Exemption from fees in owners’ associations

Welcome to Meridional and a new article on our blog. The exemption from service charges in owners’ associations is undoubtedly a topic that is always controversial. What reasons might lead to such an exemption? How should such a decision be reached within owners’ associations? Let’s take a closer look at this issue.

What is a fee waiver in a homeowners’ association?

Paying each of your homeowners’ association instalments on time is very important to ensure that the maintenance and upkeep of the estate can be carried out under the best possible conditions.

Normally, the manner in which contributions are to be made is determined by the participation coefficients held by each member, as set out in the instrument of incorporation or the articles of association.

It goes without saying that every residents’ association is unique and operates differently; for this reason, and depending on its constitution and structure, there may be doubts as to whether, for example, commercial premises and flats with street-level entrances are obliged to contribute to the general expenses in the same way as the other units.

In this blog post, we will analyse the exemption from fees in residents’ associations, as set out in Article 9(e) of the The Condominium Act:

It is the duty of all owners to contribute, in accordance with the share of ownership set out in the title deed or as otherwise specified, to the general expenses required for the proper upkeep of the property, its services, charges and liabilities which cannot be allocated to individual owners.

Article 9(e) of the Condominium Act

Consequently, exemption from the payment of fees in owners’ associations would constitute an exception to that article.

Exemption from service charges in owners’ associations: Cases

As we have just seen, and taking into account other scenarios as well, a residents’ association may grant an exemption from payment of some or all of the service charges through three means:

– Agree that this should be included in the memorandum of association.

– Include this provision in the community’s articles of association.

– To approve a specific exemption at a owners’ meeting, which must be properly organised by the property management company and always by unanimous decision.

If this exemption from charges is approved, the owners who are exempted will be relieved of their obligation to pay the contributions relating to ordinary expenses (maintenance and upkeep) and extraordinary expenses (replacements and repairs).

Examples of fee exemptions.

– Commercial premises and ground-floor units. With direct external access from the street. These units may be exempt from ordinary and extraordinary charges relating to the use and maintenance of lifts, the cleaning of staircases and other such matters.

In any case, even if they are exempt from contributions under a general exemption, if it is agreed to install a lift or a stairlift, they must contribute towards the cost, as this constitutes an improvement and modernisation of the building.

– The same applies, even if they do not make use of them, in the case of gardens and communal areas owned by the residents’ association. They can always apply for and obtain an exemption from the fee through the three mechanisms we have outlined in the previous paragraphs.

Are there any valid reasons for stopping payments to the owners’ association?

A good property manager will inform you that there are no other grounds on which you may stop paying your service charges, apart from an exemption set out in the articles of association, the deed of incorporation or one unanimously approved at a residents’ meeting.

Regardless of how you use the communal areas, the quality of the management of those areas, how you use your flat and other more or less subjective factors, the most common method of allocating the payment of expenses is via the contribution factor, although there are other alternatives such as equal distribution, to give just one example.

Neighbours in debt? What can be done?

As set out in Article 9 of the Condominium Act, it is the duty of each and every owner to contribute towards the community expenses necessary for the proper maintenance of the property. However, it is not uncommon to see how certain residents attempt to evade this obligation by offering various excuses.

If your community finds itself in this situation, it is advisable to inform yourselves of the rights and obligations of each party, and to consider the possible steps to take to claim the outstanding payments from the owners in arrears.

Regardless of the status of the property (let, vacant, occupied, etc.), the owner is always, and in all circumstances, responsible for paying the charges. For this reason, any appropriate legal action can only be taken against the owner.

An initial step you can take to exert pressure is to deprive him of his right to vote. The Condominium Act provides for this possibility from the very first instance of non-payment. However, it is worth clarifying that the deprivation of voting rights does not prevent him from attending meetings and contributing his views and suggestions.

At what point would a property manager advise seeking legal advice?

The next step when seeking payment of outstanding fees from a neighbour in arrears is to take legal action. This process can be initiated in two different ways: either when the neighbour challenges the debt through the courts, or when the owners’ association considers it the appropriate time to take legal action.

The law does not specify a minimum amount of outstanding payments required to report a neighbour in arrears, but common sense suggests waiting until the amount claimed is sufficient to justify legal proceedings. Once the decision has been taken, it must be approved at a meeting by following these steps:

– To convene a meeting of each and every owner (including those in arrears) in accordance with the procedure set out in the Condominium Act.

– The notice of meeting must be accompanied by the agenda, which must state the intention to begin the process of claiming outstanding fees, which must be set out in detail.

– The legal claim must be approved by a simple majority, as must the appointment of those who are to take charge of the proceedings.

– The resolutions adopted will be included in the minutes along with the other agreements, and will also be signed by the chair and the secretary. These minutes will subsequently be sent to each and every owner.

– Ensure that the instalments have been calculated correctly and identify who is liable for the debt.

– Request payment of the outstanding amount by registered fax within a reasonable period of time.

– Issuing a certificate confirming the resolution of the meeting approving the settlement of the debt.

– Drafting and filing the claim with the court.

Now that you know the reasons why a homeowner may be exempt from paying service charges, and the procedure for taking legal action to recover debts, you will be able to help your homeowners’ association understand what to do in such cases. Having the right advice will make the whole process easier and help neighbours reach an agreement when it comes to making a decision.