The Lockdown, and its effect on your buildings upcoming AGM.
I recently published an article on the effects of this current crisis on apartment buildings/resorts in Cyprus, and how you as a committee can put in measures relating to helping deal with these effects and increase the safety of your residents (If you have not read this article you can find it here).
I also published a more detailed article with more specific information on communal swimming pool maintenance and operations (you can find this article here).
Since publishing these articles, I have had a significant number of messages and emails from management committees across Cyprus who have their Annual general meeting scheduled soon and asking what they can do.
In response, I have published an article with answers to these questions.
Restrictions and how they affect your upcoming AGM
While organising your apartment building or resorts Annual General Meeting (AGM) of owners is normally a challenge to most committees under best of circumstances, due to the government lockdown of Cyprus there are even more challenges for your committee to overcome.
•Suspension of incoming/outgoing flights
•Ban on public gatherings
•Closure of all suitable AGM venues
•Restrictions on general movement.
•Stay at home orders.
While it may seem a simple solution to just postpone your Annual general meeting, this may have its own set of problems with potentially longstanding issues.
Effects of not holding your AGM as planned.
Firstly, and most importantly, organising an annual general meeting of owners is an important legal obligation of the management committee.
Under the immovable property law governing shared property, there are many rules on how this meeting must be held including a strict requirement that there must not be more than 14 months in between two General Meetings of Owners.
Reading these regulations it is very clear that if you were to postpone your meeting to later in the year and this date was beyond the 14-month limit, your management committee would be in breach of this law. Of course, you would likely argue force majeure, however, I will cover why I don’t think its a good idea to rely on this argument later in this article.
This requirement for the frequency of the annual general meeting is there for a reason, these meetings are important.
At these meetings
- The financial annual accounts are presented and discussed
- The legal representatives of owners are elected (the management committee)
- Important discussions and decisions are made
- Dealing with debtors & defaulting units
- Scheduling and frequency of direct services such as cleaning/gardening etc
- Maintenance projects
- Hiring/firing vendors
- Appointment of new property managers
During times of crisis like now, it may be even more important than ever for owners to discuss current challenges and plans on how to resolve them.
With this current crisis, there are even more challenges to overcome, and most people would agree that it would be beneficial for unit owners to be more involved in the discussion of these challenges and ways to overcome them rather than be kept in the dark and all decisions be made by the committee without consultation.
Things you may need to discuss
- Adjustment to communal fees
- Alterations to cleaning schedules
- Allocation / Reallocation of communal funds
- Postponement of large expenditure projects
- Advice to residents on how to help reduce their risk of exposure in a shared building
Being better informed in the challenges and more involved in the decisions on how to face them, owners will likely be more understanding and willing to accept any changes made.
Of course, there will always be a few difficult owners, who will object to all reasonable propositions and still feel this is the best opportunity to air past grievances. But these owners while louder than most are usually in the overall minority, even with this disruption holding this meeting will still benefit the majority of owners and residents.
The potential negative effects on communal fee collection rates.
Anyone who has attended one of my seminars or read The Ultimate Committee Handbook will know that I relate effective communal fee collections to three key principals.
- Transparency of accounts
- Regular reporting, budget breakdowns & analysis, open-book policy on financial records.
- Steady, Consistent and Increasing pressure on debtors
- A multi-level & customised debt collection process
- Removal of excuses
- Debtors always want to try and justify to themselves and others why they do not pay.
- By ensuring your committee operates exactly within the regulations you can remove these common excuses
- Without these common excuses to say around the poolside or at the AGM it makes continued non-payment harder and more uncomfortable to the debtor.
- You also have the bonus of having a solid legal foundation if it comes to needing to recover any debt through legal action or defend against accusation/legal action against the committee.
- Debtors always want to try and justify to themselves and others why they do not pay.
By not holding the Annual General Meeting as normal, you negatively affect two of the three essential pillars of effective credit control.
By delaying the AGM beyond the legal deadline, you give three powerful excuses to any debtor for continued non-payment.
- The AGM was not organised within the deadline which is a breach of the legal obligation of the committee
- The committee’s legitimacy is questionable as there were no elections held
- The annual accounts were not presented and accepted by unit owners.
You can argue with them until you are blue in the face how this was unavoidable, but they will simply keep repeating this reason for non-payment.
Legal threats will carry less weight as they feel more confident, they have a strong argument for the committee’s legitimacy and authority to collect the communal fund due to these breaches of their obligations.
The majority of your defence will come down to ‘Situations outside of your control’ or force majeure.
The ‘Force Majeure’ argument.
Many will point out that these are unprecedented circumstances outside of the committee’s control, AKA force majeure. However, I do not feel comfortable relying on this argument.
In my experience, anything that can be argued for can be argued against.
Whenever possible, it’s always advisable to remove any potential point of debate when dealing with debtors and the court system.
A likely scenario:
A unit owner stops payments and argues that they stopped payment as the accounts were not presented, the AGM was not held within the deadline or the committee was not elected as required in the regulations.
Rather than being fully confident in your fulfilment of all the committee’s legal obligations you need to argue why you were unable to meet them.
They can then argue with the benefit of hindsight different options you could have taken to fulfil these obligations.
They won't budge from their argument, and so you end up going through years of expensive legal action, time and stress.
