the role of a president is not clearly defined in the HPA but below is an idea of typical responsibilities

The President’s Role

^{The piece of legislation which obligates every community of owners to elect a President is probably not the most enlightened document that’s ever been written. The fact is that, although each community must have a President, there are no clear criteria which describe the duties or responsibilities of the elected person.}

^{It therefore, very often falls upon the President to write their own job description.  Sadly, this often conflicts with what many members of the community, who are fortunate enough not to be elected, think the role should be.}

^{The first thing to make clear is that the President is the ONLY legal representative of the community.  This means that he/she has the legal right to make decisions on behalf of the community.  It also means that the community can take legal action against a President who acts in a way that disadvantages the community.}

^{The assembly of the community’s general meeting is the over-riding authority of each community and it is the President’s job to implement decisions made by that assembly.  If however, unforeseen events make action necessary between general meetings, the President has the legal right to act.}

^{In reality, the communities which thrive are ones which have elected a President who is committed to the welfare of the community and is pro-active in ensuring it’s well-being.}

^{A simple list of Presidential responsibilities might be as follows:}

^{·        Calling general meetings when necessary (at least one a year in order to present the community’s accounts).}

^{·        Ensuring that accounts are kept.}

^{·        Ensuring that community assets are maintained in good condition.}

^{·        Encouraging owners to pay community fees and taking action against those who don’t.}

^{·        Providing prospective buyers with information as to whether there is a debt associated with a property.}

^{·        Being available from time to time to advise owners where necessary.}

^{·        Helping to ensure that community rules are complied with (not however, taking physical action – this is the police’s role).}

^{·        Signing contracts with any service providers that are required.}

^{·        Presiding over the community’s bank account.}

^{The above is not a definitive list, but it gives an idea of what needs to be done.  Of course, many of the above actions can be carried out by an Administrator should the President decide that one is needed to support him in these tasks.}

^{Contrary to what seems to be popular believe, an Administrator is NOT elected on to the committee (unless he is a property owner); he is appointed in the same way that any other service provider would be and can be fired in the same way too. If a contract is agreed between President and Administrator, it is legally binding, so the terms of any such contract should be fully understood before signing. Unlike the role of President, the minimum requirements of an Administrator are legally defined within the Spanish Horizontal Property Law.} 

Antonio,

I largely concur with Tadd, well as far as anyone can in Spain where the rules and laws are flexible and open to interpretation.

I don't believe that Directors & Officers cover is generally available in the Spanish insurance market, possibly due to the different culture, or the fact that in these areas Spain is 50 years or so behind a lot of the western world.

To be honest if I were in such a role in Spain I probably wouldn't bother, but if you really want the cover you can buy it in the UK.  If you speak to BIBA http://www.biba.org.uk/CustomerHome.aspx they will direct you to a specialist broker which you'll find by far the easiest route. 

In theory the premium should be not much at all as I imagine such claims are very rare in Spain, but I don't blame you for pondering the need, particularly as your most likely claimants are Brits, who are a litigious lot!

Thanks to you both for your replies. At home managing agents(administrators) will not act for you if you do not have this insurance, I suppose we are following the Americans down the litigation route.

The responsibilities are basically what I do as a director at home, my concern here was if the President were to become incapacitated I probably wrongly assumed the Vice President would step in, though from what you are saying it sounds like an EGM would have to be called to elect a new President. Is that correct?

Hi Antonio,

You're right about D & O being of  American origin.  It's a pre-requisite to accepting any senior role there and this is a growing trend in the UK. 

But if the truth be known there are remarkably few claims although of course the cover still provides litigation costs cover and as it's effectively a freebie to the individual as it's generally bought and paid by the employer/organisation it's unsurprising there's increased demand.

I'm unsure about the "stepping up" question.  From memory the situation is not covered by the HPA and also the term "Vice President" is not recognised.  So my guess would be that an EGM would be necessary, but someone else may give you a more confident answer.

VP if decided by the Community of Owners would automatically step into the shoes of  an incapicatated or absent President, so is a sensible as well as responsible role, even if you have no effective power or say whilst the President is still in place, unless of course he wishes to consult with you.

No need for an EGM as VP would fill the boots until an AGM unless he preferred to call an EGM as acting President to seek approval of owners.

Corporate liability though, which I think you are all referring to, does not appear to exist under HPA IF either President or VP follow the advice of professional advisors such as your Administrator who is insured.

