Slaying the common expenses monster

You must be aware of the problems that are created by the unworkable law regarding common expenses and administration of multiple ownership buildings.

In addition to the law, the non-payment of the common expenses creates tensions amongst the residents, ranging from personal issues to those of good maintenance of buildings/communal areas and other matters, such as capital expenses for the future.

The common expenses law, at present, stipulates that the administrative committee should cover all expenses and sue the non-payers for the amount due. In other words, the good payers must produce extra cash to cover the arrears of the debtors and then sue the debtors through the courts for it. So, they will be called upon to contribute to the debt plus around EUR 1,500 for legal fees, time consumed in court and then wait 2-3 years for a court decision to get compensated.

Human nature being what it is, this does not happen in the majority of cases and the good payers are not willing to provide extra cash for this purpose.

Once the court decision is issued against the debtor, the latter may submit a defence by claiming that they have no money and seek long-term payment terms to the committee, etc – so after the court case of 2-3 years, the administrative committee (the rest of the tenants) might have to wait for another 2-3 years and if there is still no payment, a new cause of legal action is to be undertaken, making it a never-ending saga.

Our proposal is that properties that owe common expenses, should not be leased, sold, or mortgaged unless the property gets a common expense release by the administrative committee. Also, if a debtor disputes any amount, this should be paid by them and then sue the administrative committee, so that the common expenses are not held back (exactly the opposite of what we have today).

I have also suggested that such differences should be handled by a Small Claims Court (similar to that in the US and Britain) where a case can be resolved quickly and the parties do not need to be represented (lowering the cost) with a time frame for a judgement within the day or maximum 1 month from the date of the lawsuit. This court could handle other cases as well, of a minor nature (up to EUR 10,000 in claims) while it should comprise of three parties, i.e. a judge, a representative of the owners and the tenants, such as the small business associations (POVEK). Such cases and decisions should not be appealed, a clause that needs to be clarified in the Cyprus Constitution.

The problems with common expenses are well known. It is becoming more pressing than ever, due to their excessive cost related to the tower blocks and other projects which offer facilities, such as a shared swimming pool, gym, concierge, gardens.

The inadequacy of the existing law will become more pressing and evident over the next couple of years, when the tower blocks (and other large-scale developments) will start operating, causing in many cases of non-sale-lets of problematic units and as such reducing their value.

A friend of our firm from Lebanon informed us that in his tower building (in Beirut), one apartment was sold under auction by the administrative committee, for EUR 1.8 mln because the owners did not pay their EUR 650 common expenses bill.

This is why we need to express procedures to protect the good payers and others who abide by the regulations.

Amongst the other problems of the common expenses is insuring the building.

As circumstances are at present, each owner insures their unit independently, but then if the building is destroyed by, say an earthquake, fire, how will the building be rebuilt if some of the owners have not insured or have underinsured their units?

An attempt was made in parliament last year to correct the situation through a proposed bill, but this had so many ambiguities and unworkable provisions it was withdrawn.

The indifference on the subject by the government and the various political parties is shocking as are the various associations, advisors to the state and other stakeholders.

We have had several meetings on the subject at the Ministry of the Interior from time to time, but although they have expressed their agreement with us and recognise the problem, nothing came out of it.

It is a monster in hibernation, but when it wakes up, our problems will be huge.