Cooperatives and management companies: are they really developers or not?

Some cooperatives are in fact developers and are therefore subject to liability for construction defects.

How can you really tell whether you are dealing with a cooperative or a developer? In this article we give some keys to unmasking a false cooperative or management company.

SO-CALLED COOPERATIVES OR MANAGEMENT COMPANIES

 Management companies or cooperatives, 99% of which act as developers but take care not to call themselves that, are subject, whether they like it or not, to ten-year liability even if they present themselves as mere managers.

The evidence is as follows, if that entity:

• arranged the formation of the association of owners for the construction.
• held a purchase option on the plot and had a building design drawn up,
• chose and hired the professionals, and irrevocably reserved for itself direct management, administration and supervision,
• and assigned itself responsibility for financing, contracting the works, legal advice, completion of the development… IT IS A DEVELOPER.

This does not mean that “management companies” or “cooperatives” are accused or singled out as mere legal vehicles used to sell flats, as a legal arrangement to avoid liability as “developers”, since that would amount to evasion of the law; but bear in mind that:

1. The first thing they do is sell the homes in advance.
2. They set up the association of owners, but it has absolutely no role in the construction process, and
3. It is the entity that commissioned the architects and reserved exclusively for itself the administration, management, direction and control of all activities.

In that case, there is no doubt that such activities of management, administration and direction of the building process are those of developers and those who carry them out are not exempt, any more than the developer is, from one-year, three-year, ten-year or five-year liability.

It is therefore clear that this is not a mere manager (an agent) but a developer.

As developer (whether it is the management company, the cooperative or whatever legal form it takes), it is liable for all defects or damage that render the building unfit, whether arising from construction, the ground, the design or site management.

Another question to clarify is: which persons, and who, is really liable? After all, aren’t all the owners the cooperative? It would make no sense to sue yourself, which is why all the association’s documentation must be analysed carefully to determine whether it really is a cooperative or whether it is ultimately a developer-cooperative-management company.

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