A building in difficulty: the warning signs a board can read

A building never collapses at once. It slips slowly, and the signals are readable three to five years before the crisis.

A building in difficulty is not necessarily a derelict one. It starts as a financial balance breaking: arrears settling in, cash that no longer pays contractors on time, essential works postponed year after year, and a vicious circle — less maintenance, less appeal, more arrears.

The board is best placed to spot the slide, because it sees the accounts every year. Provided it looks at the right indicators rather than the closing balance alone.

Five indicators to track every year

• Arrears as a share of the annual budget, and above all their trend over three years.
• Concentration: ten small late payers are not the same problem as one very large debtor.
• Age of the debt: arrears older than two years are rarely recovered.
• The works fund against the works the building will actually require.
• Actual payment times to contractors — an immediate signal of tight cash.

These figures are in the documents circulated before the meeting: see the accounts checklist and the review method.

The non-financial signals

They often come first. A contractor refusing to work without a deposit, a supplier terminating a contract, insurance rising sharply or refusing renewal, rapid turnover of managers, meetings that no longer reach majorities: each tells the same story.

One more is very telling: how many units are on sale at once, and at what discount. Buyers read the minutes and the settlement statement; a building in difficulty shows up on the market first.

Act on arrears, early

It is the most effective lever and the one lost fastest. Arrears addressed within three months are often recovered; the same arrears at three years have become doubtful debt carried by every other owner, who front the cash without knowing it.

The board does not recover debts itself, but it can check the manager is taking the prescribed steps, and at what pace. See the arrears procedure.

Remedies when the situation is entrenched

Once arrears pass a threshold relative to the budget, mechanisms exist to support the building: appointment of an independent administrator to analyse the situation and propose measures, then, in heavier cases, more binding procedures.

These are not penalties: they exist to stop the situation becoming irreversible. Better to have the manager explain them early than to wait for the threshold. They also assume the building is up to date with its obligations, notably its registration.

What puts a building back on its feet

• A realistic budget rather than an understated one meant not to alarm the meeting.
• A works fund contribution raised before the works become urgent.
• Recovery started systematically, with no exceptions or informal delays.
• Re-tendering the heaviest contracts.
• Regular communication: owners pay better for what they understand.

That last point is routinely underestimated: see how to communicate usefully and how to present a budget.

A building does not decline for lack of money, but for lack of having read the right figures three years earlier.

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