Developers owes communities millions
The financial crisis is leaving communities of residents with mounting debts. Their lack of income however is not just due to individual owners getting behind with their monthly fees but developers of new buildings who have stopped paying community fees for the numerous apartments that they have failed to sell.
This trend has been confirmed by the School of Property Administrators, whose representatives believe that developers’ debts with communities could run into millions of euros in the province of Malaga. What’s more the debts build up month after month. In some cases developers have not paid the community for unsold flats, garages, storerooms or commercial premises for as long as two years.
The current inactivity in the property market is behind the problem. “Before the crisis, developers religiously paid their part of the community fees for reserved or unsold properties, because they knew a buyer would come along within a couple of months; now, however they are the most problematic debtors we have to deal with, because many of the companies we are demanding money from have gone into administration”, points out Marcelo Cambló, president of the School of Property Administrators.
In the province of Malaga there is an unsold stock of around 25,000 new properties, according to figures provided by the Provincial Association of Builders and Developers (ACP). “There are no statistics to show exactly how many of these properties are not contributing to the communal expenses, but we do know that this is becoming a serious problem on new developments”, says Cambló, who adds that the community fees are the first thing developers stop paying when they start to experience cash flow problems and have to pay the mortgages of the unsold flats.
This situation, along with individual proprietors who fail to pay (administrators say that one in ten residents has stopped contributing due to the crisis), leaves communities with serious problems. “Many communities are on the verge of bankruptcy and cannot pay basic utility bills such as electricity and water for communal areas”, explains Justo Sánchez, a property administrator with Avalon Torrox. He adds that in the case of buildings and developments managed by his firm in Antequera, Malaga and the Axarquía, half of the newly formed communities of residents have problems with developers who don’t pay. Sánchez goes on to say that small development firms set up at the height of the building boom are those with the most problems now. “The larger firms may be behind with their monthly fees but sooner or later they tend to reach an agreement and pay, but many small firms have even disappeared”, Sánchez points out.
Just as they do with individual proprietors, many communities are turning to the courts for a solution. However, while it may only take around six months to get a sentence, it can be years before the claimants actually see any of the money they are owed.
In the case of the developer going into administration money owed to the community of property owners may never get paid back. Administrator Rafael Peláez, explains that communities have to wait behind banks and suppliers in the long debt-collecting queue. What’s more, Enrique Sanjuán, a judge at Malaga’s Mercantile Court, points out that many communities of property owners do not know that to receive money owed when a firm is in administration they have to put in a claim before a certain stage in the process.
If the developer goes bankrupt the unsold flats often end up with new owners, the banks, who tend to be no better when it comes to paying overdue or current community fees. They often wait until they receive a court order, says property administrator Fernando del Alcázar.
In most cases the residents end up footing the bill. According to Juan_Ruiz, delegate of the Marbella School of Administrators, “Residents put the money up front so that the community can continue to function and on developments where the monthly fees are already more than 200 euros, this can mean a considerable increase”.
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