Essential Improvements to Community Infrastructure

My question is - what is the fairest way to finance essential infrastructure repairs (not routine maintenance) given that our developer has disappeared ?

Our community has to replace its mains water-pipe because the current one is unsuitable and keeps bursting.  The cost to replace it is estimated at 6000 euros. 

Our developer has left huge unpaid communty fees, and cannot be contacted.  Less than half the 33 apartments have been sold, and of those that have been, a few owners are always very late in paying their fees, a couple do not pay at all (we've gone down the legal route and, although a charge has been put on unsold properties, we've been stuck with the lawyers bills.  These unsold apartments are now likely to be reclaimed by CAM bank who'll then not be responsible for paying any of the unpaid fees.

Should those of us that do pay fees, just have to finance this work ourselves.  I'm thinking that when CAM Bank sells the repossessed apartments at knock down prices, the new buyers will benefit from the replaced pipe as well, and they'll not be responsible for any of the unpaid debts on their new apartments.  So, should they not be asked to pay a contribution to costs that really are not the current Community's responsibility.  This isn't the only infrastructure problem that we're faced with, just an example. 

Has anyone else had any experience of this type of issue?  I'd be grateful for any advice. 

Normally communities put in an extra payment during the year as and when something major comes up that needs sorting and there's not enough money in the kitty to pay for it.

In our community, if this needs to be done, an EGM is called, the cost is agreed and the amount each owner has to pay too.

In the early days of our community we had a similar problem to yourselves.  We had many empty properties and some where the owners never paid.  So we used to have to compensate for this in calculating the amount each owner has to pay, so that we could get the work done.

As these costs are agreed at an EGM, it means that every owner has to pay it.  For those properties that are unsold or the owners don't pay, that extra fee becomes a debt associated with the property. In terms of the unsold properties, when somebody comes to buy one they (should) be informed by their solicitor what the outstanding debts are that need paying.  The buyer normally then asks these debts to be either removed from the price or be paid directly to the community.

In fact, when properties get bought, you'll find that the associated debts normally get cleared quite quickly afterwards.

Hope that makes some sense.

Thanks for taking the trouble to respond Justin.

Actually, we do add contingencies to all our budgets now, but at the end of the year this all gets spent, plus some more - we've never been able to build up a reserve.  Increasing the budget puts a strain on some owners who do try to pay their way.

My point about prospective new owners is that if and when these apartments are repossed by CAM Bank, as I understand it, the debts on the properies will be wiped out, so new owners buying from CAM Bank would not have to pay anything at all - we'd not get any of our money back by having increased community fees.

I'm wondering if there's some other way, maybe by creating a loan account, financed by a few of the financially better off owners, to which new owners would have to pay their share. We accept having to pay for all the usual maintenance costs, but it's a few existing owners keep having to pay to put right infrastructure problems, that usually the developer would sort out, that's difficult to take.

Colin

Colin, that's incorrect.  When the bank reposseses a property the bank then becomes liable for payment of the ongoing AND outstanding community fees.  They are not written off.

So payment will either come from the bank (if they do the decent thing) or from the person who then buys the property.

The debt is never written off.

 If a few wealthy owners pay to have a new water pipe installed would they not become 'owners' of that pipe and could charge for connection to it. The charge would be the cost if equally shared out. Any new owners or bank would only be connected upon payment. It would be very hard to sell a property with no water connection.

While you cant stop non paying community members enjoying current instalations eg pool, you can stop them with new additions.

Two very interesting points from Justin and cbrammeld, which we'll put to our Administrator 

Justin's information is very encouraging, but seems to conflict we've what our Administartors have told us previously, about developers failing to pay their mortgages (bank loans), or going into administration and having their properties repossessed, so we'll go back to them on this  I'll let you know the outcome.

If the debts are never written off, am I right in thinking that they'd be capped at this year's plus last year's debt, no further back?

Colin

 Hi Douch; The problem you have is not uncommon in communities in Spain due to the financial climate.Firstly try to claim the water pipe through your insurers .This may be turned down if a maintenance issue is considered but if faulty as you say then they should pay for it if your cover extends to the same.

If this fails you can claim on the insurers of the Architect ;Promotor & Constructor.This is costly in legal fees & can run into many years in court to acheive a settlement. For this reason many communities find it both cost & time effective to undertake the works themselves from their own funds.To do this you should have a EGM & create by majority vote a seperate Fundo Extraordinaire ( Extra Fund) with it's own bank account & stipulate the money is ring fenced for this repair only.Each member pays his share into the account often over 3 monthly payments.

When a new owner or bank takes over a property ; the new owner is liable by law for the current year & past year fees only but the out going owner is joint & severally liable too ( ie you can go after both for the arrears from sale day  proportion of the debt back to 1 year previous).The debts beyond these periods sit with the the past owner only.You should be asking why your Administrator has not taken on the task within his duties before now to iniciate collection of the fees from the Bank as they will pay with persuasion and then study the debtor past owner with a view to what action to take.The action on debtors should be mandatory in any formal meeting agenda.

F.Parkinson Jacksons Administradores SL