Approval of Accounts in Co-ownership: What Owners Absolutely Need to Know

Imagine you are the owner of an apartment in a residence in Valbonne, at the heart of the Sophia Antipolis technology park. You receive the notice for the annual general meeting, with the approval of the accounts for the previous financial year on the agenda. You skim through the documents: facade renovation works have been carried out, the managing agent has incurred expenses, the service charges have increased. You approve the accounts, like the majority of co-owners. But a few months later, a neighbour challenges this decision, believing that the works should not have been included. What happens then?

This situation is one I encounter regularly in my practice, whether in Grasse, Valbonne, or Cagnes-sur-Mer. Owners often ask: "By approving the accounts, am I also approving all the expenses listed in them? Am I giving my retrospective consent for works I did not vote on?" The answer is not as simple as it seems, and the consequences can be significant.

The Court of Cassation, in a decision dated 14 March 2019, provides essential clarification on this point. It reminds us that the approval of accounts has only a limited scope: it merely confirms the accounting and financial regularity of the accounts of the co-owners' association (the entity that manages the co-ownership). But what does this change concretely for you, as an owner, tenant, or real estate professional? This is what we will break down together.

The facts: a story that happens every day

Mr Dupont, owner of an apartment in a co-ownership in the town centre of Valbonne, attends the general meeting on 25 August 2012. On the agenda is the approval of the accounts for the previous financial year. These accounts include a significant expense: refurbishment works for the common parts, undertaken by the managing agent without specific authorisation from the general meeting.

Mr Dupont, like the majority of co-owners, votes to approve the accounts. But a few months later, he changes his mind. He believes that these works should not have been carried out without prior vote, and that their inclusion in the accounts is irregular. He therefore decides to challenge the decision to approve the accounts in court, arguing that this approval entails validation of the works, which would be illegal.

The managing agent, represented by its manager, defends its position: the approval of accounts is a necessary formality that merely confirms that the accounts are regular from an accounting and financial perspective. It does not retrospectively validate decisions that should have been taken separately. The dispute escalates: after an initial judgment unfavourable to Mr Dupont, he appeals. The court of appeal confirms the first judgment, and Mr Dupont appeals to the Court of Cassation.

This judicial journey, which lasts several years, is typical of co-ownership disputes. The stakes are often financial: here, the works in question represented several tens of thousands of euros, distributed among all co-owners via the service charges. undefined in Grasse, I have encountered similar cases where owners contested expenses of €15,000 to €50,000, alleging irregularities in their approval.

The court's reasoning — broken down

The Court of Cassation, in its judgment of 14 March 2019, examines Mr Dupont's appeal. It recalls a fundamental principle: the approval of accounts, provided for by Article 25 of the Law of 10 July 1965 (the reference text on co-ownership), has only a limited scope. It "merely entails confirmation of the accounting and financial regularity of the accounts of the co-owners' association".

In other words, when you approve the accounts in a general meeting, you are only checking and validating that: 1) the figures are correct, 2) the expenses and income are accounted for in accordance with accounting rules, 3) the supporting documents are in order. You are not, however, validating the merit of each expense, nor approving retrospectively decisions that should have been taken separately.

The Court of Cassation thus confirms the decision of the court of appeal, which had noted that the general meeting "had only approved the accounts for the previous financial year including an expense inherent to works". It deduces that this decision "was not tainted by any irregularity likely to lead to its nullity" (its annulment).

This reasoning relies on a crucial distinction: on one hand, accounting regularity (are the accounts properly kept?), on the other, substantive regularity (were the decisions taken legal?). The approval of accounts concerns only the first aspect. If works were undertaken without the required authorisation, their illegality persists despite the approval of the accounts, but it must be challenged through another avenue.

Be careful, however: this decision does not give the managing agent free rein to incur expenses without authorisation. It simply specifies that the approval of accounts is not the right time to challenge the substance of these expenses. What few people know is that to challenge unauthorised works, one must bring an action for nullity of the managing agent's decision, not a challenge to the approval of accounts.

What this changes for you — concretely

If you are a co-owner, this decision has direct implications. First, it clarifies your rights and obligations during general meetings. When you vote on the approval of accounts, you must focus on their formal regularity: are the accounts complete? Are the supporting documents provided? Are the figures consistent? If you have doubts about a particular expense (for example, works not voted on), you can raise reservations, but the approval of accounts itself does not validate this expense.

In short, if you are in this situation, you must: 1) vote on the approval of accounts based on their accounting regularity, 2) if necessary, separately challenge illegal decisions by the managing agent, within a 5-year period from their completion. For example, for unauthorised works in a co-ownership in Cagnes-sur-Mer, you could bring an action for liability against the managing agent, but not for invalidation of the approval of accounts.

For tenants, the impact is indirect but real. Co-ownership service charges are often passed on to rents. If questionable expenses are included in the accounts, they can increase your charges. But this decision gives you an argument: if your landlord justifies a rent increase due to unauthorised works, you can challenge this increase, because the approval of accounts does not validate these works.

For real estate professionals (managing agents, managers, developers), this decision reminds us of the importance of transparency. Incurring expenses without authorisation exposes one to challenges, even if the accounts are approved. undefined, I have encountered cases where managing agents had undertaken works of €30,000 without a vote, thinking that the approval of accounts would suffice. Result: lengthy and costly procedures.

Four tips to avoid this type of dispute

• Read the accounts carefully before the general meeting: request supporting documents for significant expenses, check their compliance with previous decisions.
• Ask questions during the meeting: if an expense seems doubtful to you, question the managing agent about its origin and authorisation. Have your reservations recorded in the minutes.
• Distinguish between accounting regularity and substantive regularity: vote on the approval of accounts for their form, and separately challenge the substance if necessary.
• Consult a lawyer solicitor if in doubt: early consultation can avoid years of proceedings. In the Grasse jurisdiction, co-ownership disputes represent 20% of real estate litigation.

Further reading: related case law and developments

This decision fits into consistent case law. Already in 2015, the Court of Cassation had recalled in a judgment (No. 14-10.677) that "the approval of accounts does not constitute ratification of the managing agent's acts". It thus confirms a guiding principle: co-owners must remain vigilant, but the approval of accounts is not a general validation of all the managing agent's actions.

On the other hand, some prior decisions may have created confusion. For example, in the 2000s, some courts considered that the approval of accounts could imply tacit agreement for minor expenses. The current trend, reinforced by this decision, is towards clarification: each type of decision has its own procedure and effects.

What does this mean for the future? Managing agents will need to be more rigorous in respecting procedures, and co-owners more informed in exercising their rights. But how to react to a managing agent that takes liberties? The answer lies in vigilance and targeted action.

What you absolutely must remember

• The approval of accounts does not validate the managing agent's illegal decisions: it merely confirms that the accounts are regular from a formal perspective.
• You can approve the accounts while challenging certain expenses: use written reservations, and bring a separate action if necessary.
• Unauthorised works remain challengeable: even if they appear in approved accounts, you have 5 years to bring an action for nullity.
• Transparency is crucial: demand all supporting documents, and ask questions in the meeting.
• In case of dispute, act quickly: the limitation periods (5 years for nullity, 10 years for liability) run from the completion of the facts.

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