Common charges are essential to the operation of a common interest community association. Such charges pay for the care and maintenance of the common elements, buildings and grounds, on-site staff, upkeep of recreational facilities, etc. If owners falls behind in common charge payments including monthly maintenance fees, special assessments, and other condo fees, the building may face difficulties paying for operating expenses. When owners default on their obligation to pay common charges, the shortfall is borne by the other unit owners by way of increases in common charges or assessments.
Most governing documents, whether it be the master deed or the by-laws include a provision that provides that every unit owner, by acceptance of a deed or other conveyance agree to pay the condominium association all common expense assessments and maintenance fees contemplated in the governing documents. No unit owner may waive or otherwise avoid liability for common charges by non-use of the common elements or for any other reason. If a unit owner falls into arrears, the board of managers (the “Board”), on behalf of the unit owners, shall have a lien on each unit for the unpaid common charges together with interest. The Board may institute foreclosure proceedings. Foreclosure proceedings are most effective in cases where there is no first mortgage default, as the first mortgage takes priority over a condominium lien. In such cases, when the owner’s equity in the unit is substantial, there is little reason for pause, since the legal fees and costs are recoverable if the foreclosure sale brings in sufficient cash.
Another way to collect unpaid maintenance fees, special assessments, and other condo fees is to sue the delinquent owner for breach of contract due to his or her failure to pay the common charges and obtain a money judgment. Enforcement of the money judgment requires the marshal or sheriff to levy on the judgment. This is effectuated by taking the debtor’s personal property, freezing bank accounts and garnishing wages. Enforcing a money judgment depends on whether personal property exists and/or can be located. It also depends on whether or not the debtor is employed. Utilizing this legal method should be considered on a case by case basis.
Pursuant to the New York Condominium Act, Article 9-B, Real Property Law (the “Condominium Act” Section 339-kk, the Board may collect rent payments from any tenants occupying a unit. The Condominium Act requires that notice be sent to the tenants advising them to make monthly rental payments to the Association rather than the landlord. If the tenant fails to make such payments, the association can pursue legal action against the tenant and the unit owner.
Regardless of which action the Board decides to take to collect unpaid common charges, it is critical that action be taken promptly. It is important that the Board institute a strict policy regarding collections and strictly adhere to same. Often times, upon receiving notice of the default, owners will negotiate a settlement and/or payoff plan to satisfy the default. In the end, the Board must consider its needs and make the best decision possible to ensure that common charges are collected and the operation of the association is not affected by delinquencies.