When you receive notice of the Community’s Annual General Meeting (AGM) approaching, you will normally also be provided with various other sheets of information. If you are lucky enough, these will be in your own language – but even so, the sheer weight of paperwork received (or the large attachment to the email if you receive notifications electronically) can be very confusing and off-putting to many – especially if you have only recently bought the property and are unfamiliar with how the Community of Owners functions.
We have put this article together to try to assist, those of you who aren’t familiar with the process, in a better understanding of the figures provided.
The Budget
Communities vary greatly in size and this of course will affect the complexity of the budget prepared. The budget will usually be created by the administrator, who will have lots of experience in preparing financial information and will also have ‘’hands on’’ knowledge of the expenditure which is likely to be incurred during the year.
Sometimes, it is just a case of estimating the community’s expenditure based on the previous year’s actual results, perhaps allowing for a known price increase which may apply in the next year or other known changes in circumstances.
In other situations, the projections can be more exact i.e. where a contract has already been signed with a supplier such as a gardener or a pool maintenance company- these amounts will be fixed in the contract and the actual costs incurred should not therefore vary from those budgeted.
Some administrators, like us, take this opportunity to renegotiate contracts or invite tenders for new ones to obtain optimum deals on behalf of the Community and these savings will be reflected in the budget.
Once the total costs for all communal expenses are known, the amount payable, known as the quota (cuota in Spanish), by each property owner can then be calculated.
Community Quotas
Every property within a community is assigned a quota or a percentage (%) share which is detailed in the original Community set up Deed, which would have been drawn up in accordance with the Horizontal Property Law.
When you buy your property and sign the purchase deed before a Notary, your property’s share in the community will be included in the document for your information.
These quotas are often based on the surface area of your property in relation to the total surface area of all the properties in the community, but may also take account of which floor the property is on, its orientation and the views amongst other things. The costs will be allocated to you in relation to your official % share based on all of the factors stated above. (Please note that your quota is also relevant when voting at the AGM as the larger your quota, the greater weight your vote will have).
During the AGM the budget and the individual quotas will be reviewed and approved. If the quota has changed from the previous year, the new amount will be made known and also an explication may be given on how and when this new amount will be effective from. This is important to note, as the AGM is usually held during the financial year in which the budget relates to. The new quotas cannot be implemented until the budget has been agreed at the AGM. In the meantime the previous year’s quotas can continue to be charged until the new amounts are approved.
Payment of the Quota
These can be paid monthly, two-monthly or even quarterly, depending on the Community Rules. Most people these days pay by direct debit – in fact several communities offer incentives for owners who pay in this way so that the administration of collecting the quotas is made easier, especially where there are several foreign owners who may only be at the property now and again for holidays, and it also helps to control the level of bad debts arising.
As the AGM is held part way through the year, your quota will be adjusted to the new level agreed at the AGM at the first available opportunity and as stated above, there may be an adjustment to bring this in line with the new rates agreed.
If you require any further information on budgets and quotas then please contact us and we will be happy to provide you with the answers.