When you get to court, the judge may agree that you were prevented in fulfilling your obligations through no fault of your own, or could feel that there were other reasonable options available which you could have used and therefore cannot argue Force Majeure’. While lawyers can and will debate the merits of each argument, there is no way of being certain on either argument winning until cases are heard which will be years down the line.
Can you organise your AGM electronically via Skype, Whatsapp or similar?
This is the most common questions I am currently being asked, and the answer is yes, and no.
To explain this, the regulations which govern how your meeting must be held were written before the internet existed, so there is no provision for electronic attendance or voting.
The key requirements for holding your AGM.
- Must be a physical location for the meeting, owners must be notified of the date, time and location with 7 days’ notice.
- There must be a quorum at the meeting for it to proceed (you can find more about quorum in this article)
- To be counted in the quorum and any votes a unit owner must either be in attendance or appoint a proxy who will physically be at the meeting to represent them.
- This proxy can be given specific instructions on how to vote.
- One person can hold multiple proxies
- Accounts must be presented
- The committee must be elected
If you look at the key requirements above, you may see there is a loophole which would allow an electronic meeting to take place.
Owners who are unable to attend the meeting in person can appoint a proxy to attend in their place, and they can give that proxy specific instructions such as “Only vote as I instruct via the meetings live video link”.
Steps to host your meeting online.
To hold a meeting this way you simply follow the below steps.
- Appoint a single individual to act as the meeting host
- This meets the current lockdown rules and bans on public gatherings.
- Set the meeting location to this hosts desired location
- Every unit who wants to attend via the live video link must complete a proxy form appointing this designated meeting host as their proxy with instructions to vote as that unit owner instructs via the live video link
With these extra steps completed, you can proceed with the rest of your meeting as normal.
A few key points on this.
- Pay close attention to the quorum.
- Don’t do all of this, only to fail because you did not follow the steps surrounding quorum. Remember not having 50% does not prevent you from having a meeting, you just need to take extra steps set out in the law to allow the meeting to proceed.
- Keep a strong paper trail.
- Make sure the meeting host has a reliable and high-speed internet connection
- Use a good quality software
- I generally suggest avoiding using basic software like skype or WhatsApp as the functionality is limited and there can be reliability issues.
- I suggest using professional software that also allows people to dial in by telephone if they struggle with IT
- As a bonus professional software usually allows recording of the meeting, sharing of documents, organising voting etc.
Possible changes to the regulations.
There are rumours that the government will bring in emergency legislation that will update the laws allowing electronic attendance at important meetings like AGM’s of companies, and this would likely apply to communal property as the legislation surrounding the meetings is very similar.
However, it is early days, so even if this is passed I still suggest in following the below steps to help meet the quorum and voting requirements of the existing law.
What if you need assistance in organising this meeting.
I have provided all the information necessary for you to be able to organise your meeting during this lockdown, however, I understand that many management committees do not have the time to organise this, access to suitable software or simply want the peace of mind to know that someone is organising all this for them so they can focus on the day to day site operations and presentations for this meeting.
If this is the case I do have an option for you.
If your development has previously benefited from our Platinum Done for you AGM service, or you are a client of my communal management company you will recognise the above steps as these are the same systems and processes we use to allow electronic attendance at the annual general meeting.
This AGM administration service was set up to help management committees negotiate the strict regulations and prevent any future problems when taking legal action against debtors or defending against any challenges over the committee’s legitimacy or the communal fund.
We have developed this service over some time and offer assistance in collecting proxy forms including online electronic proxy registration, AGM hosting, professional video conferencing software (which also allows users to dial into the audio link using a normal telephone).
Throughout this process, my team handle all of the organisation, notices, administration in setting up and notifying owners, plus I personally attend the meeting to help ensure all requirements are met and answer any questions.
While my AGM Done For You Service starts at just €349, to add on the necessary options to include video attendance you would need to select the Platinum package which is €497.
I understand that most committees will understand the importance now more than ever on making sure they follow all regulatory obligations, but also need to keep costs down wherever possible.
So, to help with this during the current crisis I am discounting this premium package by 50% from €497 to just €250.
This will include all the same options as the standard platinum package including
- Video meeting with me before the meeting
- My team organising all the steps of the meeting
- Electronic proxy submission
- Quorum calculations
- My attendance as the meeting host (via video link)
- Live video link via professional software
- Signed document of regulatory compliance
- AGM recording
- 18-month hosting of the minutes and AGM recordings
To book this service simply follow the below link, select the platinum package and input CO19 in the voucher code box during checkout.
Click here to find out more information on our Done for You AGM Package
Looking for more?
If you are a member of your management committee, (or are looking to set one up) you will know that while the communal property regulations are comprehensive, they are sometimes a little difficult to understand and even once understood its not always easy to apply these generic regulations to your individual building with its specific challenges.
To help with this problem my most recent book the Ultimate Committee handbook gives you detailed and step by step instructions on every aspect of being on your committee and running your building. It explains the communal property law in simple terms including real world examples and instructions on how to best apply these regulations.
To get more information on this book, and view a book preview you can click the below link.
Unlock the true potential of your apartment building or resort with The Ultimate Committee Handbook.
The Cyprus Communal Guide
Helping you unlock your buildings true potential.