Community of Owners in Spain

Lawyer Raymundo Larraín explains the legal intricacies of owners’ association, or comunidad de propietarios in Spanish. Makes for excellent bed reading!

Article dedicated with affection to my friends Ann and Andy H., from Wakefield, West Yorkshire, England.

Marbella-based Larrain Nesbitt Lawyers has over 16 year’s taxation & conveyancing experience at your service. Our team of native English-speaking lawyers and economists have a long track record successfully assisting expats all over Spain. You can review here our client’s testimonials.

Article copyrighted © 2.009, 2.012 and 2019. Plagiarism will be criminally prosecuted

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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
8th of December 2019

Introduction

Now that the season of General Assemblies is fast approaching for Q1 2020, I thought I’d revisit my 2009 article. The following is a revamped version of my decade-old article updating it in line with the new changes in legislation.

Community of Owners is an article which gist is to provide basic guidance on what becoming an owner in a community entails, with particular focus in Andalusia. It is not an in-depth treatise.

General Assemblies, held once or twice a year, are prone to bickering and backstabbing, where every neighbour it would seem has an axe to grind. You’d do well in acquaint yourself with your owner’s duties and rights to better protect your interests; which may not be aligned with others’.

Because this is just a ‘short’ article, I strongly recommend reading the law itself, as I have considerably abridged the sections pursuant to it, on reviewing them, giving only a general overview of its key sections and casting aside any pesky nuances which are only of interest to other lawyers.

This is a link to the Commonhold Act in English as amended by Law 8/99 & others, courtesy of Castillo Traductores. English version starts on page 4. You are welcome.

Definition

On buying property in an urbanisation, or block of flats, you may automatically become a member of what is known as a ‘Community of Owners’, or CO for short. The CO is a legal entity comprised by all the property owners within the same development, or building, and is governed and ruled by its own self-approved statutes and bylaws, besides a national legal framework that acts as common denominator to all CO’s.

General Legal Framework

There is a general legal framework acting nationwide as backbone common to all communities in Spain, as set out by the Commonhold Act 49/60 (AKA Ley de Propiedad Horizontal, Horizontal Property Act, or Commonhold Act) and by the Spanish Civil Code (arts 396 et seq).

The 1960 Law on Horizontal Property was amended most significantly by Law 8/99, amongst others, to bring it line with social changes. It is now a 60-year-old law.

Community Statutes and Bylaws

In addition to the above general laws, the day-to-day running of each community is really determined by the Communities’ Statutes which are drafted at the time of lodging the Master Deed (aka Escritura de División Horizontal or Horizontal Deed). Unanimity is required to amend either the Master Deed or the Community Statutes (arts 5 and 17). So, in practice it’s quite a feat to change either of them. An exception to this unanimity, is a recent legal change on holiday rentals (see section further below).

That’s why a community may, at its own discretion, approve additionally its own Community Rules or Bylaws (in Spanish Normas de Regimen Interno or Normas de Funcionamiento de la Comunidad de Propietarios), which are not to be confused with the above Community Statutes. Community Rules (Bylaws) need only a simple majority vote to be approved and amended so as to waive the unanimity rule. They allow for great flexibility and will rule, for example, on communal services such as garbage collection or the use of communal facilities such as the swimming pool or lifts. They cannot rule on matters reserved only to Community Statutes.

Normally, on buying off-plan, there will be a clause whereby the purchaser allows the developer to draft and lodge the Master Deed as well as the Community Rules (Bylaws) at the Land Registry. Buyers may later on amend these, when they become owners, on complying with the strict majorities that are required by the Commonhold Act (unanimity).

This means that every development may enact their particular laws governing it but always subject to, and in compliance with, the general legal framework that must be respected and adhered to at all times. Bylaws will rule for example the Community’s governing bodies such as the need or not for the optional role of vice-president or how must the owners be notified in advance of an owner’s assembly i.e. think of non-residents being notified abroad of an upcoming General Assembly (AGM or EGM).

Bylaws stem from Spain’s Commonhold Act and adapt it to the requirements of each particular CO. That’s why each CO has its own unique Bylaws, tailored to suit their own individual needs.

Naturally, given the tight space constraints of such a short article (and frankly, not to bore gentle readers to tears), I can only offer a general overview of the shared legal framework and concepts which underpin all communities in Spain without focusing on any particular Bylaw, which are unique to each CO, as I write.

