Owners Association and Common Parts Management

Owners Association and Management of Common Parts

Based on Articles (9), (10), and (12) of the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001, the legislator mandated, by operation of law, the establishment of an “Owners Association” whenever there is more than one owner of floors or apartments in the building, so that it undertakes the management of the common parts, and it enjoys legal personality within the limits of this purpose.

Membership in the association is deemed to include:

All owners, and
The actual occupants of the units,

provided that the actual occupant represents the owner before the association and replaces the owner in the rights and obligations related to management and common use, except for those that are inseparably linked to the status of the owner.

The law also considered that the owners of a single floor or apartment (or their representative) are treated as:

One member in terms of membership, and
One vote in terms of voting.

The Association’s Bylaws and Regulatory Framework

The association is required to establish internal bylaws that ensure proper use of the common parts and regulate their management, while being subject to the provisions of the Cooperatives Law No. (15) of 1992 with respect to the organization of accounts, auditing, control, and supervision.

Financial Resources of the Association

From a financial perspective, the association’s resources consist of:

Members’ subscriptions (membership fees).
A fee at a rate of (1%) of the apartment’s value when submitting the partition/segregation (ifraz) request.
A fee at a rate of (0.5%) of the apartment’s value, collected from the buyer when requesting its registration in the buyer’s name.
Permissible subsidies, grants, and donations.

In this context, the Real Estate Registration Department is responsible for collecting the (1%) and (0.5%) amounts and registering them in trust (as a deposit) for the account of the Owners Association in the building.

Establishment and Registration Procedures Under the Cooperatives Law

By referring to the Cooperatives Law No. (15) of 1992 as the procedural and regulatory framework to which the Law Regulating the Ownership of Floors and Apartments No. (61) of 1992 referred, the establishment and registration of the association are subject to the procedures for establishing cooperative associations.

Submission of the Incorporation Application

The incorporation application is submitted to the Cooperative Union in the governorate, and must be accompanied by:

The internal bylaws.
Subscription lists.
The founders’ details.
Details of the persons authorized to follow up and complete the registration procedures, for the purposes of completing registration and publication.

Decision Period and the Consequences of Refusal or Silence

The Union’s Board of Directors is obliged to decide within (60) days. If the application is rejected:

The decision must be reasoned (justified).
A grievance may be submitted, and then an objection may be filed, in accordance with the specified statutory time limits.

If no decision is issued within the legally prescribed period:

The association is deemed to be established and registered by operation of law.

Fees, Liability of Founders, and Convening the General Assembly

The founders are obligated to pay a registration fee of (10) dinars. If registration is not completed, the founders:

Bear, jointly and severally, the incorporation expenses.

They are also jointly and severally liable for:

The funds that are paid to them, until such funds are delivered to the Board of Directors upon registration, or refunded if registration does not occur.

In addition, the founders are required to:

Invite the General Assembly to convene within (90) days from the date of registration to elect the Board of Directors.

Finally:

The cooperative association acquires its legal personality upon registration.
Even though the association is established by operation of law, these procedures are for the purpose of registering the association and issuing it through a statement/announcement issued by the General Federation of Cooperatives.

Total or Partial Destruction of the Building and the Owners’ Obligation to Rebuild or Renovate

Pursuant to Article (11) of the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001, the total or partial destruction of the building, for any reason, gives rise to a legal obligation on the owners to renovate or reconstruct it in accordance with the decision adopted by the Owners Association, and by the majority specified in its internal bylaws.

Any compensation amounts due as a result of the destruction (if any) must be allocated exclusively to renovation or reconstruction works, thereby ensuring that the compensation is directed to its natural purpose and is not dissipated outside the interests of the building.

Consequence of an Owner’s Refusal to Comply With the Association’s Decision

If one of the owners refuses to implement the association’s decision and declines to comply with it, the law imposes a specific sanction, namely:

The owner is compelled to sell his rights to the other owners, or to some of them
At a price determined by the court, upon the request of the association’s president.

If the remaining owners refuse to purchase:

The refusing owner’s rights are sold in accordance with the compulsory enforcement procedures stipulated in the Enforcement Law.

Accordingly, the legislator prevents the obstruction of the building’s reconstruction due to an individual refusal, and gives precedence to the collective interest and the stability of common ownership over the will of the non-complying owner.

Legal Challenges and Criticisms

Despite the importance of the law in regulating relationships among owners in vertical buildings, legal researchers have pointed out many practical shortcomings in its application.

The law was issued hurriedly with a limited number of provisions (only 15 articles), and it does not contain sufficient procedural details or adequate administrative and economic sanctions.

It also came lacking definitions for some key terms (such as common parts) and was based on assumptions that may not align with the changing architectural reality.

