CONDO BOARDS CAN COLLECT ARREARS

"Condominiums are very weird creatures," says Dan Wurtzel, president of Cooper Square Realty. "Co-ops in arrears you can foreclose on in a matter of months," since it's simply a matter of recalling shares in a corporation. "But a condo" — which is real property — "is one of the hardest forms of ownership to foreclose on, even harder than a house. Something needs to be done at the state level," he says, "because people can stack up substantial arrears, and foreclosure proceedings take years."

Two things condo association boards should realize off the bat: You can collect arrears, and you should collect arrears. You might be hesitant to do so because foreclosure litigation can be expensive and time-consuming, but you've got other avenues. You can:

• Create payment plans

• Cut off amenities

• Make names public to create peer pressure

• If the apartment is being rented, collect rent directly from the tenant

• Hire a lower-cost expediter rather than an attorney for the initial paperwork

• Or just go to Small Claims Court, which handles amounts of up to $5,000. For most condo apartments, that's well over three months' arrears. And you can file multiple times if you hit the $5,000 cap.

Step One: Get the Basics Out of the Way

The first step is for your board to have a consistent policy in place. This generally means initiating action after 60 days. At the end of the second month without a common-charge payment being made, a savvy, serious board will have your managing agent or attorney send a certified letter, return-receipt requested, notifying the condo-owner that he or she is in arrears. It should state neutrally and non-threateningly that payment must be made immediately or a payment plan worked out. Otherwise, it should warn that a Lien of Unpaid Common Charges will be placed on the apartment.

A lot of these owners are able to borrow

from friends and relatives. If they know

you're going after them, they'll pay their

common charges before other payments.

"Nine times out of ten, when an attorney's letter is sent to an owner, all of a sudden the arrears are paid up and everything's satisfied and everyone's happy," says Arline Kob, a principal at Key Real Estate Associates.

Best-selling author and veteran real estate attorney Adam Leitman Bailey agrees. "Most everybody finds the money to pay," he says. "A lot of these unit-owners are able to borrow from friends and relatives. The key," he stresses, "is that if you don't put pressure on them to pay, then they'll pay every other bill first. If you set a tone to the building where they know you're going to go after them if they don't pay, they'll pay their common charges before their car payments."

Step Two: Offer a Payment Plan

Attorney Steven R. Wagner, a partner at Wagner Davis, says that during the 30-day payment window such delinquency letters typically offer, "It's not unusual for us to receive a telephone call from the unit-owner and we then offer them a payment plan," known as a stipulation in legal parlance. "Usually, we will get some money up front. We like to collect 50 percent of the arrears as a condition of entering into the payment plans."

Roz Sackoff, president of Bayside Mews, a 142-unit condominium in Queens' Bay Terrace neighborhood, says that method works so long as both sides are flexible. "We have a couple of apartments severely in arrears," she says. "We negotiated a little bit with one owner who owed us money for a couple of years, close to $9,000. So the property manager called her and said we needed to get this resolved. We ended up taking off the late fees and she paid up most of the arrears, from $9,000 [she's down] to just $524 she hasn't paid yet."

Next page: Legitimate Hardship Cases and Step Three — Small Claims Court >>