Q&A: Can I Put Maintenance in Escrow?

Q I’m a co-op owner in Nassau County, where my elderly mother lives. I have written repeatedly to the management company regarding water leakage issues we have been having, but while the management company had a remediation expert examine the apartment and found strong evidence of mold, they have not taken any action to remedy the situation.

“I would like to make my maintenance payment into an escrow account until the issue is resolved or until the management company remediates the problem. My question is can I just set up an escrow account?

—Aggrieved Shareholder

A “You may withhold your maintenance,” says attorney Michael J. Romer, of the law firm Romer Debbas, LLP, based in New York.

“A co-op differs from a condominium in that a condominium is considered real property, while a co-op is ownership rights in a certain number of shares attached to your unit. Similar to a tenant, a shareholder in a co-op has a proprietary lease explaining the rules and regulations of the building. One implied rule in all residential leases is the Warranty of Habitability (Real Property Law Section 235-b), which states that the premises are fit to live in and can be reasonably used for its intended purposes and do not pose any threats which are dangerous, hazardous, detrimental to life, health or safety of the occupants. If such a claim is brought against the management company, the shareholder may withhold payment of their maintenance and/or seek an abatement of the same. Putting your monthly maintenance into an escrow account ensures that the shareholder has the money available to pay the maintenance.

“In this case, mold is very detrimental to the health and safety of the occupants. Since the management company had their own expert examine the property, you have a very strong case to withhold payment since they knew about it and have failed to remedy the situation. However, this does not mean that the management company won’t bring an action against the shareholder for non-payment of their maintenance.

“First, the shareholder should give the management company notice that if the situation is not remedied by them within a reasonable time (i.e. thirty (30) days), the shareholder will withhold rent and bring a cause of action against them under the Warranty of Habitability. Next, the shareholder will want to consult with a lawyer in regards to holding the escrow for maintenance until the premises is properly cleaned, as well as discussing a lawsuit against the management company.

“You should also check your proprietary lease and the co-op corporation’s bylaws to determine if your co-op has specific rules and procedures in dealing with maintenance disputes.”

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