Delinquency can directly affect the operation and financial stability of a horizontal property regime. Failure to pay common expense fees reduces the resources available for security, cleaning, maintenance, insurance, repairs, and other services necessary for the proper operation of the property.
In Panama, Law 284 of February 14, 2022 establishes mechanisms that allow horizontal properties to address these situations, including a surcharge of up to 20% on unpaid common expense fees and certain restrictions when the legal requirements are met.
However, these measures are neither automatic nor unlimited. Their application must comply with Law 284, the Co-ownership Regulations (Reglamento de Copropiedad), valid decisions adopted by the governing bodies of the horizontal property, and due process.
What Does Law 284 Establish Regarding Horizontal Property Fees?
Common expense fees are the amounts each property owner must contribute to cover expenses related to the administration, preservation, repairs, insurance, maintenance, operation, and Contingency Fund of the horizontal property.
The obligation to pay these fees is attached to the real property unit, regardless of who owns it.
Before initiating collection proceedings, the administration should verify:
- The periods that are actually overdue.
- The applicable ordinary and extraordinary fees.
- Payments and partial payments received.
- Applicable surcharges.
- Pending credits or adjustments.
- The basis for any additional charges.
Not every amount included in an account statement is automatically enforceable. Each charge should have a legal, regulatory, or otherwise duly approved basis.
Can a 20% Late Payment Surcharge Be Charged?
Yes. Article 28 of Law 284 provides that when a property owner fails to pay common expense fees within the applicable deadline, a surcharge of up to 20% may be charged on the unpaid fee.
Is the 20% Surcharge Mandatory?
No.
The expression “up to 20%” means that 20% is the maximum permitted by law. It does not require every horizontal property to charge exactly 20%.
To determine the applicable percentage, the following should be reviewed, among other factors:
- The Co-ownership Regulations.
- Valid decisions adopted by the horizontal property.
- Existing collection policies.
- The consistent application of criteria among property owners.
The administration should not arbitrarily establish different percentages for owners who are in equivalent circumstances.
When Can the Surcharge Begin to Apply?
The surcharge applies after the payment deadline established in the Co-ownership Regulations.
If the Regulations do not establish a specific payment date, Law 284 provides the last day of the month as the relevant reference.
On What Amount Is the 20% Calculated?
The surcharge is calculated on the unpaid common expense fee.
For example:
| Concept | Amount |
| Overdue fee | B/.500.00 |
| Maximum surcharge (20%) | B/.100.00 |
| Total | B/.600.00 |
This does not mean that interest, legal fees, administrative expenses, fines, or other amounts may automatically be added. Each additional charge must have its own proper legal or regulatory basis.
Are a Late Payment Surcharge and Interest the Same?
No. The surcharge provided under Law 284 is a specific financial consequence resulting from the late payment of common expense fees.
Interest, fines, professional fees, and other charges are separate concepts and are not automatically authorized merely because the surcharge applies.
Therefore, before adding these amounts to an owner’s outstanding balance, their legal, regulatory, or contractual basis should be verified.
Can a Horizontal Property Suspend Services to a Delinquent Owner?
Yes, but only under the conditions and within the limits established by Law 284.
Article 28 allows restrictions on the use of certain recreational common areas and common services when two months or more have elapsed since the payment obligation became overdue.
Services that may be subject to these measures include:
- Gas, when provided as a common service.
- Internet or cable television, when provided as common services.
- Intercom or door-entry systems.
- Use of elevators.
- Cleaning services.
- Other common services whose provision depends on payment of common expense fees.
Can Water Service Be Suspended for Nonpayment?
No. Law 284 expressly prohibits the suspension of water service.
The administration should also not assume that any other service may be disconnected simply because an outstanding debt exists. When a particular service is not clearly covered by the measures permitted under the law, legal review is advisable before taking action.
What Other Restrictions May Be Applied Due to Delinquency?
Depending on the circumstances and compliance with the applicable legal requirements, Law 284 provides for other measures, including:
- Restrictions involving certain security, correspondence, or concierge services.
- Restrictions related to permits for materials and remodeling work.
- Limitation of access through remote controls or other technological mechanisms, while maintaining the owner’s corresponding right of access.
- Restrictions on vehicular access for certain visitors and non-essential service providers.
- Restrictions on the use of recreational common areas.
The law also provides for the possibility of displaying certain information concerning the delinquent unit, but this must be done strictly within the legally established limits and without improperly disclosing personal information.
Additionally, measures cannot prevent access by ambulances, emergency vehicles, or authorities in the circumstances contemplated by law.
Must the Property Owner Be Notified Before a Restriction Is Applied?
Article 28 does not establish a single notification format applicable to every measure. However, Law 284 expressly recognizes the right to due process.
Accordingly, a legally prudent collection process should allow the owner to understand the situation and raise objections regarding payments, calculations, or charges.
A collection notice should identify, at a minimum:
- The property unit.
- Overdue periods.
- A breakdown of the outstanding balance.
- The applicable surcharge and its calculation.
