Adjustment of co-ownership charges on a sale: who pays what?

The sale of a unit in a co-ownership (copropriété) rarely leaves the accounts perfectly up to date. A seller signs the deed in June, then three months later receives a service charge adjustment statement covering a period when he was no longer the owner. Or the reverse: the buyer discovers that he is being asked to pay a call for funds for works voted before he arrived. These situations account for a large share of post-sale disputes between private individuals. The rule that settles them is nevertheless simple in principle, even if it often comes as a surprise: it is not the period covered by the charge that determines who pays, but the identity of the co-owner on the day the sum becomes payable. This guide explains this mechanism, how the allocation clause in the preliminary sale agreement (compromis de vente) adjusts it between the parties, and the steps to take to avoid litigation.

The guiding principle: the co-owner on the date the sum becomes payable

As regards co-ownership service charges, the question of 'who pays what' between seller and buyer is not resolved in proportion to the time each held the unit, contrary to what intuition suggests. The reference text is Article 6-2 of Decree No. 67-223 of 17 March 1967, implementing Law No. 65-557 of 10 July 1965 establishing the statute of co-ownership of built properties.

This text lays down an attachment rule based on the date on which the call for funds becomes payable, and not on the period in which the charges are incurred. In other words, the debtor of a sum is the person who is a co-owner on the date on which the association of co-owners (syndicat des copropriétaires) can demand payment.

Article 6-2 of the Decree of 17 March 1967 distinguishes three categories of sums on a transfer for consideration: the payable advance on the provisional budget, advances outside the provisional budget, and the surplus or shortfall revealed by the approval of the accounts.

This distinction is not theoretical. It directly governs the allocation of charges between seller and buyer, and it is ignorance of these three cases that fuels most misunderstandings when the accounts are settled.

Understanding how calls for funds work

To apply the payability rule correctly, one must first distinguish the different financial flows between a co-owner and the property manager (syndic). The regime differs according to the nature of the expenditure.

Advances on the provisional budget

The provisional budget, provided for by Article 14-1 of the Law of 10 July 1965, covers the current expenses of maintenance, operation and administration of the common parts and common equipment. It is voted each year at the general meeting. The property manager calls the corresponding advances, in principle on the first day of each quarter, unless the meeting decides otherwise. The separate question of recovering these current charges from a tenant is dealt with in our article on the allocation of charges between tenant and owner.

These quarterly calls are payable on a fixed date known in advance. Under Article 6-2, 1° of the 1967 Decree, payment of the payable advance on the provisional budget falls on the seller. In practice, if the second-quarter call is payable on 1 April and the sale is signed on 15 May, the April advance remains due from the seller, even if part of the quarter corresponds to a period when the buyer will already be occupying the unit.

Expenditure outside the provisional budget

Some expenditure falls outside the provisional budget: works to preserve or improve the building, major works and technical studies, voted under Article 14-2 of the 1965 Law. The property manager calls the funds according to a schedule set by the general meeting.

For these sums, Article 6-2, 2° of the Decree follows the same logic: payment falls on whoever, seller or buyer, is the co-owner on the date the call becomes payable. If facade renovation works have been voted and the first call for funds is payable before the sale, the seller owes it. Calls payable after the signing of the deed fall on the buyer, even though the works were decided before he arrived.

The annual adjustment of charges

This is the most delicate point and the main source of post-sale disputes. The advances called during the year are payments on account calculated on the basis of the budget voted. At the close of the financial year, the property manager draws up the actual accounts and submits them to the vote of the general meeting. The difference between the advances paid and the expenses actually incurred gives rise to an adjustment: a surplus refunded, or an additional amount to be paid.

The adjustment of co-ownership charges on a sale: the decisive role of the approval of the accounts

The adjustment of co-ownership charges on a sale follows a specific rule laid down by Article 6-2, 3° of the Decree of 17 March 1967: the surplus or shortfall on advances, revealed by the approval of the accounts, is credited or debited to the account of whoever is the co-owner at the time the accounts are approved by the general meeting. The rules on notice, majority and voting applicable to that meeting are set out in our guide to the co-ownership general meeting.

This rule is counter-intuitive and needs to be properly understood. It is neither the period covered by the charges nor the date of the sale that determines who owes the adjustment, but solely the date of the general meeting that approves the accounts for the financial year.

Take a concrete illustration. A financial year runs from 1 January to 31 December. A co-owner sells his unit on 30 September. The general meeting approves the accounts for that year on 15 March of the following year. On that date, the buyer is the co-owner. The adjustment, whether it takes the form of a refund of a surplus or an additional call, will be posted to the buyer's account, even though it covers a year in which the seller occupied the unit for nine months.

This solution may seem unfair at first sight, but it serves a practical purpose: the property manager does not have to split the accounts according to the date of transfer, which would be unmanageable for an association with many units. He deals with a single counterpart, the co-owner of the moment. The fair economic allocation between seller and buyer is a matter not for the property manager but for their contractual agreement.

