How Failing to Pay Maintenance Fees Can Disrupt a Co-Op Delinquent Habits From a Resident Could Reverberate Throughout the Building

A resident failure to pay maintenance fees can adversely affect the co-op (iStock).

 A primary rule of cooperative living is that everyone pitches in their fair share. This applies to monthly maintenance payments, special assessments, and any other monetary obligation that allows the association to maintain quality of life for the residents and their collective property. It follows that, should someone be unable or unwilling to pony up for their piece of the proverbial pie, ramifications will be felt from the board on outward. It's to the benefit of all parties involved to sort these situations out as soon as possible, as eviction proceedings – the worst-case-scenario, usually – can be painful and drawn out, leading to dangerously depleted reserves and serious morale problems among the remaining shareholders, forced to carry the weight of the delinquent.

Baby Steps

It behooves a board to act rationally if a shareholder is in arrears; should someone fall a month behind, that is not necessarily reason to ring the alarm. But it is incumbent that a board stay aware of everyone's payment situation, such that it can act when the time comes.

“We look at our monthly sheets,” says Burt Wallack of New York-based Wallack Management. “If someone is a month in arrears, we normally send out a reminder, at which point, I'd probably say that nine out of 10 people just pay. If you have someone two months in arrears after we send out that first notice, we'll send a legal letter saying that they must pay. Finally, if they don't pay by the end of the second month or the beginning of the third, then we go to legal.”

In many cases, a little nurturing and sensitivity can go along way toward sorting out a sensitive situation. “In many cases, a shareholder is sick, or they've lost their job, or something similar is going on, and I would say that most boards have a level of patience in letting people work things out, whether that means getting their lives together or selling their apartments,” says Eliot H. Zuckerman, a partner with the law firm Smith, Gambrell & Russell, LLP, in Manhattan. “If the board thinks that there's no realistic hope that a shareholder will be able to get themselves back together financially, however, that person will have to sell their apartment, as the board can't let the shareholder continue indefinitely without paying, for the obvious reasons.”

Wallack concurs. “If I have a shareholder in truly dire financial straits,,” he says, “with work and their business, or personally, say with a divorce, I will speak to them and attempt to work out a payment schedule. And that probably works about 90 percent of the time as well. Even when we do have to go legal, via which their families will by necessity become involved, I will speak to them and try to ascertain when they'll be able to pay.”

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Comments

  • These solutions please attorneys who collect big fees every time they get involved. Eviction is a mess, and courts usually do not evict older people, so you could be in for years of legal fees. Better solutions include: * Meeting the shareholder to discuss a payment plan or alternate source of payment (a child who may be employed, other family members, a social or religious organization with whom the shareholder is affiliated * especially for older shareholders who may have a lot of equity in their apartments, a home equity loan or reverse mortgage * for seniors, applying for SCRIE to help offset maintenance increases Calling the shareholder's mortgage holder, especially if it's a large bank, could have significant unintended consequences. A short sale would damage the sale price of other apartments, and the legal costs, again, of dealing with a foreclosure add up for the co-op. Next time, get better advice!