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.”