Commonhold Quota

On drawing up the Master Deed before a Notary, every property within a community is assigned a quota or percentage thereof. This quota is composed both of privative and communal elements which are assigned to each property. Storerooms and garage spaces are tallied as well for this purpose.

A commonhold quota is important twofold:

  1. The expenses of a community will be allocated apportioning them to your quota. So, the larger your quota, the more you will have to contribute towards expenses. These can be paid monthly, bi-monthly or even quarterly depending on the Community Rules.
  2. On voting at owners’ assemblies, the quotas need to be tallied for majority vote purposes. So, each owner does not equate to one vote. There may be a single owner, such as a developer or bank, holding a significant communal quota which translates into great voting power. The resolutions reached bind all units within, regardless of whether they cast an opposing vote as majority rules apply (see below).

Owners’ Duties

Section 9 rules them in detail. The main duty will be, of course, to contribute towards the maintenance and financial upkeep of the CO.

Falling in arrears with your community fees will eventually result in your CO placing a lien against your property and may even lead to selling it in a public auction. This legal procedure in Spain works surprisingly efficiently. You have been warned!

This important article mentions the endowment of a community’s mandatory reserve fund, in accordance to each owner’s commonhold quota. The percentage of this endowment has now been raised to 10% of the community’s ordinary budget (used to be 5%). The purpose of this fund is to be used for maintenance and repair work i.e. lift repair or fixing the heated swimming pool. This reserve fund shall be endowed with an amount not lower than ten percent of its last ordinary budget. Its funds will be used as well to pay for the building’s insurance cover.

It is also very important to find out – prior to buying a property in an urbanisation – what your contribution is to avoids nasty surprises. Some of those private gated communities that lure you with breathtaking views, 24/7 top-notch security, lush tropical gardens, private gym and dream-like infinity pools command (very) steep monthly fees. This is particularly true of well-off off plan developments (when the community is not up and running yet) where it is not uncommon that unscrupulous salespeople tell you the community fees are X/month and later on it becomes only too apparent they are in fact 3X/month!

Communities’ Governing Bodies

Art 13 establishes the governing bodies are the Owners’ General Assembly (ordinary or extraordinary), the President (vice-presidents are optional), the Secretary and the Administrator. Oftentimes, the role of Secretary is also taken by the community Administrator (paid role).

Presidents and vice-presidents must be appointed from among unit owners only. The roles of Secretary and Administrator can be held by unit owners, as well as by outsiders, providing the latter hold the necessary professional qualifications and are legally licensed to perform such roles.

The Statutes will be the ones which detail exactly what roles exist in each Community of Owners. Presidents, by law, alas do not receive any remuneration for this most ungrateful task.

Following the above, no one in their right mind wants to be President, much less be elected to the same role year after year. A well-known issue is that some community presidents (which officially hold an unpaid role) perpetuate themselves year after year abetted by their web of cronies and do in fact make a very tidy living running whole communities at the expense of pocketing fees from fellow owners on fudging the numbers (specifically fellow gullible non-resident expatriates, bless their warm hearts!). I tell you – by experience – that no one who has held the role of community President wishes to repeat from one year to the next as it is a very ungrateful task that’s almost like a second job. Be wary of community Presidents who hold their position indefinitely and fight tooth and nail to retain power and control. Only on changing administration does the corruption of the former management come into light.

Owners’ Assemblies (AGM’s and EGM’s)

At least once a year an Annual General Meeting (AGM) will be called to approve the community budget and accounts. An Extraordinary General Meeting (EGM) may additionally be called at any time, needing 25% of the unit owners’ quotas.

The notification must be given with a minimum of 3 days’ notice.

This creates serious practical problems to non-residents owning second homes in Spain i.e. you need to book a flight to Spain which may be very expensive with such short notice besides having to take time off your job. Therefore, communities with a high number of non-resident owners may include in their Bylaws more realistic notices of, say, 30 days and to be notified by e-mail in addition to placing it on the Community’s Notice Board. There’s freedom and flexibility to rule on this as each community deems fit in accordance to their own needs and circumstances. Logic should prevail, albeit it seldom does in practice.

Majority and Unanimity Votes

Section 17 deals with when unanimity votes are required. Basically, unanimity is necessary for modifying the rules contained, either within the Master Deed or in the Community’s Bylaws.

