People often complain that in Cyprus sinking funds are not generally created for commonly owned properties, such as apartment buildings and comprehensive development projects.
The common expenses of a building or complex are the expenses needed to run the property. Such expenses include electricity, repairs to commonly used services, repairs to private roads and private streetlights, management fees and so on.
As most people are aware, in many cases occupiers refuse to pay even these basic expenses, creating a huge deficit in common expenses funds. This can lead to the shutting down of services, such lifts, common spaces, green areas and swimming pools becoming run down and so on.
A sinking fund should be contributed to by all owners in order to build up a fund to be used for major repairs and maintenance and replacement of equipment. This is a different fund, in addition to the common expenses fund, which should be kept in a separate account.
So common expenses are for the daily running of a project and must be paid by the occupiers, whereas the sinking fund is paid into by the owners.
If common expenses are not paid the life span of equipment and buildings is shortened, which in turn affects the owner.
Another problem that can be created when someone buys a property unit whose previous owner did not contribute to the sinking fund is that the new owner might have to come up with the deficit, which is quite unfair, and the new owner will most likely not pay it.
Sometimes the amount of money in a sinking fund can be much higher than the amount in the common expenses fund, depending on the state of repair of the building or project, and while common expenses are all put in a common money pot, with the sinking fund, depending on the management, the accounts of owners should be credited with their share.
In my 42 years of experience in running projects, I have seen such huge problems which emanate from the attitude of residents who act based on their own interpretation of their rights.
In addition, the cost and time that it takes to have disputes resolved in court is off putting for management.
The new law which is on the way will address many of the outstanding issues related to common expenses, but there is a long way to go till this happens.
Antonis Loizou & Associates EPE – Real Estate Appraisers & Development Project Managers, www.aloizou.com.cy, firstname.lastname@example.org