If you are renting a residential unit or an office/store located in an apartment building, you certainly know that communal fees are an integral part of your monthly expenses and that the cost that you are asked to pay, may, in some instances not correspond to the services provided, which may be inferior to what was agreed upon. What can you do in this case, as well as how can a “bad-paying” tenant who causes important decisions to be neglected, be dealt with?
How much should you be paying for communal fees, how is the specific amount determined and what does it include, what are the legislative provisions, and when can an increase be requested?
The answers to these, as well as to many more questions regarding the proper management of buildings, are provided by Mr. Marios Halloumas, owner of “M. Halloumas Construction Consultants Ltd”.
By Nicola Karatzia
Translation by Stephie Karagiorge
Why should the owners of a building choose to entrust its management to a company instead of taking it over themselves?
Firstly, in this way one can be relieved of the “burdensome” aspect of collecting communal fees from the tenants of an apartment building, while at the same time, this ensures transparency. Additionally, a professional can accept and resolve inquiries, as well as provide solutions to any problems that may arise. In my opinion, such a requirement should be imposed by law for the management of large complexes of more than 15 residential units or multi-purpose buildings where, in addition to residential units, there are also shops or offices whose use is different, thus the charges should be adjusted accordingly.
A proper management company for shared buildings can assist in complying with regulations or even in enacting them – if they do not exist -, as well as in ensuring compliance with the legislation.
How are the monthly communal fees that each apartment owner must pay calculated, and to what extent is this legislated?
The answer to this question is somewhat more complex due to various factors, I have to admit. There is legislation in place (Law on Immovable Property Law N. 180(I)/2014), which can be specifically found in CHAPTER 224 (PART II COMMUNAL BUILDINGS).
The legislation also covers shared buildings (that is, buildings that have a building permit but do not yet hold separate title deeds). In such cases, the problem lies in unclear regulations, which is why the provisions of the law are applied, which state that contributions are made based on the regulations of each building, according to the area of each unit.
Which obligations and expenses are covered from the amount for communal fees?
Each building must operate based on a budget, which is determined by adding up the total cost of monthly expenses.
It is worth noting that the basic expenses relate to insurance, record-keeping costs, cleanliness, electricity, water supply (where applicable), elevator maintenance and inspection.
Specific provided services that fall under the communal fees include, among others: garden maintenance, roof insulation, installation of filters in the central water supply, pool maintenance, gym maintenance, fire extinguisher refill, pest control, automation and gate maintenance.
Does the amount for communal fees remain constant every year, or is there a predetermined increase?
The Management Committee (which is mandatory and consists of the owners of the units), along with the Management Company – where applicable – forecast and prepare the budget. They then collect the necessary funds in advance so that they can pay for the services provided – after issuing the required invoices. It is important that this process is conducted at least once a year, during the Annual General Meeting, as well as in case there is the need for an extraordinary increase arises.
For example, we recently had approximately a 30% increase in the cost of electricity. A few months later, all the elevator and cleaning maintenance companies asked for an increase, which in many cases resulted in the need to revise the budgets of the management committees.
Here, it should be emphasized that the management company does not make decisions but only makes recommendations to the General Meeting of the main owners.
The maintenance costs of an older apartment building may be higher than those of a new one, thereby affecting respectively the amount of communal fees that each owner has to pay?
No, they are not interrelated, nor can such a correlation be implied, as there are cases where the opposite is true. For example, new buildings often have many special maintenance automations (e.g., door cameras with integrated UPS and security systems centrally connected to the internet). I will provide two additional examples to help you understand that each case is different and should be studied thoroughly:
a) Let’s consider two identical buildings with 20 two-bedroom units, where one was constructed in 2000 and the other in 2015. If in the first case, proper and preventive maintenance is conducted, the cost per unit would be €25.00 per month. In contrast, for the second building, due to additional amenities, the communal fees may amount to €27.00 monthly.
b) In the exact same circumstances, if the building that was constructed in 2000 had been poorly managed for years without proper and sufficient maintenance, there might now be a need to repair the damages that have accumulated. As such, even if €20.00 was previously paid for each apartment per month, at an unforeseen time, several thousand euros would need to be collected to cover the expenses incurred.
