In June I published details of a draft jointly-owned building law designed to solve a host of serious issues with the current law including the lack of management committees, non-payment of communal fees, insurance, etc., etc.
Prepared by the Department of Lands and Surveys, the objective of the law is to provide management committees with the flexibility to carry out its obligations, to ensure that unit owners meet their obligations and that properties are properly maintained.
The new bill has completed its public consultation phase and is now in the final stages of preparation; it should be ready for judicial review in a month.
Stockwatch reported on some of the discussions taking place on the bill at the Parliament’s interior committee.
Speaking to the committee DISY MP Nikos Georgiou said that the state must regulate the problems related to the maintenance and repair of jointly-owned buildings. He referred to a recent incident in Limassol where part of a balcony of a jointly-owned building in Limassol collapsed.
The MP added that apartment buildings in this condition pose a risk to the public health and safety of the owners, tenants and those who live outside these buildings.
(There were two such incidents reported in October in which one woman was slightly injured. Also in October, a woman died after falling from a balcony in Paphos. In July, four balconies in Paphos collapsed.)
Chairman of the committee, AKEL MP Aristos Damianou, said that the majority of jointly-owned buildings have not been registered and the committee will examine the issue in the coming days.
Mr Damianou added that in the meantime many companies have taken over the management of jointly-owned buildings that they have developed, which may cause questions. In many cases these buildings have no management committees and this causes problems due to their non-existence and non-payment of due amounts.
According to the Ministry, new bill will make the establishment of a management committee mandatory and it will have to be registered.
I expect there will be further discussion on this new bill and it will resolve the multitude of problems with the existing law.
Non-payment of communal fees
In my 20+ years experience, the most urgent problem to address is the non-payment of communal fees. Debts must be collected as soon as possible if jointly-owned buildings are not going to fall into disrepair and collapse like those reported in Limassol and Paphos. For example:
- Instigating a small court claims procedure where debts will be repaid in 2 or 3 weeks.
- Seizing movable property owned by the debtor and selling it to repay the debt.
- Securing the property thereby preventing its owner (or tenant) from entering the property.
- Restricting withdrawals/transfers from the debtor’s bank account(s) until the debt has been paid.
- Preventing the sale, renting, mortgaging and otherwise disposing of properties whose owners have not paid their communal fees.
- Lodging a lien against a contract of sale in cases where no title deed has been issued in the name of the debtor.
Of course, there will be genuine cases of hardship preventing owners from paying communal fees. These must be taken into account and a settlement negotiated.
The final two on the list above, preventing the sale and lodging a lien, will not achieve the quick results necessary and will only act as a final stop-gap measure.
Under the current law, management committees can take legal action against the debtor. But this does not provide a solution to the problem.
Court cases can take 3 or 4 years to be heard and even if successful payment is not assured and further court action is required. A court may also the debtor to repay the debt in low value instalments, and it could take many years to recover the debt (assuming the debtor abides by the court ruling.)
The kiss of death approach
The new law must not obligate the owners who pay their communal fees to pay the debt of those who do not pay. These owners will refuse to pay the debt and, as a consequence, often refuse to pay their communal fees as well – “Why should I pay when someone else is not paying?”. Such a move will have a domino effect until no-one pays, the management committee resigns and the jointly-owned building falls into disrepair.
This legislation is long overdue, the current situation is ludicrous, on a development of only seven properties we have two non payers, it was three, but one wanted to sell up and thankfully paid up.
We (the committee) have taken action against one which has already taken two years and we will not have a judgment before next year, and that is the fast track process. Even if we get a judgment in our favour, there is no saying that the person concerned will pay up, let alone pay the debt for subsequent years after action was begun.
Two non payers out of seven represents a shortfall of nearly 30% of our expected income, and we are struggling to maintain our expenses let alone carry out any improvements. Thankfully each property is individual, but we have to carry on insuring them even though they do not pay.
The management committee should set up a sinking fund for things like improvements and other work that is not part of the planned annual maintenance activity.
However, to stay within the law, monies collected for a sinking fund should not be combined with the communal fees collected. This will result in a surplus in the account that could lead to legal problems as management committees in Paphos and Famagusta discovered in 2017 when they took non-payers to court. The District Courts ruled that as the communal fund was in surplus there was no need for further contributions to the communal fees.
I wrote an article on the subject a couple of years ago – Communal fees – sinking fund.
There should be pressure levied against the banks holding default debts but taking no action to repossess the property.
With the banks not repossessing and selling these default loan properties they are preventing either the service management companies or committees in collecting service fees and contributions to their Contingency Funds.
Some Service Management companies are accumulating debts in excess of €20k on my complex. The default properties are falling into disrepair as no one takes responsibility for them, they become both unsellable and propagate damp and other defects into adjoining properties and/or common areas.
Banks need to take their responsibilities on bad debt and get these properties repaired and then sold.
Yes – I agree – and I’ve heard about this particular problem, but I know that one bank is repossessing properties and is contributing towards the communal fees.
In another case where Title Deeds cannot be issued due to planning infringements, the Management Committee is negotiating with the bank that repossessed some of the units to contribute towards the cost of rectifying the infringements. It’s in the banks interest to help rectify the infringements as it will enable the bank to sell the units that it’s repossessed.
Repossessing a property isn’t straightforward and it can take the bank some time to track down the debtor and try to come to a negotiated settlement. But the banks should be actively pursuing debtors rather than sitting on its hands as the bank and the owners of the other units will benefit.
Antonis Loizou has published an article today in the Financial Mirror sharing his views of how these matters should be dealt with – Justice system reform is paramount. He suggests:
A special court is needed to resolve disputes in this area quickly.
We believe that the days of “all matters” courts are over.
In the real estate sector, we urgently need the following:
In that case, decisions are issued immediately and, for the most part, at the end of the hearing.
In the above Courts, the parties waive the right of appeal (American System).
In communally owned blocks the law regarding upkeep and maintenance of the roof is clear. It is the responsibility of all the owners. With regard to balconies which jut out from the main building, it is not clear which owner (if any) is responsible for the concrete slab which forms the balcony.
It seems to be the gradual deterioration of this slab which is the chief cause of collapse. If the owner of the balcony tiles which have been laid on top of the said slab, has kept the tiles sealed and in good repair, he/she can hardly be expected to pay for the collapse of the balcony.
It seems to me that the “Committee” needs to redefine in precise deal, exactly which parts of the building are the responsibility of individual owners, and which are the joint responsibility of all owners.
Then housing committees will be able to carry out their obligations and enforce reluctant owners to do their part in keeping the building in good order.
I suggest you read my article on Jointly-Owned Building insurance.
I essence, the Management Committee is responsible for insuring, maintaining, repairing, etc. everything within the boundaries of the complex.
Owners only need to insure the contents of their property.
I suggest you also read The Insurance of Jointly-Owned Buildings.