Oops! Who’s on the Hook for Eight Years of Unbilled Fees?

Most co-op and condo boards rely on the vital income from various fees – for parking, sublets, and the storage of bikes and other belongings. But at a tight-knit, 15-unit co-op in Manhattan, the board recently discovered that one shareholder has never been charged for his storage space, which costs $40 a month. His eight years of missed fees add up to about $3,800. Board members are divided about how to proceed: Some think the shareholder should be billed for the whole amount; others think the board should split it with him; and others think that he isn’t liable since it was the building’s error. Ethics aside, the board president writes to the Ask Real Estate column in the New York Times, what are a board’s legal responsibilities? 

A co-op board has a responsibility – a fiduciary duty – to protect the financial interests of the entire corporation, not just the interests of one shareholder who did not pay for storage space for eight years. Collecting money that is owed would not undermine the familial nature of the community. Rather, it would uphold the idea that everyone in the building should pay what they owe – that no one is above the rules. 

The shareholder is liable for up to six years of unpaid storage fees because of the statute of limitations, according to attorney Peter Massa, a partner at Gallet Dreyer & Berkey. 

In situations like this one, where no bill was ever sent, boards often waive any interest or late-payment fees. Someone on the board should explain to the shareholder what happened and, if necessary, propose a payment plan to ease the burden of a large one-time sum. The shareholder could fight the charges in court, but the board would have a good case. “If everyone else is being charged, the shareholder should have known better,” Massa says.

The board should take this misstep as an opportunity to review the building’s billing procedures. What went wrong? How did no one notice the oversight? What can be done to prevent such an incident from happening again?