Collecting Arrears When Residents Don't Pay

The majority of co-op and condo residents pay their monthly maintenance fees on time and in full with no problem. The recent recession, however, changed the picture drastically for residents who found themselves laid off, under-employed, or with reduced work hours and could not afford to keep up with the payments. Even absent a major national economic upheaval, other life changes—such as an illness, divorce, or death of a loved one—can also cause unit owners to fall behind. 

Albert M. Kushnirov, CPA and president of Greenberg & Brennan, CPAs, PC in New York City says that co-ops handle arrears a little differently. “When it comes to collection, a co-op comes before a bank. So a co-op can push for the sale of an apartment and collect any arrears first; the balance would then be applied to pay the mortgage.” 

What’s interesting is that every few years the main reasons for being delinquent on maintenance fees seem to change,” says Ralph C. Ruocco, Esq. an attorney with Florida-based Glazer & Associates, P.A. “Recently, I have seen unit owners on fixed incomes struggling to pay monthly assessments that are naturally increasing due to the increase in the cost of living.” 

Ruocco says that some unit owners who do not pay fall into arrears because they're already past the point of foreclosure proceedings and are simply in a waiting game. “They're upside-down on their mortgages and are simply living out their final months in the community assessment-free,” he says. “While it varies in severity, if you show me a random community of over 50 units, odds are that their receivables are in the thousands of dollars—and more likely the tens of thousands.”

The Domino Effect

When in tough financial straits, most condo owners will pay their mortgage first, believing that their condo building or homeowners association does not have the ability to foreclose on their home. Actually, says Ruocco, “They could not be more misguided. In fact, if you have to make a choice between paying your mortgage or your association fees, you should pay your association. Association foreclosures are much faster, and definitely have fewer defenses available. Essentially, if you hold title and you do not pay your assessments, you can lose your home.” 


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  • Even when homeowners can't keep up with assessments, collecting dues is much easier in the early stages of the delinquency cycle. Using skip tracing (to ensure you have homeowners most accurate contact information), along with a brief phone and letter campaign to motivate homeowners to come to the table sooner, helps community boards offer solutions before foreclosure becomes inevitable. Along with the early consequence of potential credit reporting (as a collection account) such communication motivates homeowners to come to the table early-on, when other options are still available. A short sale many times is only available if and when the property owner's assessments are current. When boards or management firms wait too long (or merely use letters) to motivate folks who are getting behind on dues, then such options as a short sale are no longer feasible. Then there are those home and property owners who are simply shirking their responsibility. Credit reporting solves these delinquencies in 52.5% of instances wherein it's used. That's based on data from over 5,000 delinquent HOA accounts where credit reporting has been used across this country, from Florida to Hawaii. There are simple solutions for delinquent dues that don't bury homeowners in legal fees, nor destroy their financial lives.
  • We advise #Coopboards on using a much more personal and unconventional approach in order to avoid involving lawyers and banks. Our first suggestion is for the board to find out what auxiliary services the delinquent owner use. One success story is a delinquent owner who had been in arrears for over 6 months at a time, on and off, for decades. She had a storage space. When we advised the board to send a letter, not about her arrears, but to notify her that they would discard of her items and cancel her storage space lease, the problem was immediately resolved.
  • More than 200 residents have disagreed. They signed an online petition opposing the home. In sometimes lengthy online comments, they say that Taylor Street is plagued by drug crime and that they fear for the safety of their children and property — not to mention the value of their homes. “We don’t think the city has given any consideration to the proximity to the school,” said Michael Waske. “I have a 3-year-old and more on the way. We would like to live in a safe place, and when parents go to work all day, they shouldn’t be worried that’s not the case.”