Covid triggers delinquencies in neighboring communities




Non-performing loans in neighboring communities are increasing “substantially” since the beginning of the pandemic. According to a study launched by the General Council of Associations of Property Administrators, during the first wave of the pandemic it was estimated that delinquencies had increased up to 40% at the national level. However, they now believe that the rise is “not that steep” anymore. But knowing the exact number of defaulters in Spain is an arduous task as there is no official registry of owners who have stopped paying the fees of their community of owners. To this must be added a problem derived from the pandemic and the sanitary restrictions that currently apply in all territories: general meetings of owners are not being held, the only ones capable of proceeding to judicially claim a fee from a defaulting owner. “The increase is not being noticed because it is being in limbo,” says Luis Delgado, Legalitas lawyer, who sees a “reality” that is increasing delinquencies because “people with financial problems will not be paying community fees ”.

The number of defaulters, as is evident, increases when the country experiences an unfavorable economic situation. And the coronavirus crisis was not going to be an exception. However, if there is a difference between the current crisis and the financial crisis of 2008. If the previous recession was “a progressive process” whereby non-performing loans increased over several years until it began to decline in 2012, now the economy has suffered a “free fall” for which Salvador Díez, president of the General Council of Associations of Property Administrators, believes that the impact may be ‘more complicated’ to handle since when the communities foresee a period of uncertainty, they usually adjust the budget to the reality of the moment. But this has not been possible on this occasion either because “it is also necessary to convene a neighborhood council for this.” “The economy can be adjusted when it falls little by little, but when it is suddenly it is more difficult to adjust it,” he says.

For this reason, the body chaired by Díez has asked the Ministry of Justice to regulate so that meetings can be held telematically or agreements can be reached through surveys, something that has already been done in Catalonia, where they have the powers. «You have to find a solution» because late payment can complicate “the management of aid” that may come from European funds, which can be aimed at improving, for example, the energy efficiency of buildings.

There is the possibility that the owners face the payment of the fees of a neighbor who cannot meet his payments due to financial need. It is produced an agreement between the community and this “accidental defaulter” whereby the rest of the neighbors face the payments with the owner’s commitment to return that money when his situation improves. “It is done to show the good will to face this debt and to avoid the initiation of a judicial process by the community,” he continues. In any case, “delinquency has an economic effect because people are willing to pay the part of the defaulters if it is for ordinary maintenance but they are more reluctant to extraordinary expenses,” explains Díez.

In addition, these agreements are not made with professional or intentional defaulters or with financial institutions that do not have their fees up to date. According to Díez, on many occasions the owner banks compensate the value of the arrears in the sale price of the apartment.

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