A majority vote (three fifths of the owners’ assessed quotas) is required for things such as the lift service, janitors, security services or any other common service or facility. This type of majority vote will be the one used to decide on the Community Rules. Proxy votes are also allowed. Only owners who are up-to-date with their community fees may vote at owners’ assemblies. You are allowed to settle your arrears even on the same day as the General Assembly is being held. However, there are new practical limitations in place to settle arrears in cash. In compliance with new national and EU Anti-Money Laundering Regulations in force, payments in cash in excess of 2,500 euros may be declined. So, if you plan to pop over to the meeting with a wad of banknotes, you may be turned down by the Secretary!

You may find that in new unsold off plan developments, a developer may hold the majority vote as he still holds a large stock of unsold units. Conversely, it can be its lender, if they have taken over the developer’s units (repossession). Either way, both are obliged to contribute to the communities’ upkeep, paying their communal fees in proportion to their communal quotas, just like everyone else.

General Assembly Resolutions

Section 19 deals with the recording of the resolutions reached. They will be recorded in a book of minutes, validated and stamped by the Land Registrar.

A copy of the meeting’s minutes will be sent to each owner with the adopted resolutions following the AGM or EGM. Ideally shortly after the assembly, not several months after when no one can remember what transpired at the meeting.

The Secretary will act as the custodian of the general meetings minutes book.

Any Other Business

If you want to put a concrete matter forward to the Assembly for consideration, you must do so well in advance of being notified by the General Assembly. You cannot simply turn up at the AGM or EGM and expect to nonchalantly raise new issues which were not previously included in the day’s agenda. The President and/or Secretary will simply disallow it and move on with the agenda’s points.

Challenging General Assembly Resolutions

Section 18 rules on how assembly resolutions can be challenged at court. I’ve written a specific article on the matter due to its complexity: Community of Owners in Spain: Challenging Assembly Resolutions – 21st October 2011.

This can be done on three accounts:

a) When resolutions are contrary to Law or the Community Statutes;
b) On them being seriously detrimental to the interests of the community and benefit one or several unit owners.
c) When they are seriously detrimental to some unit owner who has no legal obligation to sustain such detriment or when they have been adopted in abuse of power.

There are four deadlines depending on the matter. The most important deadline is the 3-month-rule. Or else a year, if a resolution is against the Law or the Community Statutes. I would always advise challenging a resolution before the three-month deadline is up as a judge may not agree with you that the adopted resolution is against the law or community statutes, in which case you wouldn’t have a year to challenge it, only three months. Pro tip: don’t wait over 3 months to challenge them.

Only owners who are up-to-date with their community fees may challenge community resolutions before a court. Alternatively, they can lodge the owed amounts before a law court prior to litigating. You can only challenge approved assembly resolutions at court, through litigation; sending a strongly-worded letter or e-mail to the President, Secretary or Administrator stating you are in full disagreement with resolution X is a futile exercise. But if that indulges you…

Holiday Rentals

As we reported back in March (Spain’s new rental laws in 2019), a new law was approved early on in 2019 which brought a raft of changes, specifically on holiday rentals. If you buy into a gated community or building, chances are high you will become part of what is known as a community of owners. New laws passed on March 2019 have empowered communities of owners across Spain to outright ban, or restrict, holiday rentals. You really do not want to invest several hundred thousand euros in a property only to find out later on you are banned by your community to offer it as holiday accommodation! All changes effective as from 6th of March 2019. General Assemblies (AGMs or EGMs) which adopt restrictive resolutions on holiday rentals should lodge them at their local Land Registry for them to be enforceable.

The main two changes are as follows:

  1. Community of owners may now ban holiday lettings outright

Spain’s Horizontal Act has now been amended allowing Community of Owners to vote by a simple majority of 3/5 (or 60%) to ban outright holiday rentals within a community.

I had already pointed out in a blog post in 2017 that this step was necessary, as the Horizontal Property Act at the time required unanimity to ban them, which logically was never going to happen because landlords would vote against it because of their vested interest.

This change has no retroactive effect. Meaning that if you attained a Tourist licence before your community banned holiday rentals, you can continue doing so. There is an ongoing debate on this point between lawyers, as it is a bit of a grey area until there are further like-minded rulings consolidating a jurisprudential trend settling the controversy.

    2. Community of owners may now increase the community fees of all those owners who market their properties as holiday lets through holiday platforms

Spain’s Horizontal Act has been amended allowing Community of Owners to increase the communal quota assigned to a landlord of the overall community budget.

In plain English, communities of owners may now vote to increase the community quota of a property owner who uses his property/ies as a holiday home. The Community can vote to increase your quota by as much as 20%.

This change has no retroactive effect.

