Unpaid Service Charges: Where Owners Associations Lose Their Position

Arrears in a Saudi building are usually a procedural failure rather than a collection problem. These are the mistakes that make the money unrecoverable.

A building with significant arrears is not a building full of people who will not pay. It is usually a building where the charge was never properly demanded, where the basis for the charge was never documented, or where the association never did anything about the first owner who stopped. By the time arrears are serious, the association position has been weakened by its own conduct, and these are the specific ways that happens.

Why these keep happening

Associations are run by volunteers who live next door to the people they are chasing. Nobody wants to be the neighbour who escalates, so the first missed payment is excused, the second is overlooked, and by the third the association has established a pattern of not enforcing. Every subsequent attempt to enforce then has to explain why this owner is being pursued when others were not. The problem is social before it is legal.

1. The charge was never properly adopted

Demanding money requires a basis: a budget approved in the way the governing documents require, at a meeting with a proper quorum, with the shares applied correctly. Associations frequently set a figure informally and then find that an owner who challenges it is right on the procedure, whatever the merits.

• Avoid it by: Adopt every budget by the procedure the documents specify and minute it properly.
• Proof it is closed: Minutes showing the budget adopted, the quorum present and the shares applied.

What it costs you: An unenforceable demand, and often a requirement to redo the whole year.

2. Demands that are not documented or not delivered

A charge discussed in a group message is not a demand. Associations often cannot show what was demanded, when, or that it reached the owner, particularly where an owner lives abroad and the contact details were never updated.

• Avoid it by: Issue written demands to a recorded address, keep the record, and maintain the owner register.
• Proof it is closed: A demand file with dates and delivery evidence for every owner, every period.

What it costs you: An inability to show the debt was ever properly claimed, which undermines everything after it.

3. Waiving or discounting without a decision

A committee member tells an owner in difficulty not to worry for a few months. It is a kindness and it is also, in effect, a variation agreed by someone without authority. Other owners then learn about it, and the association finds itself defending inconsistent treatment.

• Avoid it by: Route every concession through a minuted decision with a defined duration and repayment plan.
• Proof it is closed: A minute recording each concession, its terms and its end date.

What it costs you: Loss of the consistent position that makes enforcement defensible.

4. Spending the reserve to cover the shortfall

Arrears create a cash gap, and the easiest way to close it is to use money collected for replacement. The building then has no reserve and the arrears are invisible in the accounts, so nobody treats them as urgent until a lift fails.

• Avoid it by: Keep the reserve separate and report arrears as a distinct line in the accounts.
• Proof it is closed: Accounts showing the reserve balance and the arrears balance as two separate figures.

What it costs you: A hidden deficit that surfaces as an emergency demand on all owners.

5. Letting arrears pass to a new owner unnoticed

A unit is sold and the association is not told, or is told and does nothing. The new owner arrives with no knowledge of the debt and no reason to accept it, and the association has lost track of the person who owed it.

• Avoid it by: Operate a procedure requiring the association to confirm the arrears position before any transfer.
• Proof it is closed: A standing procedure and a record of the arrears position issued on each sale.

What it costs you: A debt attached to a party who has gone, and a new owner relationship that starts in conflict.

6. Taking no step for years and then escalating suddenly

An association that has ignored arrears for three years and then demands immediate payment with threats looks arbitrary, and the owner response is usually to challenge the historic charges rather than pay them. The delay has converted a simple debt into a dispute about the whole period.

• Avoid it by: Apply the collection procedure consistently from the first missed payment, without exception.
• Proof it is closed: A collection log showing the same steps taken at the same points for every owner.

What it costs you: A straightforward claim turned into an argument about years of accounts.

7. Nobody has confirmed what enforcement routes are available

Committees debate what they could do based on what someone heard about another building. The routes available, and what evidence they require, are questions with real answers that nobody has asked a professional. The association therefore prepares for the wrong thing or does nothing.

• Avoid it by: Get written advice early on the available routes and the evidence each requires, then build the file accordingly.
• Proof it is closed: Written advice on file, with a document checklist derived from it.

What it costs you: Years of ineffective pressure and a file that does not support any formal step.

A short check before you sign

• Was this year budget adopted by the procedure the governing documents require, and is it minuted?
• Can the association show a written demand, with delivery evidence, for every owner and period?
• Is every concession recorded in minutes with terms and an end date?
• Do the accounts show arrears and the reserve as separate lines?
• Is there a procedure confirming the arrears position before a unit changes hands?
• Has anyone taken written advice on the enforcement routes actually available?

If it has already happened

Where arrears have built up, start by rebuilding the paper position: confirm how each budget was adopted, reissue demands properly for the periods you can, and bring the owner register up to date. Then take written advice on which periods are realistically recoverable and by what route, because pursuing everything equally usually means recovering nothing. Procedures and the available routes in this area are subject to change, so take that advice on the current framework rather than on another building experience.

Domira works on the ownership side of a Saudi property for owners based abroad: verifying title and boundaries, assessing the building, handling registration and handover, and managing the asset afterwards. For legal and tax questions, work with a licensed adviser; Domira will tell you plainly what the property itself supports.