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Community Bankruptcy

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Disponible en: | Available in: Español

What happens if we are in over our head? How to stop this happening

Community accounts tend to run on a 12 month basis, but this can vary if agreed at a meeting or in the statutes. The law does not specify the financial term, the length or when it should start or end. The community does, however, need to comply with certain tax declarations that run according to the Spanish financial year, from January to December, so it is highly recommended that communities adjust their financial term to this period, as we do not know what tax declarations will be compulsory in the future.

Regardless of the financial situation, the Government or the tax office will not intervene in a community due to bankruptcy, and an audit is not compulsory, unless specified in the statutes. So what happens if the community is bankrupt and cannot pay its bills?

A community is formed by all owners of properties, regardless of their property type, and they respond to any community debt if the community does not have the money to pay. Therefore the overall financial picture is very important and one of the reasons why you need to keep everyone paid up, including banks. If the community takes out a bank loan, the guarantors for that bank loan will be each owner, and if the community fails to pay, then the bank can go against and owner for their share of the debt. This would however be the last case scenario, as prior to this, the court would have issued an embargo on the community bank account and would have seized all funds available, the same would happen if you had a big legal bill or any other debts. This is something each owner needs to keep in mind when thinking ‘the community will pay for it’, because all owners are the community.

If you are in over your head, the only option is to cut services or increase fees

Basically, what you need to look into isn’t just the balance sheet at the end of the year, the deviations on each of the items detailed in this budget, but the final position. If all your bills are paid and you have money in the bank (forget about the debtors as they will not help in the short run).

You need to balance things out. Yes, the President is responsible for supervising the situation, but he does not legally need to be an accountant, so he needs to be advised appropriately so that the situation doesn’t get worse.

The situation with debtors make things worst, we have heard many a time that ‘we will pay the bills when the debtors pay’ or ‘we will paint the urbanization when the debtors pay’, but that’s pie in the sky, as they will eventually pay, but you can’t count on those funds for your financial status.

It’s important for this to be taken into account, especially this year, as community income is dropping as owners can’t pay their fees due to the current situation. Look into this now, do not wait until you are in the red, as when fees go up, they go up for the good payers, we can’t wait on the money from debtors. And look into your costs, make sure your employees do the work they are being paid for, make sure you have local, trustworthy providers who care, because at the end of the day having people in charge who care, is the best-case scenario for every community.

Not a nice way to end the year, but prevision is everything, partial accounts will be available after the holidays, and remember, always look at the big picture and then break it down, the community belongs to all owners, and so do the debts.
The new year is here, no one said it will be easy, but we are here to live it, love it, and enjoy it.

Joni Burnett
Administradora de Fincas Colegiada Nº 2447
Il. Colegio de Administradores de Fincas de Málaga y Melilla
COMUNIMAS – Administradores de Fincas Colegiados
www.comunimas.es info@comunimas.es

Disponible en: | Available in: Español

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