How to reduce arrears in a residents’ community: the real problem
Reducing arrears in a residents’ community to 2% or below is achievable. Arrears are one of the most recurring — and most painful — problems facing property managers. According to data from the General Council of Property Managers’ Associations, average arrears in Spain hover around 15–20% of invoices issued in residential communities. In some buildings in major cities, the figure exceeds 30%.
Yet there are firms managing portfolios of 50, 80, or even 100 communities that consistently keep arrears below 2%. It is not luck or coincidence: it is a method.
In this article we explain it in detail, step by step, so you can apply it in your firm or your community.
Why arrears exist: understanding the problem before tackling it
Before discussing solutions, it is important to understand the causes. Arrears in residential communities are rarely malicious; they tend to be a combination of:
- Genuine oversights: owners who do not see the invoice, who change bank accounts, or who simply forget. These represent 40–50% of cases.
- Temporary financial difficulties: short-term personal situations that, when handled well, can be resolved through payment arrangements.
- Disagreement with a particular expense: owners who withhold payment as a protest over a special levy or works. These are the most complex cases to manage.
- Chronic structural arrears: a minority of cases that require legal proceedings.
The method presented here is designed to resolve the first three groups proactively, and to ensure that the fourth reaches the courts with all documentation in order.
The staged notification system: the cornerstone of the method
The difference between firms with 2% arrears and those with 20% is, in the majority of cases, the speed and consistency of their communication system. The best firms do not wait; they act as soon as a missed payment occurs.
Level 1: preventive notice (days 1–3 from the due date)
A friendly, automated message via email or WhatsApp reminding the owner that the invoice has not been collected. No accusatory tone. The aim is to resolve 60% of cases with this single action. A genuine oversight is resolved within 24 hours if the notice arrives promptly.
Example message: «Hello [name], we are writing to let you know that the community charge for [month] of [amount] € has not been collected. If you have changed your bank account or there has been an error, please contact us at [phone/email]. You can make the payment directly at [link].»
Level 2: formal reminder (days 7–15)
If payment has not been made within the first few days, a more formal communication is sent — either by letter or recorded-delivery email — stating that the balance is outstanding and that the community may incur additional charges. This reminder resolves a further 20–25% of cases.
Level 3: formal legal notice (days 15–30)
For cases that remain unresolved, a formal legal notice is the appropriate tool. It carries evidentiary weight before a judge, formally notifies the debtor, and generates a delivery receipt. Digital legal notice services now exist that reduce the cost from €15–20 to under €3 per notification.
Level 4: payment arrangement or order for payment procedure (days 30–60)
At this stage, the manager makes direct contact to attempt a deferred payment arrangement. If the owner is facing genuine difficulties, a signed repayment plan is preferable to a lengthy and costly legal process. If there is no response or the debtor is a repeat offender, the order for payment procedure is initiated.
The order for payment procedure: faster and cheaper than you think
The order for payment procedure is the judicial process designed specifically for the recovery of monetary debts, and it is particularly favourable for residents’ communities under the Law on Horizontal Property.
Its advantages in the context of communities:
- No solicitor or legal representative is required until the debtor files an objection (which occurs in fewer than 30% of cases).
- The debtor has 20 days to respond: if they neither pay nor object, the court issues an enforcement order automatically.
- The costs of the process (including solicitor’s fees, if applicable) are borne by the debtor.
- The debt to the community is recorded in the certificate issued by the secretary-manager, which carries full validity as an enforceable title.
The key is to have all documentation prepared before initiating the process: minutes of the general meeting approving the budgets, account statements showing unpaid invoices, and the debt certificate signed by the community president.
Digitalisation as an accelerator: why manual processes generate arrears
One of the most significant hidden drivers of arrears is the payment collection process itself. If the owner can only pay by direct debit and cannot update their bank account details online; if the invoice only arrives by post and the owner lives outside the building; if the missed payment notice takes 15 days to be sent because the manager reviews it manually once a month — the system is structurally generating arrears.
Firms with the lowest arrears rates share the following characteristics:
- Online owner portal: the owner can view their balance, download invoices, update their bank details, and make payments at any time from their mobile device.
- Automated notifications: the system detects a missed payment on D+1 and sends the notice without human intervention.
- Multiple payment methods: direct debit, bank transfer, online card payment. The more options available, the less friction there is.
- Real-time arrears dashboard: the manager can see at a glance which invoices are outstanding, at which notification level they sit, and how long they have been unpaid.
Case study: from 18% to 2.3% in 14 months
A medium-sized property management firm — 45 communities, 1,800 owners — had a historical arrears rate of 18%. The director told us they were dedicating two members of staff part-time solely to managing outstanding payments.
After implementing a digital system with four automated notification levels:
- Month 3: arrears fell to 11%. 60% of new missed payments were resolved within the first 72 hours thanks to the automated notice.
- Month 7: down to 6.5%. The order for payment procedure was initiated in 12 cases; 9 were resolved before the first court hearing.
- Month 14: down to 2.3%, and still falling. The two staff members who previously managed arrears are now focused on growing the portfolio.
The 6 most common mistakes that drive arrears upwards
- Waiting until the end of the quarter to review outstanding payments: by that point, the debtor has gone weeks without any pressure.
- Sending notices by post only: in the digital age, many owners no longer check their physical letterbox regularly.
- Failing to formalise deferred payment arrangements in writing: verbal commitments are rarely honoured; written ones largely are.
- Not keeping owners’ bank details up to date: invoices returned due to incorrect account details generate technical arrears that can become real ones.
- Not communicating transparently where funds go: owners who understand what they are paying for are more punctual than those who do not.
- Delaying the order for payment procedure out of fear of conflict: paradoxically, acting late costs more money and does more damage to the relationship with the debtor than acting sooner.
You may also be interested in
- Debtors in the community: what to do step by step
- Reserve fund: how to calculate it and avoid penalties
- Request a free FixrOS demo
Reference source: Law on Horizontal Property — order for payment procedure (Art. 21)
Conclusion: arrears are managed, not endured
Arrears are not a force of nature that a property manager must accept stoically. It is a problem with specific causes and specific solutions. Communities that keep arrears below 2% are those that have a system — not those that have more luck.
If you would like to see how FixrOS can help you implement this system in your firm — with automated notifications, an owner portal, invoice management, and a real-time arrears dashboard — request a free demo. We will show you how it works, tailored to your portfolio.