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Beware of the false economy that is cheap administration

By Thursday, 19 February 2015 18:29 0
Beware of the false economy that is cheap administration shutterstock.com

Community Law Corner
By José Luis Navarro


MOST communities employ an administrator to handle their affairs; the current and ongoing financial crisis means the charges offered for these services are tumbling dramatically. Unfortunately so is the level of service.

Good service is the principal point of having a good administration. To reduce the charges there have to be cutbacks and often the dismissal of administration staff.

Fewer staff invariably means a reduction in the administrator’s ability to provide a good service and so it goes on and the relationship between owners and the administration starts to deteriorate.

There are now companies who offer to charge as little as €2 per month, per property for community administration. In the cold, hard reality of life this is just not viable, so the administrator’s profits must come from somewhere else. Communities should be aware that cheap administration is not necessarily their safest option.

Cheap companies will first offer reduced administration fees, but will agree with the community that all services apart from the ones expressly established in the contract will be paid separately. In this way, the administrator can charge extra for things normally included in the service fee. Collecting a new minutes’ book, calling the town hall, overseeing minor works, holding an EGM; in fact, anything and everything. The result? The fees are now higher than before.

In addition, the administrator will often only provide services through their own companies, those with whom they share a common interest or a family connection. Once the new administration is in this position, they earn their money not through their administration fee but through related issues like pool cleaning, maintenance and repairs, gardening and so on.

Furthermore, the new administrators will often propose a contract for more than one year; should the community decide to dispose of the administrator’s services after one year they may well be liable to pay compensation for the duration of the contract, sometimes for five years.

The crowning ingredient in this comical cocktail is that many such administrations are not even registered with the Official College of Administrators so they are not even subjected to disciplinary actions by the college in case of misconduct. Many do not even have public liability insurance and few are up to date with current legal regulations so there is no guarantee the community will be run properly nor how secure it is.

The irony is the money saved is not that much. If community fees are €145 per month, per property, including €7 for administration, companies offering a reduction of €5 down to €2 for the administration means the owner still pays €140 a month. The dark cloud deepens, after finally dismissing such companies and possibly paying them compensation, communities may have to employ accountants to redo their accounts; they may face court cases from owners for unfair costs and suppliers for unpaid bills.

Maintenance not carried out properly has to be redone and more importantly the community has lost faith in the committee and there is now disharmony and suspicion. What may have started out as a good idea has ended in an absolute disaster.

We at Intercala Administration are in this business; in our opinion, a community should only ever change its administration if the new service will be noticeably better or when the new administration office is physically closer to the community.

Apart from that, if a community is run properly by an official and registered administrator, changing just for a reduction in the fees is a risky decision in which there is a lot to lose and very little to gain.


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