Large-scale projects and the ‘curse’ of common expenses
The industry’s efforts to modernise the law on common expenses dates back a good decade. We have submitted our views to successive ministers about the problems associated with the common expenses laws and also raised the subject in parliament, when Andreas Christou chaired the committee, with the only objection coming from the Land Registry.
The officer in charge at the Land Registry even went on to write a ‘handbook’ after his retirement, one that remains incomprehensible even today. As the law stands today, it cannot be properly implemented and punishes the regular contributors who are forced to pay for the bad payers, as a result of which building suffer from poor maintenance. At present, the law says: - There should be a management committee registered with the Land Registry. However, the registry itself says that this is not necessary and a simple decision of the general meeting of tenants is sufficient, without having to register the management committee itself. So, who is right?
- The law further states that if someone fails to pay common expenses, the rest (regular contributors) should pay the balance and seek legal recourse. This is the worst possible legislation for regular contributors as it it affects them morally and financially, who will also have to cough up legal and court fees, while the black sheep of the building continues to enjoy the benefits of public services free of charge, until such time as a court rules on the matter. In addition, if current tenants sell their home or unit to a third party, how will they ever recoup the expenses they have paid for, as well as legal fees for cases that could drag on for 2-4 years?
- The matter gets more complicated in the case of largescale projects, primarily with foreign buyers who were attracted to Cyprus either for investments or for passports and visas, who will in about 3-4 years have to face these problems, because it is a common phenomenon both among locals and foreigners as well.
- This will result in reaction from mainly new foreign buyers and could lead to fresh pressure, similar to what happened by the Property Action Group that reported the Cyprus government to the EU courts over the bogus title deeds scams and could start a new catastrophic cycle for the market, especially after all the hard work by some of us to attract high-income foreign investors. For us, the system is fragile and short-sighted, despite all the warnings about the current situation.
The arguments we raised some ten years ago are valid, even today:
- The management committee must be registered at the Land Registry with the relevant legal status of any legal entity.
- Non-payment of common expenses should be notified onto a public registry and onto the information network of the project ie. to use the “name and shame” method.
- Prior to any rental, transfer, mortgage, the owner or current tenant must present a certificate or proof from the management committee to be addressed to the incoming tenant that there are no other dues owed to third parties.
- It should be stated that the lawfully responsible person is the owner/buyer and not the tenant and carries the relevant responsibility regardless of what is said in the contract.
- Until past dues are settled, and based on a management committee decision, the owner/buyer cannot use public areas or services, eg. common heating/cooling, elevator, public pool, etc.
- The management committee should be more professional and should be paid for their services, and no volunteer to do it free of charge, as is the case now. This way, a proper manager or administrator will be hired who is a professional and who will have the energy and reason to do the job.
- Anyone who wants to challenge the common expenses fees should pay first and claim later, having the right to sue the management committee or even the administrator, in other words the exact opposite of what happens today.
In order not to overload the courts with such disputes, these should be referred to an arbitrator whose decision will be binding for all parties. Such arbitrators are now publicly available through the local chambers of commerce or the technical chamber ETEK.
Such issues unfortunately cause serious problems to small communities and we will soon be faced with a fresh round of bad press if the matter is not resolved properly.
In previous columns, I referred to the “curse of common expenses” which is no exaggeration and I believe the Interior Minister himself should take the mater very seriously before it grows out of proportion or blows up in our face, as has happened in the past.