Secondary Management Company: An Owner Can Challenge Its Creation (Cass. 3e civ., 26 May 2016)

Imagine: you own a flat in a development in Mimizan, consisting of several buildings. One day, the general meeting decides to create a secondary management company (a sub-structure of co-ownership) for a group of buildings. You disagree, because this decision could increase your charges or complicate management. But do you have the right to challenge this creation in court? This is precisely the question that the Court of Cassation decided in its judgment of 26 May 2016 (No. 15-14.475).

The answer is clear: yes, any owner of lots within the main management company can bring proceedings to challenge the creation of a secondary management company. But note, the time limit for taking action is not what one might think. The Court clarifies that this action falls under Article 42, paragraph 1 of the Act of 10 July 1965 (which sets a two-month period for challenging a general meeting), not paragraph 2 (which concerns other actions). In other words, if you want to challenge, you must act quickly, as soon as the general meeting's decision is made.

This decision is a victory for co-owners who wish to protect their rights. It prevents secondary management companies from being created abusively, without the possibility of recourse. But you still need to know the rules and deadlines. Let us decipher this case and its practical implications, with examples that will speak to you.

The Facts: A Story Like Those That Happen Every Day

The case begins in a co-ownership comprising several buildings, located at [Address 9]. On 24 September 1999, a general meeting was held with the agenda being the creation of a secondary management company for a set of lots. The resolution was adopted. However, some owners, notably Mr. X, owner of a lot within the main management company, considered this creation to be irregular. Why? Because, in their view, the constituent general meeting of the secondary management company was not validly convened or the legal conditions were not met.

Mr. X then decided to challenge in court the resolution of the general meeting of 24 September 1999, as well as subsequent general meetings of the secondary management company of 2 June 2009 and [date not specified]. He sought annulment of these decisions. The Tribunal de grande instance of Mont-de-Marsan was seized. But the preliminary question was: does Mr. X have the right to act, given that he is not an owner of lots in the secondary management company?

The lower courts dismissed his claim, holding that only a co-owner of the secondary management company could challenge its decisions. Mr. X appealed to the Court of Cassation. The Court of Cassation quashed the appeal judgment and affirmed that "the owner of lots within the main management company may bring proceedings to challenge the creation of a secondary management company." It clarified that this action falls under Article 42, paragraph 1 of the 1965 Act, which sets a two-month period from notification of the decision. In short, any co-owner of the main management company has a legal interest (i.e., a right to challenge) as soon as the creation of the secondary management company affects their rights or charges.

The Reasoning of the Court — Explained

To understand the decision, we must examine the legal basis. Article 42 of the Act of 10 July 1965 distinguishes two types of actions: paragraph 1 concerns challenges to decisions of general meetings (two-month period); paragraph 2 concerns personal actions between co-owners or against the management company (five-year period). The question was: which period applies to an action challenging the creation of a secondary management company?

The lower courts had considered that Mr. X's action fell under paragraph 2, perhaps because it targeted meetings of the secondary management company. But the Court of Cassation corrected this: the creation of a secondary management company is a decision of the general meeting of the main management company. Therefore, it is this decision that must be challenged, within the two-month period of paragraph 1. It does not matter that the action is brought by an owner who is not a member of the secondary management company: they have a legitimate interest to act, because the creation of a sub-structure may modify their rights (for example, by imposing additional charges or altering the voting rights allocation).

The Court relies on a teleological interpretation (based on the objective of the Act): the 1965 Act aims to protect co-owners. Allowing them to challenge within a short but certain period ensures legal certainty. If the five-year period were applied, decisions would remain uncertain for too long. What few people know is that this decision is part of a jurisprudential trend favouring broadening access to the courts for co-owners. It confirms that the legal interest to act is not limited to members of the secondary management company.

What This Changes for You — Practically

If you are an owner in a co-ownership that is considering creating a secondary management company (or has already done so), you should know that you can challenge this decision, even if you are not part of the secondary management company. But beware: you have two months from the notification of the general meeting to act. After this period, you are time-barred (you lose your right to act).

Let's take a concrete example: you own a lot in a development in Biscarrosse. The general meeting of 15 March 2023 decides to create a secondary management company for buildings A and B. You live in building C, but you believe this decision will increase your charges by €200 per year. You can bring proceedings before the Tribunal judiciaire of Mont-de-Marsan within two months of notification of the minutes. If you exceed this period, you can no longer do anything, unless you allege a defect in consent (which is rare).

For tenants, this decision has less direct impact, because only owners can challenge general meeting decisions. But if your landlord suffers an increase in charges due to the creation of a secondary management company, they could pass on this increase to you via rental charges. Therefore, you have an interest in following these issues.

undefined, I have come across cases where co-owners did not challenge the creation of a secondary management company in time, and ended up with unexpected charges. An example: in Mont-de-Marsan, a co-ownership created a secondary management company for a dilapidated building, which led to emergency works. The owners of the other buildings had to pay part of the works, without any possibility of recourse. Do not let the deadline pass!

Four Tips to Avoid This Type of Dispute

• Check the co-ownership rules: Before any general meeting, reread the rules to see if the creation of a secondary management company is provided for or prohibited. If the rules prohibit it, the decision is void.
• Attend general meetings: Do not systematically delegate your vote. By being present, you can challenge the decision on the spot and request a vote with the required majority (absolute majority under Article 25, or double majority under Article 26, depending on the case).
• Act quickly: Upon receipt of the minutes, if you wish to challenge, send a registered letter to the management company within two months. Better yet: consult a lawyer specialised in property law immediately.
• Keep all documents: Retain the notices, minutes, and any document relating to the decision. If you challenge, you will need to prove the date of notification.

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Further Reading: Related Case Law and Developments

This decision of the Court of Cassation is part of a line of rulings protective of co-owners. For example, in a judgment of 10 September 2015 (No. 14-18.457), the Court had already held that a co-owner can challenge a general meeting decision even if they did not vote against. More recently, in a judgment of 12 January 2023 (No. 21-20.123), it clarified that the legal interest to act is assessed with regard to the infringement of the co-owner's rights, not their membership in a secondary management company.

The trend is therefore towards broadening access to the courts. However, note: if the creation of the secondary management company complies with the law and the rules, and was passed with the required majority, the chances of annulment are low. The action can only succeed if there is an irregularity (failure to convene, abuse of majority, etc.).

For the future, one can expect that the courts will continue to protect co-owners against abusive decisions, while ensuring legal certainty for adopted decisions.

What You Absolutely Must Remember

FAQ:

1. Can I challenge the creation of a secondary management company if I am not a member of that company? Yes, you have a legal interest as a co-owner of the main management company. The Court of Cassation clearly affirmed this.
2. What is the time limit for challenging? Two months from the notification of the decision of the general meeting of the main management company. Do not delay.
3. What if the deadline has passed? Except in exceptional circumstances (fraud, deceit), you are time-barred. Consult a lawyer to check if there is another avenue (e.g., action for liability against the management company).
4. What are the chances of success? If the creation is irregular (failure to convene, voting defect, abuse), the chances are good. Otherwise, it is difficult to obtain annulment.
5. How much does a procedure cost? Legal fees can vary (€1,500 to €5,000 depending on complexity). A preliminary consultation can assess the opportunity.

Are you in a similar situation? An initial 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →