Recovery of Community Debts

Difficult situation you face Mike with your problems of debtors impairing the the community of owners being able to continue the supply of services you are duty bound to your owners.

My first advice to communities is to try to understand the financial running of a commuity is a mirror image of running a business.The members must understand that if their fees are not paid this will only lead to the other paying members having to increase their share of the running costs which in turn will increase the debtor's indebtness.In treating the financial running like a business the board with the administrator must pay attention to the outstanding debtors of the community and seek by way of individual study of each a method of collection.Communication with the debtor is primary as from here a negotiated payment structure can be achieved.In the case where communication fails then the study needs to move on to how can the debt be most effectively collected.This point of the study needs to consider the residence of the debtor & the costs implications.If the debtor is a UK resident ( and most north European countries( Denmark excluded)) then a quick & effective method of collection can be made via the county courts using European law by a specialist lawyer or debt collector.The costs are not expensive & can be recovered with the debt in a 10 week programme.If the member is Spanish resident then the system is less effective in time and more costly in the courts ( average 1500€) and whilst some lawyers will take the case on a 10% deposit of costs the community must pay the account at sentance point in the future whether the debt is recovered or not.Hence these costs must be shown in the liabilities section of the community accounts.I use Spanish debt collectors first who have been effective in some cases without up front fees & only have a right to  the debt collection for 3 months.If  they areunsucessful the study can decide if to proceed with legal action depending on the debt size to the cost ratio risk but with more historical knowledge.

The most important factor is for the administrator to be on top of the debtor before the outstanding balance becomes a a problem to the commuity's finances.

I hope this helps.

F.Parkinson .  Administradore

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I can sympathise with Mike and I find it terribly frustrating that there seems little we can do to resolve the situation

We are a small community of 31 apartments and because of some owners who have simply refused to pay we are now being forced to pay additional fees otherwise the lift maintenance and pool maintenance will cease to start with and then God knows what after that.
One Spanish owner has never paid since he moved in 7 years ago (when the apartments were built) and still blatantly comes in with loads of his family and uses the pool even though he doesn't live here now and rents out the apartment to another Spansih family.

Proceedings have been taken against him in the courts and as far as I can see has been going on for 3 years even though it seems from the law it should be a quick process. I am told that it is a quick process but the courts are then so busy that you have to wait years for a ruling. Then the apartment can be sold and the debts cleared (well 2 years worth anyway).

Other owners (who have mortgages) have handed their keys back to the bank who have done nothing to accept ownership so once again community fees are being unpaid and indeed were unpaid before the particular owners defaulted.

It's a bit of a mess and some of the owners who do pay are seeking some sort of retaliatory action against the ones who still use the communal areas but the law will not allow it as I have told them but they are inclined to change locks etc so they will not be able to use the pool or the roof terrace. Also one of them is saying that he will just stop paying as well as nothing seems to happen to those who don't.

I simply wondered if anyone else has had similar experiences (particularly in Almeria) and if they found some way to sort it. But the truth is that we will all to have to pay more now anyway as there is nothing left in the bank and creditors to pay.

Perhaps a Spanish debt collector would be an option.

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 Happy New year to all;

The community problem of owner's debts reflects in the administration of the community as the administrator should have had a time line policy on action to collect fees at the AGM or a EGM of the community. The members would from the advice of the administrator empower him/her to take legal action against all those who had not paid once a debt became aged of the agreed time limit ( normally 6 months ). This authority from a formal meeting is required by the Spanish courts to commence any action. 

In terms of options these must be considered by a study of the debtor.

If resident in Northern Europe the European law can be used to good effect ( Denmark not included) at low cost ( around 200€ per demand) in their home country. The need for a study is required to establish what the asset value of the debtor is in both his own country if non- resident & in Spain.If the property in Spain is belonging to a Spanish resident ( Nationality has no baring) then the legal action in the courts will cost around 1500€ per case.This will only be stage one as you state embargo proceedings to the property are required which is a second stage with a similar fee involved.The legal costs of both can be claimed additionally but again often in another action but of less legal cost.

If the embargo is against a mortgaged property then it is not as effective unless there is substantial equity as the first charge holder is in control of the sale & has first call on all funds.I have recently been involved in a case where a 20,000€ community debt against a property free of charge was refused a sale order by the judge as the value ratio was 10:1 of the debt.Hence before expensive legal costs are incurred by the community it must establish if it has a chance to recover the debt.Embargos are a good option on the basis of a sit & wait policy but with property values having plummetted it may be a long time before sales start to move at higher prices when the embargo could be disharged by payment.There are other embargos available to debtor's bank accounts , cars & earnings which can prove a shorter period of recovery time.Again these options should have been made available to the members in their meetings.

It does lead one to conclude the Spanish system does favour the debtor but no action will inevitably lead to no result.

Finally  the time of the court proceedings depends on the type of action ( defended or undefended). Each court differs but most defended cases are heard within a 1 year to 18months time frame.Undefended are as quick as 6 months.

I hope this helps.

F.Parkinson  Administradore

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Happy New Year to everyone. 

I wonder if Jacksonadmin has any opinion or experience re claiming fees debts from a bank.  Most of the 200 properties on our development are unsold, the developer is in bankruptcy so we hope we will receive at least something once their assets are appraised but we also know that could take some time.  Our really pressing current problem  is that we only have 46 fee paying owners, and in the main have no problem collecting fees from these owners, but the bank who have repossessed a number of properties and have also accepted some as dacion en pago, have not yet paid a cent.  They have actually promised to pay and given us several dates by which they would do so, claimed to have the same interests as us, blah blah, but in the end we have had to start legal action as we are now in the situation that we cannot maintain even basic services on our current income.  The bank failed to pay by their last deadline and now are making vague statements about difficulties with audit, more blah blah, meanwhile we can't cover the bills coming in.

The money the bank owes in both arrears (we know this is different depending on whether the property was repossessed or accepted as dacion en pago - they no longer take properties back if there are unpaid fees but did this on a few properties until last year) and the current monthly fees would allow us at least to be sure our properties are habitable for the coming year, otherwise we may have to shut up shop.

Thanks.

 

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Very helpful, and gives me some questions to ask at the AGM e.g. if the courts are as quick as you mention then why on earth has nothing happened since allegedly we started proceedings 3 years ago. Of course, the bigger question is why did we wait 4 years before proceedings were started.

The law was amended in 1999 to supposedly make it easier for Communities to take action but somewhere along the line it went wrong in our case. I have only owned our apartment since the end of 2010 so I don't have the history. The apartments are 8 years old.

Another problem we have is that the vast majority of owners are English speakers and the Administrators have no English speakers at all. Interpretation is carried out by a local agent who also deals with contracts for lift servicing, fire alarms, pool maintenance etc and as far as I can see actually perform some of the tasks that should be carried out by the Administrator.

I know what functions an administrator carries out but without approaching another Company I have no idea what would be a reasonable monthly or annual fee. In our case with 31 apartments we pay €3,500 per annum and additonal fees to the local agent (who are very helpful and speak both English and Spanish but unfortunately are not qualified as Administrators).

The President is a lovely old chap but has no computer and doesn't communicate very well with the owners so another little problem, but it's a position of responsibility that no-one else really wants.

So, pretty much like other Communities I suspect!!

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Sorry, another post came just as I was replying to Jackson.

But another interesting comment for Hosilverlining regarding ther banks not taking properties back if there are outstanding debts from community fees, as, I suspect that is happening to us. And, how do we know that the keys have been handed back? In one recent case, just last month someone walked out owing over €1,000 and allegedly handed the keys back to the bank but is still able to come in from time to time to check post so obviously has retained a set of keys.

And of course there are mutterings from other people that as nothing seems to ever happen to these people maybe we should all withhold payment although I doubt any of the decent full time resident owners would do that really.

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 I have to say I am not convinced by any speed or efficiencies within the Spanish legal system, perhaps our Administrators have not been as good as they might but have advised us local courts are possibly taking ages.

We also won a case recently in court but are still to receive any funds.

Properties owned by businesses also appear to be harder to get satisfaction as it seems more difficult ot get funds out of struggling companies than individuals who may well have other assets.

We too have recently seen properties either repossed by banks or handed back to them and I agree it is going to get harder and harder to get historic debts out of them to, it seems re registration of the property into the banks name is oftern delayed by the banks making it vittually impossible to recover funds for anyone.

With regard to UK owners, you should probably talk to one of the UK Debt Collection agencies that are able to utilise European Laws to chase debtors a little quicker and cheaper than Spanish Courts. 

I understand any UK assets could be seized, whereas as Jackson says there is very little positive equity likely to be left in the Spanish property given the crash.

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but if you do use a uk debt collection company you may find that the people handing properties back and not paying community fees are not  doing it by choice.

they want to but they just cant because they have nothing.

one case i know of someone having his 2 properties repossed in spain also had an order from somewhere to recover the money the bank lost from his english property.

he was ok with this because he owed more on the mortgage in the uk than the property was worth.

so for him it was all a blessing because he is now renting an apartment for 450 euros a month instead of trying to meet his 1800 euors repayments in spain and his 600 in the uk.

it is easy to look at these people not paying community fees as bad people stealing off the community and i am sure some are.

but

but

a massive amount would love to pay but they have nothing and are crippled in debt in every part of their life, from still paying for the furniture packs they got loans for the paying the car finance they got for their new holiday home.

chances are if someone is has made so many terrible finacial decisions in spain they have made them in their home country and other parts of their life.

so yes you could say the courts are slow and these bad people dont pay their fees but a lot of the time it is actually because there is no money to actually recover.

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What is frustrating is the owners who will not pay but are making money renting their property,either through long term lets or holiday rental during the summer, and they are legally entitled to still use the facilities that are paid for through the community fee!

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 I would wreck their apartment between visitor stays. How many times are they going to spend money fixing it before they get the message?

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What is frustrating is the owners who will not pay but are making money renting their property,either through long term lets or holiday rental during the summer, and they are legally entitled to still use the facilities that are paid for through the community fee!

 

The chances are (like probably almost all such private  lets and even many through real estate agents )  the lets are illegal. 

Anyone tried having a word with Hacienda ?

 

( I would point out that of course Guy's 'suggestion' is a joke of course and not meant to be taken seriously )

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Mungry, I can understand that some people have got themselves into this situation either through stupidity or naivety but as I said we are a small community in a small town and we know these people and we know their situation. There is only one who might possibly fall into that category who has returned to the UK.

The rest have just made a choice not to pay and can certainly afford it, in fact the Spanish guy who has never paid has other properties and is a wealthy man and is often seen around the town drinking with his friends. He has rental income from this property as well as others but is laughing at the ineffectiveness of the court system.

We will probably have to write off the previous debts anyway but in the case you mentioned the bank had respossessed and if we could just get that to happen then we would at least know where we stood.

I was lucky enough to only buy my first Spanish property in 2010 from someone who had defaulted and the bank didn't really want the property so we did a deal and in so doing I suppose I saved the situation regarding more unpaid community fees.

Anyway, it's good to see we have a discussion as the poster said about this very contentious matter and maybe we'll hear of a success story soon.

