Do Many Buildings Have Owners Who Pay Monthly Fees Late?

July 16, 2015 — Falling behind on collecting arrears is a big problem with smaller buildings, especially co-ops. Larger buildings have many shareholders and they can survive if a few people don't pay. I see this in the large new condominiums in which the foreign investors often don't pay their common charges.  

In smaller buildings, there are only a few owners. If one or two of them do not pay, the other owners have to pay double. In essence, the owners who pay are punished for the malfeasance of those who don't; they have to pay their own common charges and put in money through assessments or increased monthly charges to make up the budget shortfall.

These buildings have mortgages to pay. If they don't have sufficient funds to cover their mortgages, they could default and the lender could foreclose. We saw this in the early 1990s when the bigger buildings got into trouble because sponsors with unsold apartments and rent-stabilized or rent-controlled apartments could not afford to make the monthly maintenance payments. In sum, boards are advised to aggressively pursue arrears. Although the legal costs may be significant, you have to get owners to pay. Banks will not lend to buildings or unit-purchasers if there are significant arrears in maintenance or common charge payments.

Martin S. Kera is president of Bren Management