Cyprus Property Forum for Buyers, Sellers & Investors

Hello,

Can anyone advise on this..

I am currently the chairman of our owners management committee and have an issue with how our management company reports our accounts they hold on our behalf.

Our management company holds a deposit on each property to cover common expenses which is approximately 45% of the annual charge.

The company charges 8% interests on outstanding balances on 31st December each year on individual owners accounts.

They say that if we have more than 50% of the annual budget in the bank then the interest belongs to the committee otherwise it is their money. I don't have a problem with that although in theory we would never have 50% at the end of the year unless our repair fund was not utilised and had built up over some time.

The main issue I have is how they report the debtors to us.

eg: Our maintenance fund is € 20,000
Our deposits are € 22,500
Total deposits € 42,500

less Debtors € 15,500

Balance € 27,000

So the Debtors is inflated by long term (missing owners) none payers that have been charged interest each year.

So the Debtors would be € 12,000 of missed payments towards common expenses and maintenance fund
plus € 3,500 of interest (over the years)

Therefore, please correct me if I am wrong, I believe the interest is a debt of the management company and not of the committee and is not a cash movement.

So the example above should read line this...

eg: Our maintenance fund is € 20,000
Our deposits are € 22,500

Total cash deposits € 42,500

less Debtors € 12,000

Balance € 30,500

The Interest is charged directly by the management company to the owner and in my view is not part of the debt to the committee. Also as a notional income there is no direct cash outlay and it is only ever realised when it is paid to the company. I appreciate that the company may have costs if they are in an overdrawn position at their bank but this is their business cost not the complex's.

I would love to hear back on whether you are in agreement or disagreement of my thinking.

Many thanks

Chloraka Complex.

Hi Chloraka Complex and welcome to the forum.

I'm not an accountant and I cannot answer your question. Hopefully someone else here will be able to advise.

But there are a couple of things I suggest:

You should take legal action against the non-payers. If you do not have their contact details, you can get these from the Land Registry. You can claim for the debt plus the cost of legal and court fees.

Regarding the communal fund - once it is in surplus there is no need for further contributions. (Districts courts in Paphos and Famagusta have ruled on this.) If you wish to set up a sinking fund for emergency repairs and unplanned/scheduled work you will need to set up a 'sinking fund' as described in my article Communal fees – sinking fund.

Regards