 

 

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Yes and Mungry is quite correct, not all debtors are bad people many have got themselves into a mess through some rather rash or possibly stupid investment decisions and it is this overspend that has got the world into a mess. I guess certain politicians can be accused of the same.
We certainly attempt to help out those that are struggling offering payment plans etc. as long as they talk to us but as you point out the stubborn non payers are sticking 2 fingers up to a system still not able to cope.
This means that in more cases, those that do pay will have to contribute more to cover the services required to keep the community going or else we will all lose our investment. Not a happy state if affairs but realistic.
Bad debt provisions will become the norm in all community budgets.
Yes it will be good to hear from Communities who have managed to use the system to recover funds.
Banks are still a law to themselves and many will pay 2 years debts as a matter of pride but as property foreclosure s mount more are reluctant to cough up the old debts as they really do not want the property anymore. Not sure what happens when property gets transferred into SAREB

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 Happy New Year to you Hosilverlining;

I  encounter your problem with the recovery of community fees from banks & bankrupt promotors on a regular basis.

There is alot of bluster given by some banks to delay payment of the community fees they owe.I can say Caja Murcia are execellent & have paid me in communities not just their arrears but a year in advance to help them.There are others that will employ any delaying tactic available. The time delay in registering their ownership from the courts to the land registery is a benefit to them as Hugh man states in his post.The administrator should ask them to declare their interest & if they do not he should make regular searches at the land registery of the nota simpla to the suspect properties.

Firstly it is necessary the administrator knows the law to make them responsible for what they owe & understands fully the corporate bankruptcy law of Spain.

So banks first :

The LPH provides for the new owner ( bank or private purchaser  regardless of method of purchase ie dacion) to be responsible for the year they acquired & the year previous.This is law & hence can be applied in court.The fees are to be paid up to date & then on going as prescribed by the community in their formal meeting of members ( AGM or EGM & Ordinary).

Bankrupt promotors: This is known as a Concurso in Spain & applies to both SA & SL ( PLC & LTD equivelents in the UK).

The system is slightly more complex than UK insolvency process as it is granted by the mercantile courts in Spain but in a nut shell works as follows :

The company can bankrupt itself by presenting a petition to the court or a creditor can do the same against it. The costs have just increased significantly with the introduction of a new tax scale.The maximum & most cases meet this is 10,000€ tax levy ( if a creditor presents the petition then 40 % of the tax will be refunded to them through their tax code on sucess of the action .The refund takes about 3 months).

On bankruptcy the company is controlled by court appointed private licenced practioners ( equivelent of a licenced insolvency practioner in the UK appointed off the official receiver's list).They are now the trustees.

The trustees have a responsibility to pay the community fees due from the day of their appointment in the prescribed payment terms as outlined in my paragragh above until the property is sold.

The community has a preferential status in the creditor pool above ordinary trade creditorsbut ranks behind any mortgages & goverment debt along with employees wages .The 2 year rule ( as my paragrah above ) applies to the first 2 years of the debt.This is important as Concurso is designed to help the company continue in business but reduce by 50 % the liabilities to it's trade creditors.Hence the community has a right to 100% of the current &  past year fees at the time of bankruptcy.

If the community is the petitioner then their preference position improves (not by order ) but by value of all their debts owed to them to 100%. The costs to petition are around 10,000 € for a specialist lawyer plus the tax stated above.The lawyers will normally except a 3 stage payment.

It is also important to consider the cost the promotor will face against his company which is 10 to 15 % of the accumlative value of his assetts & liabilities conbined .Hence it not unusal if a petition is sort against a promotor for him want to settle the community debt by agreement to withdraw the petition.

I hope this helps.

F.Parkinson Administradore

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Hello and thanks F Parkinson,

The information you provided is already understood and in hand with our administrators thanks, I hope it is useful for anyone else with similar problems.

In our case the developer has been taken to bankruptcy by a third party, interestingly not the bank who could have taken proceedings themselves, so we now have some debt already owed by the bank and a number of properties we know they are in process of repossessing but the rest - by far the majority - fall to the developer's administrator.  Having agreed at a previous EGM to take legal action against the bank and the developer we then learned about the bankruptcy procedure, we are just in process of signing off our AGM minutes in which we have agreed to present the Community debt to the developer's trustee.

Now we are at the mercy of the court system and hope we can recover something soon before we have to consider closing down.

