HOW SHOULD THE MANDATORY RESERVE FUND OF OWNERS COMMUNITIES LEGALLY BE AND FUNCTION IN SPAIN?

28 Dec HOW SHOULD THE MANDATORY RESERVE FUND OF OWNERS COMMUNITIES LEGALLY BE AND FUNCTION IN SPAIN?

The owners are obliged to contribute, in accordance with their respective participation quota, to the endowment of the reserve fund that exists in the owner community to attend the works of conservation, repair and rehabilitation of the estate, as well as for the realization of accessibility works.

All owners are obliged to contribute to the endowment of the reserve fund, without exception, in the proportion resulting from their participation ratio. This obligation is applicable even if there are clauses in the statutes exempting certain owners from contributing to the costs of retaining and repairing certain elements, since until the fund is used, in whole or in part, in case of a particular work of preservation or repair it will not be known whether the corresponding costs fall within the exclusion provided for. All this is without prejudice to the liquidation that has to be done in each case.

The reserve fund, owned by the community for all purposes, is endowed with an amount, which may in no case be less than 10% of its last regular budget. Therefore, the amount of the reserve fund is the one freely agreed by the owners’ meeting, with the sole limit that it is not less than 10% of the amount of the last regular budget.

The community may enter into an insurance contract from the reserve fund, that covers the damage caused to the estate or conclude a permanent maintenance contract for the property and its general facilities.

The contribution to the reserve fund is passable to the tenant, if agreed, within the concept of overhead for the appropriate support of the property.

Constitution of the reserve fund

Without prejudice to the provisions adopted by the Spanish autonomous communities in use of their powers, the establishment of the reserve fund must comply with the following rules:

• With regard to the new communities of owners, the establishment of the reserve fund must be done when approving its first regular budget.

• At the time of its establishment the fund must be provided with an amount not less than 2.5% of the regular budget of the community. To this end, the owners must make the necessary contributions in advance according to their respective participation quota.

• When the regular budget for the annual year immediately following that in which the reserve fund is established is approved, the endowment must reach the minimum amount of 10% of the community’s regular budget.

The non-provision of a item for the reserve fund in the approved regular budget does not result in the nullity of the agreement approving the same, since it can perfectly be the case that the community has subscribed insurance for the conservation and repair of common elements.

Fund maintenance

The endowment of the reserve fund, except as provided for in the constitution of the same, may not be lower, at any time during the financial year, to the established legal minimum (10%).

The amounts taken from the fund during the financial year to cover the costs of conservation and repair of the estate are counted as an integral part of the estate for the purpose of calculating its minimum amount.

At the beginning of the next financial year, the necessary contributions must be made to cover the amounts drawn from the reserve fund.

Purpose of the fund

The objective of the constitution of the fund is to allow communities to cope with the works of conservation, repair and rehabilitation of the estate, and the realization of accessibility works that must be addressed in it, thus favouring compliance by the community of owners of their obligation to maintain the property in the conditions of habitability, water tightness, health and safety.

The fund should be used for the execution of the works indicated, not to cover improvement works, not required for the proper conservation, habitability and security of the property, nor for the payment of general expenses of the community outside those indicated, such as payment of porters, gardeners, employees, administrator, etc.

The limitations of the fund’s destination are not an obstacle to the fund’s assets being seized and subsequently made in compliance with the debts that the community may bear with third parties and without prejudice to the obligation that the owners subsequently have to provide the fund with the appropriate amounts.

There is a defraud of the law for pretending to carry out improvement works from the reserve fund against the justified refusal of payment of one or more of the commoners, for exceeding the amount of the works the amount of three ordinary charges of common expenses.[:]