‘Inheriting’ communal debts

Unlike in other countries, in Spain community debts follow the property, not the owner. When you buy a property in Spain you may find yourself being liable for several thousand euros of unpaid community fees owed by the ex-owner. At times, sellers blissfully forget (God forbid) to mention any outstanding community fees pre-completion. When you buy a property in Spain you immediately take over all existing debts and the seller walks away scot free. A buyer is liable for the previous three years of community arrears plus the current one (total 4 years). More on this in our in-depth blog: Buying in a Community of Owners – Outstanding Debts!

Also, on buying a property, which is part of a Community of Owners, I strongly advise you to request the general assembly’s minutes of the previous 4 years (both AGM’s and EGM’s). The reason is that, unbeknown to you, the community may have voted on an item that requires you to fork out thousands of euros i.e. to repaint the whole flaking paint of the building’s façade. Seller’s at time surprisingly neglect to disclose such key points, I guess they are too busy booking flights to Bora Bora with the sales proceeds!

Which is why, under law, the signing of the deed of transfer of ownership requires a Communities’ certificate, signed by the President and the Secretary (normally the Administrator) stating that all communal fees are up-to-date for that unit. The purchaser can however waive this requirement voluntarily – unadvisable.

Property located in Andalusia

Following arts 7 & 9 of Decree 218/2005, off-plan vendors of property located within the autonomous region of Andalucía must hand over the DIA (Documento Informativo Abreviado) to purchasers. The DIA is the Spanish equivalent of the UK’s Home Purchase Information (HPI), or Seller’s pack. Both the Community’s Statutes and Community Rules must be included in the DIA pack.

Conclusion

There is a general legal backbone, common to all communities in Spain, which is embodied by both the Commonhold Act and the Spanish Civil Code. Besides this girder – which applies nationwide – each community of owners fleshes out its own set of Community Statutes and Bylaws adapted to its own idiosyncrasies; the latter are really the ones that rule on the day-to-day of each community and are unique i.e. no pets allowed in the pool. No two communities hold the same bylaws.

It is strongly advised that, prior to purchasing a property on a development, you request both a copy of the Community Statutes, known in Spanish as Estatutos de la Comunidad de Propietarios, as well as the Community Rules (Bylaws), known in Spanish as Normas de Regimen Interno, if at all existent. You may avoid unpleasant surprises, such as communities that ban pets or even piano players, gasp!

Communities of Owners should be run – in theory – like small, tidy democracies. Well, that’s the theory anyhow.

In practice, they resemble more dictatorships with full blown egos as many owners can vouch for. I would advise you bring your tin hat to owners’ assemblies and prepare for some serious and protracted trench warfare, whereby each owner will hold his own ground, yielding occasionally to fleeting interests.

Good luck; trust me, you’ll need it.

At Larrain Nesbitt Abogados, we can assist you twofold:

“Every pound is a prisoner.” Margaret Nesbitt

Margaret Nesbitt (nee Conway) 1917 – 2013. From a humble working-class background, she lost her husband at a very young age, and was forced to fend for herself, single-handedly raising her four young children. Assisted by a generous (unsecured) loan of St Aloysius churchgoers, she bought a guest house in Glasgow and set up a business all by herself, without formal education, which she would run until her mid-nineties. Within only the span of a few years, working hard, she managed to repay the kind private loan with interests on top. As is often the case in life, she placed great value in that which she had been deprived of in her youth, which was a formal higher education;  she went to great lengths to generously ensure all her children, grandchildren and even great grandchildren enjoyed the perks of a privileged higher education. A quiet, courageous woman with strong religious beliefs that always managed to hold a positive outlook towards life despite all the social and financial hardships she was forced to endure and overcome alone. In the wee hours of any morning at Aldara, you would find her guest house’s kitchen brimming with bobbies on the beat enjoying a short pause and savouring the lavish generosity for which she was much loved.

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Article also published at Larraín Nesbitt Lawyers: Community of Owners in Spain

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About Raymundo Larraín Nesbitt

After completing his dual law degree in Madrid (ICADE) in 2003 Raymundo went on to work for prestigious Spanish and English law firms in Spain before moving to the UK for several years to work for a British multinational. He is a prolific writer of legal & financial articles in English, with well over 140 articles published and widely used in the Spanish real estate sector. Raymundo now runs his own law practice in Marbella, where he advises local and foreign clients on all legal matters with a focus on conveyancing and non-resident taxation. He is regularly quoted by the international press as a reliable source in his field of expertise.