As a President I have questioned this position on a number of occasions, as like you I do think President or VP could be in a difficult position at times and should have some sort of cover under European Laws.

The Spanish however still think their laws and rules are sufficient.

Directors & Officers insurance is not quite the same as Corporate Liability, it is the personal liability of the individual in carrying out their function.  There is case law around the world which typically finds that the CEO, Financial Director, Technical Director, Human Resources official failed to undertake their function, or made an error or failed to take action etc.  I don't believe there's much in Spain as yet.

It's been described as "Professional Indemnity cover for the individual official".  I believe the most common successful claim is for "wrongful trading" where a Financial Director/Company Accountant etc is sued personally for continuing to allow his company to trade whilst insolvent.  He can be held personally liable for the losses incurred by creditors.  One of the organisations that has uses this for it's own ends is HMRC/Inland Revenue!

There are lots of examples of other situations where an official can be help liable when he/she failed to exercise good judgment and often in hindsight can be sued by a shareholder, fellow employee, competitor etc etc who can show financial loss caused by a negligent act, error or omission of the individual functionary.

I suppose there are potential areas where a President of a community can be similarly held liable.  I've never heard of such a claim being made in Spain, but quite possibly in a few years time it may become a pre-requisite insurance before a person agrees to accept the Presidency of a community.  Whilst the HPA is "quiet" on the subject that will not provide any protection for the President.  He/she will have a potential liability, perhaps even more so for a Brit who has assets in the UK who can be sued there.  But again I do not believe this has happened and there are quite a few obstacles on the way to do so.  So it's also unlikely at present.

Often it's the cost of defence lawyers that represents the selling point of the cover, the number of actual compensation awards are comparatively few.  Usually the legal test is "gross negligence", rather than if a mistake was made.

PS A few quick points before the brick bats start:

~ I don't believe the cover is currently necessary for a President of a community
~ I am not involved insurance, nor am I a lawyer!

I have a while to make a decision. My experience at home is that no one wants to help but everyone expects your attention when things are going wrong.

Antonio

I don't think you will find any difference in Spain or elsewhere when it cones to running Community affairs.

The majority will be only too happy to leave it to others, until something goes wrong of course.

I think Acer has described the position precisely, there are few countries left where D&O insurance is not a necessity, other than Spain currently as most of the local Administrators will interpret Spanish Community rules under HPA as they always have, not accepting that eventually European Law would or should overrule.

main question to ask when considering accepting VP position is will my President liaise with me and consult over tough decisions?

ehw

sent the following question via PM

I've just read your reply to Antonio1 on the question of Legal Protection and your reply to him ends:-

"If a contract is agreed between President and Administrator, it is legally binding, so the terms of any such contract should be fully understood before signing. Unlike the role of President, the minimum requirements of an Administrator are legally defined within the Spanish Horizontal Property Law.

Now I'm more confused than ever because you, Hugh_Man and I were all in agreement that an annual vote on appointing the Administrator is necessary as required by clause 13.7 of the LPH. Am I right in thinking that when you say "If a contract is agreed between President and Administrator, it is legally binding", you mean the President personally is legally bound but not the Community? Perhaps you'd care to reply in the forum as obviously it is a matter of public interest.

My understanding is

The only person who can sign a contract on behalf of the community is the president.

As for a contract to engage an administrator first the administrator must be voted as the administrator for the community by the community and then the president then can sign the contract to engage the administrator.

The first thing to make clear is that the President is the ONLY legal representative of the community.  This means that he/she has the legal right to make decisions on behalf of the community.  It also means that the community can take legal action against a President who acts in a way that disadvantages the community (e.g. signing a contract with an administrator that was NOT agreed by the community).

Happy to be corrected as role of presidnet is NOT fully defined anywhere

Tadd

Very valid points, only thing is that I think you intended to post it on the other thread re Administrators.

hugh_man

good point but the PM from ehw  indicated this thread and referred to one of the answers on here.

The existence of vice-presidents shall be discretionary.

They shall be appointed by the same procedure established for the designation of the president.

The vice-president, or vice-presidents in the order prescribed, shall replace the president in cases of absence, vacancy or incapacity, and assist him/her in the exercise of his/her functions under the terms established by the general assembly.

The Community can agree on the hiring of Indemnity Insurance of course.

You may like taking a look to this product:

http://takelegal.com/index.php/en/store/categories/product/2-understanding-community-of-owners-in-spain