Monthly charges, including common charges, emergency repairs, lawsuits, assessments, maintenance fees, dues and so forth, are a big part of owning a co-op or condo in New York City. When an owner is late, or misses monthly payments entirely, it affects the whole building and can adversely impact the entire community. There is less revenue that month, so savings may have to be raided. Property managers have to spend time better invested elsewhere dealing with the problem. Legal fees mount. And so on.
In the case of arrears, the difference between a co-op and a condo is vast, for reasons that are covered below. In short, co-ops are more insulated from potential financial harm than condos, whose ownership affiliations are tied to real property and personal mortgages.
What recourse do boards have when said payments are late or missed for months at a time? How does the process work? And how does it differ from co-op to condo? Let's take a look.
What is Arrears?
The word arrear is similar in sound and spelling to rear, as in one's hind quarters. And indeed, both words share the same Middle English root: arrere, meaning behind. To be in arrears—the word is always used colloquially in the plural—is a snazzy, legalese way of saying to be behind in one's payments.
While no one presumably wishes to be in arrears, the vicissitudes of life, livelihood and the economy ensure that some delinquency is inevitable. Statistically, about two percent of units are in arrears at any given time. Why does this happen?