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When Apartment Owners Divorce, Who Pays the Monthly Charges? Anyone?

Ronda Kaysen in Board Operations on May 28, 2013

New York City, Flatiron District, Manhattan

May 28, 2013

"That is certainly the most perilous period," says Elliot Meisel, a partner in the law firm Brill & Meisel. "The condo and co-op boards should stay out of legal aspects of ownership rights."

Where's the Money?

Then there's the matter of money. Two years ago, a small luxury condominium in the Flatiron District was left holding the bag when a divorcing couple left the country. The husband had lost his job and didn't have the money to pay anymore. His wife refused to agree to sell the apartment and so, with no money on hand, they let common charges go unpaid for more than a year before finally agreeing to sell and pay what they owed the condo.

When a marriage falls apart, maintenance fees and condo charges often end up entangled in the dispute. Assets get frozen. Ousted spouses refuse to pay co-op maintenance or condo common charges for apartments they have left behind. In a Gramercy co-op recently, a husband left his wife and took all the money. Until an agreement could be reached, she had no cash with which to pay her maintenance fees. 

Julie Hyman, a matrimonial attorney at her eponymous firm, warns that a divorcing couple's property "is going to get tied up in litigation," and so "it's better to catch this problem before it happens."

Step to the Arrears

"These situations are dependent on the resolution of the divorce issues by the court," says Bruce Cholst, a partner at Rosen, Livingston & Cholst. "An arrears situation can drag on for a long period of time, especially if it's tied up in a divorce decree where the parties are fighting over assets. If it's not a primary residence, that's worse because neither party has an interest in resolving this issue. They can hang tough because it's unclear whether this property will be theirs by the end of the divorce, so they don't want to sink money into an asset that they may not own."

A co-op board can move to evict shareholders who don't pay their maintenance because the co-op has first lien on the apartment. So if the shareholders are in arrears, the bank holding the mortgage will ultimately be required to pay the co-op maintenance and then go after the owners to recoup the money.

But condos don't share that same protection. The condo gets paid after the banks and after taxes entities, and sometimes may never recoup its losses, especially if the apartment goes into foreclosure.

Freezing Their Assets Off

In the case of frozen assets, a board's lawyers can talk to a matrimonial attorney to see if there is a way to unfreeze assets, but the courts rarely intervene if the property isn't the couple's primary residence.

"I think divorce courts are unlikely to intervene because they only have direct jurisdiction over the matrimonial dispute and the co-op is a third party," attorney Cholst says. "Their attitude would be to tell the co-op, 'Go sue if you want to. Get in line.'"

For more cautions about apartment-owners divorcing, including about fake spouses, read Part 3 or pick up the May issue of Habitat.


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