Homeowners’ association

What it means

An association of flat owners is a legal entity set up by the owners of flats in a building to manage the common parts and facilities themselves. It is an alternative to a contract with a property management company and is governed by the Slovak Act on Ownership of Flats and Non-Residential Premises.

The association contracts with suppliers of energy, water and maintenance, collects monthly advance payments for services and contributions to the repair and maintenance fund from owners, and settles actual costs once a year. Its bodies are the owners’ meeting, a chair and a board or other supervisory body.

Although not set up to do business, the association is a separate accounting entity. It keeps double-entry books under the rules for non-business entities, prepares financial statements and has tax obligations like any other legal entity.

How it works in practice

For associations whose books we keep, the key is separating the repair fund money from advances for services. The fund is often held in a separate account and its balance belongs to the owners, so it must be clear at all times how much is in it and what it was spent on.

We prepare the annual service charge settlement from actual costs and agreed allocation keys, such as floor area or number of occupants. Owners must receive a clear statement within the statutory deadline; overpayments are refunded and arrears collected.

An association can also have taxable income, for example from renting out common areas or roof space for advertising or antennas. This must be recorded separately and taxed, and VAT considered for larger amounts. Interest on the repair fund account is assessed separately too.

What to watch out for

The most frequent problem is insufficient oversight of the chair, who has access to the accounts. It is sensible to require two signatures for payments above a certain amount and have the supervisory body review statements regularly. Misused funds are hard to recover.

The association must also meet the obligations of any legal entity: filing a tax return, depositing financial statements in the register, keeping an active electronic mailbox and, if it has employees, meeting payroll duties. Neglect leads to fines that the owners ultimately pay.