Dealing with the Realities of the Recession Default Protection

 Consider the (fictional) couple, Mr. and Mrs. Smith. They love their co-op  apartment, and have lived in their comfortable and convenient New York City  neighborhood for the last seven years, moving in when Mr. Smith took a job as  editor of a prestigious magazine. He was making a great salary, and Mrs. Smith  was enjoying her new career as an elementary school teacher. When the economy  took a hit last year, Mr. Smith’s magazine took a major hit— advertisers bailed and the magazine folded. Mr. Smith has had a hard time  finding a job ever since, and Mrs. Smith’s salary isn’t enough to make ends meet. The couple has been struggling— and they’ve missed several maintenance payments.  

 Their cousins, the Jacksons, own a condo in New Jersey. Unfortunately, they are  experiencing some of the same struggles as their Big Apple relatives. The  Jacksons have also experienced layoffs from their jobs and, as a result, have  fallen behind on their bills. They’ve exhausted every avenue of financial help and have defaulted on their mortgage—missing several payments as well as monthly dues payments to their homeowners’ association. Both couples are now facing foreclosure on their homes.  

 All Too Common

 Unfortunately, this is a common scenario these days, both in New York and around  the country. More than 1.5 million foreclosure actions occurred last year and  at the time of this printing, there was tax help for struggling homeowners,  which could slow down the problem. Unfortunately, when a homeowner misses a  payment, they aren’t the only ones affected. The entire building and homeowners association feels  the effects when one homeowner misses a payment. That effect multiplies when  there are more delinquent residents.  

 “Foreclosures on co-ops and condos affect the buildings because in order for the  buildings to run they need to receive a certain amount of rent or common  charges from their tenants,” says Joseph Colbert, a partner at Kagan Lubic Lepper Lewis Gold & Colbert, LLP in New York.  

 “The impact of a foreclosure in a condominium is often more severe than a  foreclosure in a cooperative,”says attorney Eric Goidel, a partner with the New York-based law firm of Borah  Goldstein Altschuler Nahins & Goidel, PC. “While the lien of a cooperative for unpaid maintenance is superior to the liens  of all lenders, the lien of a condominium board of managers is subordinate to  the lien of a first mortgage of record.”  

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