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Old 2nd June 2015, 14:13   #1 (permalink)
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Charging interest on maintenance debts

As with many sites in Turkey there are some owners on our site who persistently run high debts and do not keep up maintenance payments. The condo law allows site managers to charge interest on outstanding debts and we would like to implement this to incentivise owners to pay on time.

section 4 - III Participation in the General Expenses of the Main Landed Estate amendment dated 28.11.2007 - 5711 Article 9 which states that mandatory interest of 5% per month can be added to outstanding debt.

Our accountant is concerned about the possible tax implications of doing so. Is anyone able to offer legal or practical advice?

Thanks!
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Old 2nd June 2015, 15:30   #2 (permalink)
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Re: Charging interest on maintenance debts

We implemented it on our site in Bodrum 18 months ago. There are 2 lawyers on the site. They would not have introduced it if there would be any problems. Note that the 5% can only be charged on the single monthly debit not added to the accumulative total.
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Old 2nd June 2015, 17:19   #3 (permalink)
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Re: Charging interest on maintenance debts

Thanks for your reply! It's good to know that someone else has done this!

Our accountant thinks we may have to register as a company in order to do this (with all the associated tax implications) and is getting nervous! Do you know if you had to do this on your site?

Also please could you clarify the comment on the application of the 5% interest charge? If an owner has an existing debt of 1000tl and the monthly fee adds another 250tl to that, can we only calculate the 5% on the 250tl and not on the 1250tl?

Finally (phew!) do you know of any good information in English which would help us navigate this minefield?!

Thank you!!
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Old 2nd June 2015, 17:49   #4 (permalink)
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Re: Charging interest on maintenance debts

Regarding the 5%, the point is you cannot charge interest on interest (compound).
Calculate month by month going back to the month where the debt first started.
We have this system on our site and enforce through the bailiffs office if necessary. There's never been any question raised of forming a company.
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Last edited by jearden; 2nd June 2015 at 18:04..
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Old 3rd June 2015, 07:34   #5 (permalink)
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Re: Charging interest on maintenance debts

You also have the other route, if the debt is particularly large, of auctioning off the property and taking the debt from the proceeds. We used the threat of this through a lawyers letter to one such on our site and the outstanding debt going back some years was paid by return.
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Old 3rd June 2015, 15:23   #6 (permalink)
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Re: Charging interest on maintenance debts

You cannot compound the interest. You do not need to have a business. You can force a sale to recover proceeds. We implemented cutting off water and electric to any apartment with debt over 1,000Tl.
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