Limited Application in Practice and Continued Reliance on Ordinary Co-Ownership Rules

The law has also remained rarely applied in practice, as some researchers and judges believe that property owners and many Iraqi courts have either not become aware of the existence of this law or have neglected to apply it.

As a result, they continued to apply the rules of ordinary common ownership (co-ownership in undivided shares / shuyu‘) to disputes related to buildings.

This is further confirmed by the scarcity of judicial rulings that apply the law, which has limited its effectiveness in protecting the partners’ rights.

Limited Suitability for Large Residential Compounds and the Need to Address a Legislative Gap

On the other hand, the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001 was originally drafted to address the situation of a specific “building” with segregated units and common parts within the scope of the building itself.

This makes it, by its nature, less suitable for regulating large residential compounds that go beyond the idea of “a single building” to include shared facilities outside the buildings, such as:

Gardens and parks
Garages/parking facilities
Swimming pools
Internal roads
Services

These facilities have become a potential source of future disputes between owners, or between owners and the investor/developer.

This raises the issue of a legislative gap that requires being filled with newer provisions that:

Regulate shared facilities at the compound level
Specify the body responsible for their management
Define collection mechanisms, maintenance arrangements, and liability.

Linking the Common Ownership System With the Investment Law in Post-2003 Housing Projects

In the context of housing projects implemented within the investment environment after 2003, the importance of linking the common ownership system with the Investment Law No. (13) of 2006 (the chapter on advantages and guarantees) becomes evident.

Article (10) provides that the investor enjoys advantages and guarantees while remaining subject to the law’s obligations. It also permits the investor (whether Iraqi or foreign) to be granted ownership of lands allocated for housing projects that belong to the state and the public sector.

It further permits the purchase of land belonging to the private sector / mixed sector to establish housing, on the condition that this does not conflict with the uses set out in the basic master plan. It also provides for placing a non-disposal (no-transfer) notation on the title deed until the obligations are fulfilled.

The law obliges the investor:

Not to engage in speculation
To use the property for the purpose for which it was granted ownership.

It also grants the investment/registration authority a mechanism to:

Cancel the registration
Return the property to its previous owner in the event of breach, while requiring the investor to construct the units within the specified period and sell or lease them in accordance with the instructions.

Accordingly, updating the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001, or issuing parallel legislation for residential compounds, should draw on these principles to ensure:

Protection of owners
Effective management of shared facilities within investment projects.

Instructions No. (1) of 2025 as a Practical Framework for Selling and Leasing Housing Units in Investment Projects

As a supplement to what has been stated above regarding the deficiency of the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001 in regulating the facilities of modern investment residential compounds, Instructions No. (1) of 2025 concerning the sale and lease of housing units in investment projects came to establish a direct practical framework governing:

The relationship between the investor and the beneficiaries
The mechanism of marketing
Sale on the map (off-plan sale) and financial guarantees, in a manner consistent with the philosophy of the Investment Law No. (13) of 2006, in linking ownership transfer to the implementation of obligations and prohibiting speculation.

Core Obligations Imposed on the Investor

The instructions obligate the investor to:

Construct the units within the periods of the license and the contract.
Limit the sale of units to Iraqis, while allowing leasing to Iraqis and non-Iraqis in accordance with the law.
Adhere to the unit price stated in the feasibility study, as approved, and as recorded in the investment contract.
Adopt the beneficiary contract template approved by the Investment Commission before concluding it.

Regulating “Sale on the Map” and Project Escrow Accounts

Most importantly, the instructions regulated sale on the map on the condition that no less than (25%) of the project is completed (or of the phase, where implementation is carried out in phases), including the infrastructure.

They also required:

Opening a guarantee account / dedicated bank accounts for the project in accordance with the Central Bank’s controls.
Establishing mechanisms for managing the account and disbursing funds for implementation requirements.
Submitting a monthly statement of expenditures to the Commission.
Transferring the remaining amount to the investor upon completion of constructing the unit, with the reservation of (5%) of the value of each unit until after the maintenance period, unless a good-performance guarantee is provided.

They further provided for:

Restricting seizure/attachment on the funds of the account.
Not considering the account funds as security for the investor’s creditors, except within the limits of the phased entitlement and by a final judgment.

Behavioral and Regulatory Obligations, Leasing Rules, and Follow-Up Mechanisms

The instructions also placed on the investor behavioral and regulatory obligations, including:

Advertising, and the prohibition of monopoly and speculation.
A maintenance period of not less than one year.
Monthly marketing reports.
Delivery and transfer of ownership in the Real Estate Registration Department.
Prohibiting resale (sale “from the secondary level”) to persons who have a relationship with the investor.
Providing the Commission with copies of contracts and documents within 30 days.