Allocation of charges between seller and buyer: what the preliminary agreement provides

The statutory rule in Article 6-2 governs relations between the association of co-owners and the co-owner. It does not fix the final allocation of charges between seller and buyer, who remain free to agree on a different split as between themselves.

The pro rata temporis allocation clause

In practice, the preliminary sale agreement and then the notarial deed almost always contain a clause allocating charges. The most common provision is a pro rata temporis allocation: each party bears the charges corresponding to the period during which he held the unit, irrespective of the date on which the calls became payable.

Let us return to the previous example. The seller held the unit for nine months of the financial year concerned. A pro rata temporis clause will provide that, when the adjustment is notified to the buyer after the March general meeting, the seller must reimburse him (or may claim from him) the fraction corresponding to his nine months of ownership. The notary frequently calculates a provisional adjustment on the day of the sale, on the basis of the latest known accounts, with a final adjustment once the actual accounts have been approved.

It is essential to grasp this interaction: the clause in the preliminary agreement does not change who must pay the property manager; it organises a reimbursement between the parties once one of them has paid the sum to the association.

The clause cannot be relied upon against the association of co-owners

The fundamental legal point, often overlooked by sellers and buyers, lies in the privity of contract. The allocation clause in the preliminary agreement or the deed of sale cannot be relied upon against the association of co-owners. The property manager is not a party to the sale; he applies only the rule in Article 6-2 of the 1967 Decree.

Thus, if the adjustment is debited to the buyer because he was the co-owner on the date the accounts were approved, the property manager will demand payment from the buyer, and from him alone. The buyer cannot rely on the pro rata temporis clause against the property manager to refuse to pay the share corresponding to the seller's period of ownership. He must first pay the full amount, then claim against the seller on the basis of their contractual agreement.

This separation between the 'co-owner / association' relationship and the 'seller / buyer' relationship is the key to understanding all litigation over the adjustment of co-ownership charges after a sale.

The état daté and information of the parties before the sale

Before the notarial deed is signed, the notary requests from the property manager an état daté (statement of the seller's account with the association), a document provided for by Article 10-1 of the Law of 10 July 1965 and detailed by the 1967 Decree. This statement summarises the seller's financial position vis-à-vis the association: sums still owed, provisional budget advances for periods after the sale, advances, and sums that will become payable after the transfer.

The état daté enables the notary to settle the seller's account on the day of the sale and to inform the buyer of the sums awaiting him. It is the reference financial snapshot. However, it cannot anticipate the outcome of an adjustment whose accounts have not yet been approved. It is precisely in this blind spot, between the état daté drawn up on the day of the sale and the later approval of the accounts, that difficulties arise.

In addition, the transfer must be notified to the property manager. Article 20 of the 1965 Law organises this notification (notice of transfer sent by the notary) and allows the property manager, where appropriate, to lodge an objection (opposition) on the sale price in order to recover the sums owed by the seller. Until the property manager has been duly informed of the transfer of ownership, the former co-owner remains, as far as he is concerned, the apparent debtor of the calls. On the other means available to the property manager to recover unpaid co-ownership charges, see our article on that procedure.

Post-sale disputes: anatomy and prevention

Most disputes arise a few months after the sale, when the annual adjustment arrives. Two scenarios recur regularly.

The scenario of the surplus kept by the buyer

Imagine a seller who occupied his unit for almost the whole financial year. The advances he paid amply covered the actual expenses, generating a surplus. As the adjustment takes place after the sale, this surplus is credited to the buyer, now the co-owner. Without a suitable allocation clause, the buyer keeps a refund that economically corresponds to the seller's advances. The seller, if he discovers the situation, has a claim for reimbursement based on the pro rata temporis clause, provided that it is indeed included in the deed.

The scenario of the additional amount claimed from the buyer

Conversely, if the financial year closes with a deficit, the property manager calls an additional amount from the co-owner on the date of approval, that is to say the buyer. He finds himself paying a shortfall in advances that arose largely during the seller's ownership. He will have to pay the property manager, then claim against the seller in proportion to the seller's period of ownership.

These two scenarios illustrate the same point: the allocation clause does not exempt anyone from paying the property manager; it merely opens a claim between the parties. That claim must still be capable of being exercised, which requires careful drafting.

Prevention measures

Several precautions considerably reduce the risk of litigation:

• Insert in the preliminary agreement an explicit pro rata temporis allocation clause, expressly referring to the annual adjustment and to voted works, rather than a vague wording referring to 'customary practice'.
• Provide that the party who later receives from the property manager a sum belonging to the other undertakes to pay it over within a set period after the approval of the accounts.
• Place in escrow with the notary an amount intended to cover the future adjustment where the latest accounts suggest a significant adjustment, particularly where works are in progress.
• Check that the état daté mentions calls for funds for works already voted but not yet payable, in order to anticipate their allocation.
• Keep the minutes of general meetings and the individual statements, which are essential documents for quantifying a claim between seller and buyer.

