Q&A: Lost Checks, Late Fees

Q. I live in a manufactured home co-op, and earlier this year we switched property management companies. At first, they lost a check – which I guess can happen. Then a few months later, a group of us received demands for rent and were served eviction notices by the sheriff’s office. I set up a payment arrangement and have stuck by it for the last three months, Then another check went missing.

Long story short: when I called the management company and asked for a copy of my account and what I have paid in, I was told it was sent to the co-op’s lawyer, and I would have to contact him to obtain it. I told the woman on the phone, “Ummm, no. This is my account and I am asking you for a copy of what I have paid in, including arrears.” She told me she would email it to me. I told her I wanted a hard copy. I received an email copy from the attorney. When I read the ledger, I found that even though there were months that the check was picked up prior to the 5th of the month, they were not being credited to my account until after the 15th, and an automatic $25 fee was being added. To me this seems very odd. Is it a normal practice? 

                 — Disgruntled Shareholder

A. “In a dispute involving late fees charged by a cooperative,” says attorney Cathleen Hung of the New York firm Anderson Kill, “the first thing to look at is the cooperative’s governing document, the proprietary lease. The authority of the cooperative to charge late fees is usually found in paragraph 12 of standard proprietary leases.  The standard language establishes a grace period for the payment of monthly maintenance before late fees are charged, and also sets the late fee equal to the maximum legal rate of interest.  There are conflicting interpretations as to what the ‘maximum legal rate of interest’ is, but for most co-ops the late fee is usually two to five percent of the monthly maintenance.

 “If the proprietary lease does give the cooperative the authority to charge a late fee, and provides a grace period up to the 5th day of each month, then you would have good standing to have the management company remove those late charges from your account  The management company’s own records reflect that the maintenance checks were picked up prior to the 5th of the month, which is within the grace period.  It is irrelevant when those checks were cashed; what matters is when those checks were received by the management company. If, however, the proprietary lease states that maintenance payments are due by the 1st of each month with no mention of a grace period, the cooperative is within its rights to impose a late fee. It is important to be aware of what is stated in your proprietary lease, as it dictates the rights and obligations of both you as a shareholder and the cooperative.

 “Also, to address any future issues regarding lost checks, or when checks were actually delivered, my recommendation would be to obtain a receipt whenever you drop off your maintenance checks. This is especially good practice when you have entered into a payment plan with the cooperative, as untimely or missing payments may be cause for eviction. The receipt will not only provide you with a written record that you have made your payment, but the date your payment was made.”

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