- The legal or regulatory basis for the measure.
- The restriction that may be imposed.
- The proposed effective date.
- A channel through which the owner may request clarification.
Who Can Decide on Measures Against Delinquent Property Owners?
Law 284 distributes responsibilities among the different governing bodies of the horizontal property regime.
General Assembly of Property Owners
The General Assembly is the highest governing body of the horizontal property regime and may adopt general decisions within the powers recognized by law and the Co-ownership Regulations.
Board of Directors
The Board of Directors must comply with and enforce the applicable decisions and has powers related to the management of fees, engagement of legal counsel, and authorization of certain collection actions.
The Board is not authorized to waive common expense fees, surcharges, fines, or extraordinary fees.
Administrator
The administrator collects fees, maintains financial records, and performs the functions assigned under the supervision of the Board of Directors.
However, the administrator should not unilaterally create new penalties or implement policies that exceed the powers granted by law or by the competent governing bodies.
What Rights Does a Delinquent Property Owner Retain?
Having an outstanding debt with the horizontal property does not eliminate all of the owner’s rights.
Among other circumstances, an owner may challenge a measure when there are:
- Payments that have not been recorded.
- Errors in the account statement.
- Incorrectly calculated surcharges.
- Extraordinary fees that were not properly approved.
- Charges without sufficient basis.
- Restrictions imposed before the legally required period has elapsed.
- Decisions adopted by a body without proper authority.
- Restrictions exceeding those permitted by law.
An objection does not automatically eliminate the debt, but it may require a review of the outstanding balance and the legality of the measure imposed.
How Should Collection Efforts Be Documented?
Documentation is essential to protect both the financial and legal position of the horizontal property.
For each delinquent unit, it is advisable to maintain records including:
- Account statements.
- Proof of payments and partial payments.
- Communications and payment demands.
- Proof of delivery or notification.
- Co-ownership Regulations.
- Relevant General Assembly or Board minutes.
- Approvals of extraordinary fees.
- Payment agreements.
- Surcharge calculations.
- Evidence of measures implemented.
Can a Delinquent Property Owner Be Sued?
Yes.
When extrajudicial collection efforts do not result in payment, judicial collection may be considered.
Article 28 of Law 284 provides for the possibility of initiating executive proceedings once two months or more have elapsed since the payment obligation became overdue and establishes that the account statement or unpaid receipts may serve as an enforceable instrument.
Before commencing judicial proceedings, the specific circumstances should be analyzed, including the amount owed, available documentation, ownership of the unit, and applicable procedural rules.
Common Mistakes When Managing Delinquent Property Owners
Practices that may increase the risk of disputes include:
- Automatically applying the full 20% without reviewing the applicable rules.
- Confusing surcharges with interest.
- Suspending unauthorized services.
- Suspending water service.
- Applying restrictions before the legally required period has elapsed.
- Failing to verify payments or partial payments.
- Imposing charges without sufficient basis.
- Allowing the administrator to exceed their authority.
- Applying different standards to owners in equivalent circumstances.
- Failing to retain evidence of actions taken.
How Should Delinquency Be Managed in a Horizontal Property?
An appropriate fee recovery policy should follow an organized process:
- Identify the delinquency.
- Reconcile the account statement.
- Verify the basis for each charge.
- Review Law 284 and the Co-ownership Regulations.
- Determine which governing body has authority to act.
- Formally communicate the outstanding balance.
- Allow clarification of payments or potential errors.
- Consider a payment agreement when appropriate.
- Apply only legally permitted measures.
- Document each action taken.
- Keep the outstanding balance updated.
- Evaluate judicial collection when appropriate.
Legal Advice for Delinquency Collection in Horizontal Properties
Managing delinquent owners may require a combined analysis of Law 284, the Co-ownership Regulations, decisions adopted by the horizontal property’s governing bodies, and applicable procedural rules.
LAC Legal advises boards of directors and administrators of horizontal properties in Panama on matters including:
- Review of delinquency and collection policies.
- Validation of charges and account statements.
- Preparation of payment demands.
- Negotiation and structuring of payment agreements.
- Extrajudicial debt recovery.
- Review of proposed measures and restrictions.
- Organization of collection files and supporting documentation.
- Judicial proceedings for the recovery of unpaid fees.
A properly structured collection policy can help protect the horizontal property’s finances while reducing the risk of challenges arising from improperly implemented measures.
Frequently Asked Questions About Horizontal Property Delinquency in Panama
Law 284 permits a surcharge of up to 20% of the unpaid common expense fee, subject to the rules applicable to the particular horizontal property.
No. The 20% represents the maximum permitted by law and is not necessarily the percentage that must be applied in every case.
Certain measures provided under Article 28 may be applied when two months or more have elapsed since the payment obligation became overdue.
No. Law 284 expressly prohibits the suspension of water service.
Law 284 includes the use of elevators among certain common services that may be subject to measures in cases of delinquency, provided the applicable legal requirements are met.
The law provides for the publication of certain information concerning the delinquent unit, but does not authorize publication of the owner’s name.