They also:

Regulated the tenant’s obligations and the termination of the lease contract in the event of violation.
Decided that the new investor replaces the previous one when ownership of the project is transferred.
Adopted the Iraqi dinar for the purchase consideration and installments.
Formed follow-up committees in the Investment Commissions.

The Need for a Broader Legislative “Umbrella” After Handover

Accordingly, these instructions represent a complementary legislative link aimed at protecting beneficiaries and (controlling/disciplining) financing and marketing within investment projects.

However, they still remain in need of a broader legislative “umbrella” that regulates the management of the shared facilities of compounds after handover, including:

Gardens
Services
Roads
Facilities

and that specifies:

The managing entity
Collection mechanisms
Responsibility/liability

This reinforces the idea of updating the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001, or establishing a specific regulation for investment residential compounds.

Practical Imbalance and Conflict Between the Applicable Legislative Frameworks

Based on the reality of the applicable legislative regulation, it can be observed that there is a practical imbalance and conflict between:

The framework of the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001—which was originally enacted to address a single “building” with segregated units and common parts within the boundaries of the building.
The framework of housing investment after 2003, represented by the Investment Law No. (13) of 2006 and its instructions, in particular Instructions No. (1) of 2025, which govern the mechanisms of development, marketing, off-plan sales, and escrow/guarantee accounts.

The first law assumes the management of common parts through an Owners Association, following an approach close to cooperative organization. By contrast, the investment laws and instructions operate under the logic of:

The investment contract
The authority of the Investment Commission
Dedicated bank accounts for the project

Along with rules governing sale and financing without clear provisions that determine: The exact moment of transition from the authority of the investor/commission to the authority of the owners, or the management of compound facilities outside the buildings (such as internal roads, gardens, and services) in terms of:

Ownership
Collection of fees
Maintenance and Governance after handover

This creates a legislative gap and leads to disputes between the owners and the investor/developer, or the owners and the management company.

Additional Practical Observations From Field Experience

In addition to that, and based on our practical experience and our dealings with major investment companies operating in investment housing projects, this framework—especially with regard to the establishment and activation of the Owners Association and the mechanisms for its management under the 2001 law—does not find regular, consistent practical application on the ground in the manner intended by the legislator.

In practice, facilities and services within compounds are often managed through:

Contractual arrangements
Administrative arrangements put in place by the developer or the management company.

This further reinforces the need for an explicit legislative update that:

Integrates the requirements of investment with the protection of owners
Establishes a binding legal framework for managing the facilities of modern residential compounds after handover.

Conclusion

It becomes clear from the foregoing that the legal regulation of the ownership of floors and apartments in Iraq has proceeded along two parallel tracks:

A traditional track, represented by the Law Regulating the Ownership of Floors and Apartments No. (61) of 2001, which was enacted to address the reality of a single building, define the owners’ rights and duties, and regulate the common parts through the Owners Association.
A modern track, linked to the post-2003 environment and the growth of investment housing projects, embodied in the Investment Law No. (13) of 2006 and its instructions—especially Instructions No. (1) of 2025—which established practical rules for development, off-plan sales, escrow/guarantee accounts, and for linking ownership transfer to the fulfillment of obligations and the prohibition of speculation.

However, an analytical reading of this framework reveals that the Law Regulating the Ownership of Floors and Apartments in Buildings No. (61) of 2001—despite its importance—has become of limited effectiveness in confronting the new urban and investment reality, whether due to:

Its narrow scope (the single building)
Its lack of sufficient procedural and enforcement tools
The weakness of its practical application.

Moreover, the rise of the “investment residential compounds” model—with its shared facilities outside the buildings (internal roads, gardens, services, operational facilities)—has exposed a clear legislative gap in determining:

Ownership
Management
Fee collection
Maintenance
Governance after handover

At the same time, it has produced a practical conflict between:

The logic of an Owners Association subject to a cooperative-type framework
The logic of the investment contract, the authority of the Investment Commission, escrow/guarantee accounts, and marketing/financing controls.

This unresolved overlap opens the door to expected disputes between owners and the investor/developer or the management company, especially at the point of transition from the construction and sale phase to the long-term operation and management phase.

Accordingly, there is a need for a legislative update that achieves harmony between the common ownership system and the housing investment system, by adopting a specific regulation for investment residential compounds that expressly defines the relevant rules—so that a transition can be made from a system that addresses the “building unit” to a system that keeps pace with the “planning unit” of the investment project, and that ensures:

Protection of owners’ rights
Sustainability of facilities
Clarity of obligations within the modern investment environment

If you need tailored guidance on Owners Association setup, common parts governance, or compound handover arrangements, contact Osama Tuma for Legal Services and Advisory—your trusted law firm in Iraq.