Revoking Amenities Over Arrears - Braverman & Associates

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BACKSTORY In today’s challenging economic climate, there invariably has been an increased number of defaults by condominium unit-owners in their payment of common charges. And that, in turn, has resulted in an increased number of foreclosure actions and plenary lawsuits by condominium boards to recover such sums. Indeed, many condominium bylaws mandate that a board take action to recover any unpaid common charges. Unfortunately, there have also been statewide cutbacks in court budgets that have resulted in an already slow process being ground to a virtual standstill. The glacial speed at which foreclosure actions move through the judicial system has caused an exceeding amount of frustration, not to mention economic distress, on the part of several of our condominium clients.

Inasmuch as it is very difficult for condos – unlike co-ops – to secure financing, the only way for a condominium association to cover a significant shortage of cash flow is to impose assessments, thereby creating a dynamic where the non-delinquent unit-owners are shouldering the economic burdens and obligations of their neighbors. Needless to say, this can create an extremely uncomfortable dynamic within one’s community, especially if there is a belief that the delinquent unit-owner has the financial ability to meet his or her obligations.

Unfortunately, there is little if anything that can be done – at least in the foreseeable future – with regard to the speed of the judicial system. However, there may be ways that a board can at least cause a unit-owner to think twice about paying his/her common charges before buying that Armani suit at Bloomingdale’s.

Over the past year, several of our clients have taken bold and unique steps to try and deter common charge delinquencies. Such measures have included the publication in common areas, such as the lobby and elevator, of the names of delinquent unit-owners and the amounts they owe to the condominium; the removal of parking spaces; and the ability to use building amenities such as gyms, pools, roof terraces, and playrooms. In one instance, the board ordered the elevator fobs of delinquent unit-owners be disconnected; the couple in arrears lived on the fifth floor of a five-story building. This last example resulted in a lawsuit in which the unit-owners unsuccessfully sought a court order compelling the board to reactivate the delinquent unit-owners’ elevator fobs.

COMMENT While there is not an ample amount of judicial authority on whether a condominium board maintains the power to take away access and privileges to amenities, the few lower court cases that have addressed the issue have ruled in favor of the board based upon the fact that it is empowered to manage and operate the condominium’s common elements and to promulgate rules and regulations in connection therewith, so long as the imposition of such rules is made in good faith and in furtherance of the association’s best interests.

As for the success of such measures, we have found that where a unit-owner has the economic ability to pay – but faces the possible loss of his gym privileges and/or the public embarrassment of being on the published “delinquent list” – payments have been forthcoming, along with interest, late fees, and legal fees.

However, as the old saying goes, you can’t get “blood from a stone,” and where a unit-owner is indeed in economic distress and simply doesn’t have the money, delinquencies tend to mount until the owner gets back on his feet or sells the unit.

We recommend, before taking any of these steps or even starting any sort of formal legal action, that a board, through its managing agent, attempt to contact the unit-owner and urge him or her to come current. Likewise, we do not believe that the suspension of privileges or the use of amenities should necessarily be the sole remedy pursued by the board. Rather, such steps, if taken, should be done in conjunction with exercising the association’s other legal remedies, notwithstanding the currently backlogged state of the judicial system.

From the Desk of RJB:

At a co-op/condo meeting, a disgruntled shareholder threatened to take me outside and beat the s–t out of me because I asked that he hold his question until the end of the meeting.