Surviving a Financial Firestorm Overcoming Fraud & Neglect

One of the biggest problems that can cause the downfall of any co-op or condo is a lack of funds, or more specifically, not enough money to keep operations running smoothly and to make the necessary repairs to keep everything up to par.

These financial firestorms may happen when a co-op or condo development has a long-running squabble with the building sponsor/developer, is faced with a disproportionate number of sublets and rental tenants, falls victim to a major unexpected, ill-prepared-for repair project, or are the unhappy victims of fraud.

If there’s no money in the reserve fund, a lack of equity to borrow from to make repairs or not enough people able to pay high special assessments, the building will be in serious trouble—falling into bankruptcy or worse.

The Root Causes

When it comes to money, whether it’s a household budget or a multimillion dollar co-op or condo budget, honesty is always the best policy. This is especially true in being honest with oneself and maintaining a realistic perspective on the bottom line.

The most common cause for financial distress “is people not being realistic about budgets,” says Gary S. Adler, CPA, a partner with Bass & Lemer LLP, a full-service accounting, tax and business-consulting firm with offices in New York and West Hempstead.

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Comments

  • We have a 24 unit condo where water bills were not being paid and approximately 25% of owners were in arrears. In addition water damage lawsuits had to be settled and a great deal of money was wasted on legal fees instead of settling. Owners eventually won their cases. Water bills were not paid and maintenance was kept artificially low to satisfy some Board members who didn't want to pay a higher maintenance. The impact is we now have an arrangement with the DEP to pay approximately $250 in arrears for the next fifteen years. This is an example of neglect and mismanagement that your article addresses. Thanks