CONDO ARREARS, P.2

Negotiation and compromise are especially important in hardship cases. Sackoff recalls a longtime owner who'd lost a leg to diabetes and was in the hospital and then in rehab, and became so depressed she fell months behind on all of her bills. Sackoff reached out to a friend of the woman's, who notified the woman's nephew on the West Coast. When he flew in to deal with matters, the board "took off the late charges. In situations like that, I err on the side of compassion. These are your neighbors, and you try to deal with things in a kind and compassionate way." And the arrears got paid. 

"People may have lost their jobs and need some time… we're all neighbors and we want to get along," Bailey says. "But we still have to pay our heating and trash and electric bills, and we need everybody to contribute."

If you've made good-faith efforts and the delinquent owner appears to be stalling — refusing to enter into a payment plan, for instance, or to make some other good-faith gesture — then it's time to file a lien, a security interest placed on a property that has to be paid off before the owner can sell it, refinance, or do most anything else. If you do, make sure you notify the unit-owner's bank that there's a lien — it can't hurt, and in some cases it might even spur the lender to apply pressure.

Lien and Mean

"Collecting arrears is a bear," observes Sackoff, "but it doesn't cost that much to place a lien — a couple of hundred dollars usually, including legal fees. We pay it up front and that gets back-charged to the owner."

Cooper Square president Wurtzel followed that same legal path at his own Long Island condominium, where he's president of the board of directors — and ran first hand into a legal wall all too familiar to condo boards. "One person in my development in Nassau County hasn't made a common-charge payment in two and a half years," he says ruefully. "We've gone to court, but she's paying her mortgage," and so her bank won't foreclose, leaving that difficult task up to the board.

And you can fight back. The mechanism to do so in New York State is Real Property Law Article 9-B, Section 339-AA ("Lien for Common Charges; Duration; Foreclosure"), which says, in part: "In the event that unpaid common charges are due, any member of the board of managers may file a notice of lien… if no notice of lien has [already] been filed within sixty days after the unpaid charges are due… Such lien may be foreclosed by suit authorized by and brought in the name of the board of managers…."

Again, notify the bank. In rare cases, some may even choose to pay the arrears and add that amount to the mortgage balance, according to Washington, D.C., attorney and columnist Benny L. Kass.

And as with any lawsuit, of course, the wheels of justice grind slowly — and expensively. All this has made some boards reluctant to pursue arrears. "The legal fees preclude the avenue of taking these people to court," says Sackoff, angry at a system that, given the relatively low amounts involved, is easy for a delinquent owner to game. "It costs too much and there's no guarantee the court will grant you legal fees."

Step Three: Small Claims Court

That's why condo boards, say attorneys, are slowly becoming aware that condo common charges are usually low enough (under the $5,000 threshold) that you can turn to Small Claims Court. "The liens of condos are relatively small because condominium common charges don't include an underlying mortgage for the building or taxes for the building — each unit is taxed separately," says Wagner.

When you win the judgment — it's highly unlikely a judge will say, "Sure! They can live there for free indefinitely!" — the first step to collecting is to notify the unit-owner. Even if he or she has ignored your attorney's letter, seeing a court judgment is different. If they still ignore it, you can garnish the debtor's wages or bank account or even seize assets like the debtor's car.

Locating the bank account, for example, is simple if the person had been paying his common charges by check. Armed with this and other relevant information, you notify a city marshal, who is authorized to seize bank accounts, wages, real estate, automobiles, stocks, and bonds, and upon satisfactory completion sends the board a check. The marshal may request mileage and other nominal fees, which can be added to the original judgment amount.

Part 2: LEGAL WAYS to Cut Off Deadbeats' Amenities and More!