Homes in Bermuda are generally owned either by way of freehold ownership or condominium ownership. Condominiums are often more affordable than freehold properties, and also may benefit from having restrictions that maintain and enhance value and provide control over their environs. However, a successful condominium owner will need to be able to get along with his or her neighbours.

A condominium is a specified part of a building that is owned separately from the building in which it is situated. The building structure, access to the condominium and other common amenities (such as gardens and parking) are generally owned and controlled by a condominium association.

A condominium's status in Bermuda is governed either under the Condominium Act 1983 ("the Act"), or by way of long leasehold, usually 999 years. Each condominium becomes a property unit capable of being sold, mortgaged or let.

Given that developers often perceive the long leasehold route as being faster, less expensive and less burdensome to set up, than under the Act, the long leasehold route is more prevalent in Bermuda. In such circumstances – this article is about long leasehold condominiums – the condominium owner is the tenant and the condominium association is the landlord.

The condominium long lease governs the relationship of the owners with the condominium association. The condominium association is a Bermuda company with directors and so is governed by its by-laws and the Companies Act 1981, as amended. Typically the condominium owners hold the shares in the condominium association company and so exercise shareholder control over the condominium association.

Under the long lease, an owner is typically required to pay a monthly maintenance charge by the condominium association for the maintenance and repair of buildings and grounds.

These charges can range from $400 to $1,400 per month in Bermuda, and can include building insurance, garden and grounds maintenance, the cleaning of communal areas such as halls and stairs, and any shared utilities. Other obligations are often imposed on a condominium owner, such as internal painting of his or her condominium, keeping balconies clear of laundry, and noise control. A well-informed owner will know that the existence and financial health of the condominium association is very important in connection with successful ownership of a condominium. A well-run association will:

¦ insure the buildings and other amenities;

¦ keep the common parts in good repair and condition (this usually includes the structure of the building, its roof and foundations);

¦ retain such staff as are necessary for carrying out duties;

¦ collect maintenance charges from the owners for management of the development; and

¦ maintain a reserve fund for any future extraordinary expenditure, so that the annual maintenance charges do not suddenly have to increase to cover the cost of, for example, a new roof.

Condominium owners run most condominium associations in order to keep down maintenance charges. The condominium association will be similar to a property maintenance company, except that it will not be run for profit and its directors may be unpaid amateurs.

Problems often occur when condominium owners get too demanding of their condominium association and/or do not pay maintenance charges, and so make others reluctant to serve as unpaid directors. Sometimes in such circumstances, the condominium association, which is a company, will be delinquent and may get struck off by the Registrar of Companies.

If that occurs, not only will there be the practical day-to-day problem of who runs the building and amenities, but the condominiums may become undesirable to potential purchasers. Owners should therefore cherish their condominium association, respect its directors and pay the maintenance charges on time.

If an owner is dissatisfied, that owner should offer to join the condominium association management by standing for election as a director.

The attempted sale of a condominium is often when problems with the association are dealt with, but usually at some cost in time, fees and penalties. In order to reinstate the association as a company, an applicant must prepare and supply certain legal documents for processing by the Registrar of Companies and the Attorney General, plus pay any outstanding fees and penalties. This process can take several months, thereby delaying any sale.

A purchaser of a condominium should carefully check that the relevant condominium association:

¦ is in good standing with the Registrar of Companies; and

¦ has adequate funds to pay for the day-to-day expenses of the building and amenities; and

¦ has a contingency fund for extraordinary expenditure.

Often, owners of condominiums want to know if a property can be let under a tenancy. Sometimes, a condominium lease will require the consent of the condominium association prior to the grant of any tenancy. If the condominium lease is silent on the question, then a tenancy can be granted without reference to the condominium association.

Directors and managers of condominium associations know of the everyday challenges facing an association. Whenever faced with a request a condominium association should make sure there is:

¦ the power to fulfil the request under the terms of the long leases;

¦ money in the bank to service the request; and

¦ corporate authority to act on the request i.e. in the by-laws and/or by way of a written board resolution.

Additionally, an association is wise to make sure all of the condominium owners are in favour of the expenditure. This may avoid problems with collection of charges and bad feeling amongst neighbours. This article is not specific to any condominium scheme. Readers should seek legal advice from an attorney expert in the area about any particular condominium scheme they are interested in, or concerned about.

Attorney Neil Molyneux is a member of the Property Practice Group of Appleby. A copy of this column is available on the website at www.applebyglobal.com. This column should not be used as a substitute for professional legal advice. Before proceeding with any matters described herein, persons are advised to consult with a lawyer.