When Condominium Owners Aren’t Paying Their Share

    Tips on how to address this problem

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    A condominium, or sometimes known as a consortium or community group, has a number of common expenses associated with the co-ownership, and these expenses are the responsibility of all the joint owners involved.  But maintenance of the condo depends on the contributions that each owner makes to cover these expenses.  But if one or more of the joint owner fails to make those agreed upon contributions, for example the condominium fees, then the entire condominium property can very quickly end up in a financial crisis.

    To address this situation, condominium managers have some options:

    • Reservations: To cover the shortfall caused by the nonpayment of their share by one or more of the joint owners, you can dip into the reserves usually held by the condo. This includes reserve funds created either by the rules and regulations of the condominium, or by prior agreement of the condominium owners. Sometimes there is a “surplus” from previous periods.  Although the condominium should not have them, in practice this does happen.
    • Extraordinary Fees: If you cannot use the reserves, either because there are none or some other impediment, another alternative is that the Condominium Owners Association approves a special assessment.
    • External Financing: There is a possibility that the condo goes into debt, and agrees to obtain a commercial loan to meet its needs. This option is still in its infancy in Costa Rica. But you could consider a collateralized loan against future shares, or a transfer of shares against delinquent condominium owners, or pledging of other common assets – upon approval of the Association of course.
    • Payment Arrangements: To recover amounts owed by the owners who have fallen into arrears, administrators must be able to negotiate and conclude payment arrangements in order to avoid a long collection process. In the case of payment arrangements, there is a need to distinguish between the waiver of debt (which is an authority that should be ratified in general), and the settlement of payment as recovery of the debt. The latter would be on the authority of the administrator, which according to Article 20 and 30 of the LRPCs, is called the collection of fees and other obligations, as the administrator is responsible for the healthy finances of the condominium itself.

    In each of these cases, it is important to look at the kind of power and limitations granted to the administrator, generally or through a power of attorney.

    Contact Us for more information on real estate options in Costa Rica.

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