ONE MONTH
1. At 1 month of common charges or maintenance owed, have your managing agent call them. Perhaps they were traveling, lost the bill and were waiting to pay both months in the following month, the agent's banking system may have misapplied the payment (it may have ended up in someone else's account), or they may have bounced their check.
A friendly reminder should bring out the truth with a phone. However, a phone call is often not answered, a voicemail is not returned, or a promise to send in a check is never executed.
A friendly letter may be optionally sent, but requiring your agent to do this may take away their time from more important activities. Phone calls are quicker and friendlier.
1. At 1 month of common charges or maintenance owed, have your managing agent call them. Perhaps they were traveling, lost the bill and were waiting to pay both months in the following month, the agent's banking system may have misapplied the payment (it may have ended up in someone else's account), or they may have bounced their check.
A friendly reminder should bring out the truth with a phone. However, a phone call is often not answered, a voicemail is not returned, or a promise to send in a check is never executed.
A friendly letter may be optionally sent, but requiring your agent to do this may take away their time from more important activities. Phone calls are quicker and friendlier.
2. At 2 months of arrears, send a letter suggesting that if a payment is not received, legal action may ensue in order to protect the wellbeing of the building's finances. Phone calls at 3 weeks and 4 weeks into the month should be placed.
If these actions do not produce a payment, discuss the option of a Board member speaking with the owner. Sometimes, an owner may not tell the managing agent the truth over the phone about why their payment is late. However, this is the touchy situation I was referring to. It often works, but it is not necessary.
THREE MONTHS
3. At 3 months, it is time to consider what type of legal action to pursue. At this point, the Board needs to separate their personal feelings and relationships with the delinquent owner and treat the situation as a business decision. The Board has a fiduciary responsibility to the condominium or corporation in which they reside and as such they must do whatever necessary to maintain the income owed to the corporation.
A good starting point is to have the attorney write a letter to the owner, stating possible future options the owner may face in their delinquency, such as freezing of bank accounts, garnishing of wages, or a lien on their apartment.
This letter will cost $50-$150 from the attorney, the charge of which should be paid for by the building and levied to the owner's account. The owner will be responsible for building reimbursement of the attorney's fee.
3. At 3 months, it is time to consider what type of legal action to pursue. At this point, the Board needs to separate their personal feelings and relationships with the delinquent owner and treat the situation as a business decision. The Board has a fiduciary responsibility to the condominium or corporation in which they reside and as such they must do whatever necessary to maintain the income owed to the corporation.
A good starting point is to have the attorney write a letter to the owner, stating possible future options the owner may face in their delinquency, such as freezing of bank accounts, garnishing of wages, or a lien on their apartment.
This letter will cost $50-$150 from the attorney, the charge of which should be paid for by the building and levied to the owner's account. The owner will be responsible for building reimbursement of the attorney's fee.
FOUR MONTHS
4. At 4 months, it's time to take action. Speak with your attorney about filing a lien and attempting to cover all owed fees in small claims court. In NYC, the maximum allowed reward by a judge is $5,000 per filed case. Attorney's fees may be rewarded in small claims cases if the judge finds the fees of a reasonable amount. If the amount of arrears is greater than $5k, an additional suit may be filed in small claims court.
4. At 4 months, it's time to take action. Speak with your attorney about filing a lien and attempting to cover all owed fees in small claims court. In NYC, the maximum allowed reward by a judge is $5,000 per filed case. Attorney's fees may be rewarded in small claims cases if the judge finds the fees of a reasonable amount. If the amount of arrears is greater than $5k, an additional suit may be filed in small claims court.
5. At 5 months or more, it is time for more serious action. Speak with your attorney about garnishing wages, freezing bank accounts, and filing for an eviction.
I'm not an expert in evictions, even after going through the process twice. Depending upon the ownership (Condominium versus Cooperative) the options and sequence of events change dramatically. However you slice it, you're looking at a minimum of a one year process, upwards more commonly of two years, and a cost of $20,000-$30,000 in legal fees.
Note: If your delinquent owner has a renter and your lease agreement permits it, you may have the renter pay the building directly. If your lease does not have such a rider, I recommend getting one.
I've heard of buildings posting a list in the lobby of unit owners in arrears. This method can prove counterproductive as the owner may be more willing to work with the Board on a payment plan without having their pride hurt. Also, the unit owner may have lost their job or had another legitimate reason why they were not paying and posting the arrears notice would only cause embarrassment, not an expeditious payment.
If an owner is in arrears and known to the Board as having the ability to pay, they should be in legal. If they can't pay, they should be selling their unit. If the owner forecloses on the apartment, the building is generally last in line to collect and there's a good chance that any legal fees to date would not be included in the settlement. Plan on collecting only outstanding common charges and nothing more.
(images from suitcase guy from clipartof.com, house in chains from mortgagearrears.org.uk, and board room from ct.gov)
If an owner is in arrears and known to the Board as having the ability to pay, they should be in legal. If they can't pay, they should be selling their unit. If the owner forecloses on the apartment, the building is generally last in line to collect and there's a good chance that any legal fees to date would not be included in the settlement. Plan on collecting only outstanding common charges and nothing more.
(images from suitcase guy from clipartof.com, house in chains from mortgagearrears.org.uk, and board room from ct.gov)
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