The bank's behaviour is completely despicable, they have reneged on promises to start making payments while they crucify us with mortgages on properties that we can't sustain because they don't pay their fees.

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With much thanks to Jacksons for their valuable advice, we are now starting to tackle some of our long term debtors through more efficient routes than the Spanish lawyer our current administrator employes.

However we seem to have still hit a brick wall with those debtors who still enjoy the common heating/air con and hot water.

We did take the decison to switch off their heating and hot water. One of the renters of an apartment owned by a serious long term debtor took court action against the community and the judge made an order that the hot water and heating should be switched back on for this apartment.

Sadly the President and Administrator took the decision not to fight our case in court or indeed even send a lawyer.

The apartment still enjoyed cold water and electricity supplied by the utility companies.

Us poor suffering owners who are currently subsidising the debtors argued that the President or Administrator should have contested this case on behalf of the community. In fact the renter was not deprived of basic services as they had cold water supply and electricity. They could have used their electricty to heat teh apartment, cook and heat water for washing etc.

We felt that if the President/Administrator had contested the case we could have won and forced many of the long term debtors to pay up, ceratinly those who make a nice income from both short and long term rentals.

At  a meeting with the president in January with a small group of concerned owners the President announced that the HPL had been updated and that we could now withold the services without penalty. However when we asked the administrator yesterday when the hot water and heating/air con was to be switched off to those apartments owned by the serious debtors, we were advised that the law changed had not even been passed yet.

We are confused and again appear to have been misled by the President or Administrator.

Can anybody offer a view on how we stand on the withdrawal of service such as hot water and air conditioning/heating to debtors.

any information that will help would be most welcome. We have our AGM coming in a few weeks and we wish to put pressure to have this resolved on the President and Administrator, having clear facts on the position will help us.

Thank you

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It was always my understanding that you could not deprive the owners in the Community of any access to the common parts e.g. even if they had never paid a penny in community fees for the last 7 years (actually thye case for one person in our Community) you still could not precvent them from using the pool.

It appears though that you get different advice from different lawyers but I suspect the same would apply to Lomasmike situation.

It causes a few arguments here as some owners who pay their fees on time can't understand why we can't just change the locks etc but we have beena advised that it would be illegal to deprive the non payers of access to the "common parts".

Incidentally, I have "volunteered" to be President as from our last AGM so am taking an even greater interest now. (Little choice as the previous President resigned and there were no volunteers so the names were going into a hat and there could have been a disastrous outcome)!

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To answer the original question, if you want to get fees in without going to court, you need to approach the debtor in a particular way. I work with a company that does just this and if anyone wishes to PM me, I can arrange to call you. Depending on the resort we would usually expect a 60 -70% resolution without the need for litigation.

 

This message was last edited by vantage on 24/02/2013.

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Best of luck Fyfin, it is indeed a thankless and tough task, but some bugger has to do it, so you may as well have a go at doing the right thing.

Frustrating yes for the many fee paying owners that there appears to be little that can be done to reduce debtors,even though much of the media tries to tell s it is much easier, this is blatantly not the case as the Spanish legal system is creaking at the centre unable to keep up with a situation they never thought would happen.

There ha been some mention of denying debtors unnecessary facilities such as pools or tennis courts but as previously mentioned this has not been thoroughly tested and is open to different interpretations.

The saddest situation now appears to e that with much noise about chasing European debtors via European Laws, it now appears to be tough to force payments from Irish and even Scottish debtors due to their own legislation.

Perhaps the only way forward is for enough Communities to get together taking decisive and firm action simultaneously and taking on the legal system at the same time. Well if all else fails, it calls for desperate measures.

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It appears to me that many communities go to court once they think they have exhausted the opportunity to negotiate with the debtors. In reality, many administrators and indeed presidents have neither the time nor the tools to get to the bottom of why someone does not want to pay.

If they use a professional service, they will find that they can get results and in many cases there is absolutely zero outlay to the community. Again, PM me if you want to know more.

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