If an owner/tenant fails to pay their share every month, how would you as a management company resolve the issue?
M. Halloumas S. K. Ltd (it should also be done by others as well) operates with transparency to enhance trust among the parties, providing answers and explanations (e.g., why unit “Y” needs to pay “X” amount each month). Each owner or tenant who is required to pay communal fees must first of all understand where the money is being spent and why.
In this manner, we neutralize possible excuses and questions from their defence lawyers, as we ‘disarm’ them and leave no room for any excuses.
If someone doesn’t come to their senses, they will be brought to justice, after we first inform them of the hundreds of cases and decisions in favor of the management committees that cooperate with us (cases from 2010 to 2018).
I say with honesty that in the past three years, from fifty cases that used to be brought to justice each year, they have decreased to five for the year 2022, while only one ended up in the courtrooms in 2023. Furthermore, some of these cases concerned units whose owners had left Cyprus.
In cases where there are shops on the ground-floor of a building, is their share priced in the same way as the apartments, since they do not benefit from the use of elevators, stairs, or electricity in common areas?
Your question is reasonable, but difficult to answer. As I mentioned before, everything depends on the regulations that were either established at the time of the building’s construction and are written in the contracts, and are therefore binding, or they should be established in a statutory General Meeting with votes amounting to 75% of the total owners.
But what happens if the above do not exist? If separate titles deeds were issued for the building after 1993 or were updated after that year, then the model regulations come into effect. As illogical as it may sound, yes, even the shops on the ground floor of an apartment building will have to pay for expenses such as electricity, elevator maintenance, and staircase cleaning, even if they do not benefit from their use! The cost will be calculated based on their area. As such, the key word for all these disputes and uncertainties is ‘regulations’.
In case we are interested in renting an apartment, before agreeing on the amount of communal fees that we are asked to pay, should we “demand” from the owner to present us with an annual detailed statement of the expenses of the apartment building?
No, tenants are not the owners of the units and do not have the right to vote. This means that they cannot influence the budget, nor can they ask for the abolition of a service (e.g., rented on the first floor, has claustrophobia, does not use the elevator, and does not want to pay for it).
According to the law, however, the tenant has the right to know how expenses are allocated and, in very few cases, can refuse to pay a certain amount. For example, if they realize that out of €38.00 per month, €8.00 is being accumulated for the creation of an owners’ fund for the future painting of the apartment building, they could refuse to pay this expense.
However, at this point, we recommend caution, especially to the owners, regarding rental documents. Any separation of communal fees into portions of payment could potentially provide a “loophole” for the tenant, who will not be able to be brought to justice for non-payment of communal fees, as the responsibility always lies with the owner.
As a Building and Project Management company, we facilitate both tenants and owners by separating expenses and sending separate invoices to the two parties, with everything that concerns each party according to the law.
Before costly work is decided on a building, is it required by law to convene a meeting of all owners and obtain the consent of the majority? What happens if someone disagrees or is absent from the meeting?
An Annual General Meeting should be scheduled, and all owners should always be informed, especially about decisions. In the legislation there is a note that states that only those who have settled their dues have the right to vote. This provision contributes to making decisions more promptly, while also serving as a safeguard for those who pay their dues, ensuring that they do not lose the right to maintain their properties in good condition.
What is the range of your charges for the provision of your services, and how is the payment made? Is it by adding a percentage to the amount of communal fees for each apartment?
The pricing policy of M. Halloumas S.K. Ltd is exactly the same as the other services enjoyed by the building, depending on size.
The minimum charge for a building is €50.42 + VAT (i.e., €60.00 monthly), while the maximum reaches €504.20 + VAT (i.e., €600.00 monthly) and concerns complexes with more than 150 units, such as marinas and small private villages. Beyond that, the cleaning crew charge, the Electricity Authority of Cyprus, insurance, elevator maintenance, and all other expenses are added and divided by the percentage of the units. Each unit pays the money to a common fund, i.e., a bank account in the name of the building. Only the management committee of the owners has exclusive access to this account. Both we and the other service providers are paid from this account.