Once the dispute has arisen, the action is settled on contractual grounds. The court applies the allocation clause as stipulated. In the absence of a clause, or where the clause is ambiguous, the final burden tends to follow the actual period of ownership, but the outcome becomes uncertain and costly. It is therefore better to lock in the allocation beforehand than to hope for clarification after the event.

The specific case of works voted before the sale

Major works deserve separate attention, as they involve high financial stakes. Where a general meeting votes works under Article 14-2 of the 1965 Law before the sale, but the calls for funds are spread beyond the transfer, Article 6-2, 2° of the Decree allocates each call to the co-owner on the date it becomes payable.

A buyer who acquires a unit for which the meeting has voted facade renovation will therefore bear the calls that become payable after his arrival, even if he did not take part in the vote. It is essential that the seller inform the buyer of these decisions and that the deed state which of the seller or the buyer bears the cost of the voted works. Two options coexist in practice: either the seller bears the works voted before the sale and the amount is set aside, or the buyer takes them on, which is then reflected in the negotiated price. In the absence of a clear provision, the buyer remains liable to the property manager for calls payable after the sale, with no automatic claim against the seller.

Conclusion

The allocation of charges between seller and buyer rests on a principle that cannot be ignored: the debtor of the association is the co-owner on the date the call for funds becomes payable and, for the annual adjustment, the co-owner on the date the accounts are approved. It is not the period of ownership that governs payment to the property manager. Economic fairness between the parties is decided elsewhere, in the allocation clause of the preliminary agreement, which cannot be relied upon against the property manager but is decisive as between the parties.

The practical lesson is clear: never rely on the property manager to make a fair split in proportion to your time in the premises. He applies an attachment rule, not a rule of fairness. Before signing, have a professional review the charge allocation clause in your preliminary agreement, insist that it expressly covers the annual adjustment and voted works, and consider an escrow where the accounts point to a significant adjustment. It is at this stage, and not after the adjustment statement arrives, that the dispute is prevented.

Frequently asked questions

Who pays the adjustment of co-ownership charges after a sale, the seller or the buyer? As regards the property manager, the adjustment is owed by whoever is the co-owner on the date the accounts are approved by the general meeting, pursuant to Article 6-2, 3° of the Decree of 17 March 1967. If the sale took place before that meeting, it is therefore the buyer who pays the property manager, even for a period when the seller occupied the unit. Between the parties, a pro rata temporis reimbursement may then be made if the preliminary agreement so provides.

Can the charge allocation clause in the preliminary agreement be relied upon against the property manager? No. The association of co-owners is not a party to the sale and the property manager applies only the rule in Article 6-2 of the 1967 Decree. The pro rata temporis clause only organises a reimbursement between seller and buyer. The person from whom the property manager claims the sum must first pay, then exercise his contractual claim against the other.

What happens if the adjustment reveals a surplus after the sale? The surplus is credited to the co-owner in place on the date the accounts are approved, generally the buyer. If this credit economically corresponds to advances paid by the seller, the seller may claim repayment on the basis of the allocation clause in the deed. Without a suitable clause, the claim becomes more uncertain.

Are works voted before the sale borne by the buyer? Each call for funds for works voted under Article 14-2 of the Law of 10 July 1965 is allocated to the co-owner on the date it becomes payable. The buyer therefore bears the calls that became payable after the signing of the deed, even if he did not vote for the works. The deed of sale must state who bears these works and, where appropriate, provide for the amount to be set aside.

What is the purpose of the état daté provided by the property manager before the sale? The état daté, provided for by Article 10-1 of the 1965 Law, summarises the seller's financial position vis-à-vis the association: sums owed, future advances and forthcoming calls. It enables the notary to settle the seller's account and to inform the buyer. It cannot, however, anticipate an adjustment whose accounts have not yet been approved, hence the value of a precise allocation clause.

How can a charge adjustment dispute be avoided after a property sale? The preliminary agreement should include a pro rata temporis clause expressly referring to the annual adjustment and to works, provide for an undertaking to pay over sums within a set period after the approval of the accounts, and consider an escrow with the notary where the latest accounts suggest a significant adjustment. Keeping the minutes of general meetings and the individual statements then makes it easier to quantify any claim.

Can the property manager claim from the new buyer charges relating to the seller's period? Yes, where the sum becomes payable after the transfer or where the adjustment is approved while the buyer is the co-owner. The property manager deals with the co-owner of the moment, without regard to the date of sale. A buyer who has paid a charge that economically belongs to the seller must claim against the seller under the allocation clause, as the property manager does not have to make that split.