Imagine this scenario: the condominium board has not received payments for common charges from a unit-owner for over a year. The arrears total thousands of dollars. It’s the board’s usual practice to file a common-charges lien against the unit and, if necessary, foreclose on the unit through litigation.
But this is not the usual situation. Here the unit-owner is a landlord and rents the unit to a tenant. What should the condominium do? Should the condominium proceed with foreclosure action and spend significant time and resources pursuing litigation? An inexperienced or uninformed board may go this route. And if the unit-owner appears and opposes it, the litigation may take years to complete with no certain outcome.
Luckily, the New York Real Property Law sets forth a relatively simple, inexpensive, and efficient mechanism for the board to obtain the money it’s owed directly from the rental tenant without litigation. That’s New York Real Property Law Section 339-kk.
Specifically, this statute provides the following: if a non-occupying unit-owner rents an apartment to a tenant and then fails to pay common charges, assessments, or late fees within 60 days of the expiration of any grace period, the board shall provide written notice to the tenant and the non-occupying owner stating that, commencing immediately and continuing until all payments for common charges, assessments, or late fees are made current, all rental payments are to be made payable to the condominium association.
So how does this work? First, the unit-owner must be a non-occupying owner. Second, the occupant of the unit must be a rental tenant. An occupant who is not a rental tenant, such as a relative who does not pay rent, is not subject to the statute.
Third, the arrears for common charges, assessments, or late fees must be more than 60 days past due.
So what happens if the arrears are made current? RPL 339-kk provides that the board is required to provide written notice of that fact within three business days to the unit-owner and the tenant. Thereafter, the tenant is to resume paying rent directly to the unit-owner.
One issue that comes up frequently is whether a unit-owner can contest the written notice to the tenant. The statute has a procedure for that as well. The unit-owner has the right to present facts supporting the unit-owner’s position that the rental payment should not be made to the board at the next scheduled board meeting. That meeting must be held within 30 days of the date that the board received notice from the unit-owner that he or she intends to dispute the claim.
Another issue is whether the tenant may be subject to liability for failing to make rental payments to the unit-owner. In other words, is the tenant potentially facing an eviction proceeding by directing rental payments to the board?
The statute has an answer for that as well: payments can be made by the tenant to the condominium association, and that relieves the renter from the obligation to pay such rent to the unit-owner and “should be an absolute defense in any non-payment proceeding.”
What happens if the tenant refuses to direct the rental payments to the condominium after receiving the written notice to do so? The board may bring an action against the tenant compelling him or her to pay the rent directly to the condominium.
Clearly, this statute is designed to assist condo boards in collecting common charges and assessments, and it provides a quick, fast, and efficient procedure for collecting from a rental tenant.
Jonathan Temchin is an associate at Tarter Krinsky & Drogin.