Non-Judicial Collection of Co-op Maintenance Arrears
The vast majority of these matters are resolved before auction, by either the shareholders or their lenders paying all outstanding sums due, or by negotiating a settlement with the shareholder and executing a formal written agreement for payment of the outstanding sums due. Where there is a loan on the unit, the lender often pays the co-op in full to protect its loan which is subordinate to maintenance charges.
It is generally our experience that these non-judicial foreclosures are cheaper and quicker than Landlord/Tenant proceedings. In a rare circumstance, after a non-judicial foreclosure is conducted, the shareholder may challenge the procedure in court. Such a challenge may result in litigation and additional attorneys’ fees which, if the co-op is successful, the shareholder may be held responsible to pay. Landlord/Tenant court is often cumbersome and more expensive than the non-judicial foreclosure procedure, and often requires court appearances by either a member of the board or managing agent. Our firm is also experienced in handling Landlord/Tenant cases.
Procedures for Collecting Condominium Common Charges
The steps to assist condominiums in collecting outstanding common charges are different than those for a co-op. The first step to collect outstanding common charges is to file a lien against the unit. The City is currently accepting these liens for filing. We advise all our condominium clients to file their liens as soon as possible, especially if there are significant arrears and where there is a mortgage. Condominium common charges are subordinate to mortgages and real estate taxes. If there are any other liens or judgments filed before the condominium’s lien is filed, those may also take precedence over the condominium’s lien for common charges.
If the owner does not pay after the lien is filed and served, the next step is to initiate a court proceeding to foreclose on the condominium’s lien. Our firm is experienced in handling these types of cases. Standard condominium by-laws make the unit owner responsible for costs and legal fees in connection with such a court proceeding.
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