Community
Law Corner:
Article
7
The Easy Way of Penalizing the Bad Debtors
By José Luis Navarro www.intercala.com
The Solicitor and Property Administrator for Intercala Administration
and
Pete Woodall (Woody's Los Boliches)
This article first appeared in the Euro Weekly News, Costa del Sol Edition December 2011
Many communities throughout Spain are plagued by bad debtors and often a court action
seems the best solution to collect outstanding community fees that should have been paid months or even years before.
Not many people realise, that in most cases, the amount of money you can claim in court is limited to the outstanding community fees plus legal costs only.
Before starting any legal action against a debtor, it is necessary to approve the amount owed at a general meeting.
Some clever owners who are in debt to their community take advantage of this preliminary step to pay up just as the general meeting is about to be held. As a consequence of this trick, these debtors get off lightly as they only pay their outstanding debts and do not incur any kind of penalty for late payment.
The punitive solution could be to impose a fine or surcharge on a debtor who does not pay on time, but this possibility could only be invoked provided the community had already established a late payment penalty in their statutes and had it approved by the unanimous 100% consent of the community. Even if this were to be the case, a judge could easily consider this rule to be illegal, as according to Spanish Law, communities do not have the legal capacity to fine anyone.
The solution is to reach an agreement the other way round. To do this the community approves an increase to the budget at the general meeting by the exact percentage they would like to impose on a debtor for non payment. Then simultaneously establish a prompt payment discount for the same amount for the owners who pay on time.
With this in place, the nice responsible people who pay their fees on time will receive the discount. The quotas (fees) paid will still be the ones needed originally, but the owners who did not pay on time will not enjoy the new discount so the quota they have to pay will be higher. Furthermore, it is important to note, that to approve a prompt payment discount, only a majority vote of those at a general meeting is needed and not the unanimous consent of the community required to approve a “fine” or surcharge.
For example: the community wants to set a new 25% surcharge to deter debtors, the actual budget of the community is calculated to be 100.000 Euros, then the community will approve a larger budget of 125.000 Euros and simultaneously offer a prompt payment discount of 20% if fees are paid by a certain date.
If all the owners pay on time, then the community will receive the 100.000 Euros which is the amount they wanted in the first place. After the agreed date has passed owners who did not pay will then have to pay the full amount,
as they can no longer enjoy the prompt payment discount.
In our opinion, this is a wonderful way to encourage everyone to pay their community fees on time and to also impose a penalty on the debtors and late payers who don't, without encountering any legal problems involving Courts.
As usual,
We at Intercala Administration strongly suggest you always seek proper and competent advice in all matters regarding the law.
The Easy Way of Penalizing the Bad Debtors
By José Luis Navarro www.intercala.com
The Solicitor and Property Administrator for Intercala Administration
and
Pete Woodall (Woody's Los Boliches)
This article first appeared in the Euro Weekly News, Costa del Sol Edition December 2011
Many communities throughout Spain are plagued by bad debtors and often a court action
seems the best solution to collect outstanding community fees that should have been paid months or even years before.
Not many people realise, that in most cases, the amount of money you can claim in court is limited to the outstanding community fees plus legal costs only.
Before starting any legal action against a debtor, it is necessary to approve the amount owed at a general meeting.
Some clever owners who are in debt to their community take advantage of this preliminary step to pay up just as the general meeting is about to be held. As a consequence of this trick, these debtors get off lightly as they only pay their outstanding debts and do not incur any kind of penalty for late payment.
The punitive solution could be to impose a fine or surcharge on a debtor who does not pay on time, but this possibility could only be invoked provided the community had already established a late payment penalty in their statutes and had it approved by the unanimous 100% consent of the community. Even if this were to be the case, a judge could easily consider this rule to be illegal, as according to Spanish Law, communities do not have the legal capacity to fine anyone.
The solution is to reach an agreement the other way round. To do this the community approves an increase to the budget at the general meeting by the exact percentage they would like to impose on a debtor for non payment. Then simultaneously establish a prompt payment discount for the same amount for the owners who pay on time.
With this in place, the nice responsible people who pay their fees on time will receive the discount. The quotas (fees) paid will still be the ones needed originally, but the owners who did not pay on time will not enjoy the new discount so the quota they have to pay will be higher. Furthermore, it is important to note, that to approve a prompt payment discount, only a majority vote of those at a general meeting is needed and not the unanimous consent of the community required to approve a “fine” or surcharge.
For example: the community wants to set a new 25% surcharge to deter debtors, the actual budget of the community is calculated to be 100.000 Euros, then the community will approve a larger budget of 125.000 Euros and simultaneously offer a prompt payment discount of 20% if fees are paid by a certain date.
If all the owners pay on time, then the community will receive the 100.000 Euros which is the amount they wanted in the first place. After the agreed date has passed owners who did not pay will then have to pay the full amount,
as they can no longer enjoy the prompt payment discount.
In our opinion, this is a wonderful way to encourage everyone to pay their community fees on time and to also impose a penalty on the debtors and late payers who don't, without encountering any legal problems involving Courts.
As usual,
We at Intercala Administration strongly suggest you always seek proper and competent advice in all matters regarding the law.