New York's Cooperative and Condominium Community

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LEGAL/FINANCIAL

HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

Condo Boards Have a New Tool for Collecting Arrears

Frank Lovece in Legal/Financial on April 7, 2017

Chelsea

Condo Arrears

The Heywood Condominium in Chelsea, scene of a decade-long legal battle to evict a unit-owner (image via Google Maps)

April 7, 2017

When it comes to evicting residents, co-op boards have traditionally enjoyed a bigger arsenal than their condo counterparts. But condo boards are not without their weapons. And that arsenal just got larger, thanks to a major court ruling in The Heywood Condominium vs. Steven Wozencraft.

The case began in April 2007, nearly a year after Steven Wozencraft bought an apartment in the Heywood, a 10-story luxury condominium in Chelsea. According to Jonathan Landsman, his lawyer, Wozencraft “had an extreme financial problem” and stopped paying his common charges. Sixty days passed, after which time the Heywood’s house rule taking away non-essential services kicked in.

When Wozencraft’s financial issue was resolved, Landsman says his client “offered to pay common charges going forward and make a payment plan for claimed arrears as long as the board restored full services.” According to Landsman, the board refused this offer.

In 2013, the board hired the law firm of Schwartz Sladkus Reich Greenberg Atlas, which came up with a different way for a condo board to collect from residents who do not pay. With Wozencraft now owing a claimed $100,000 in arrears, late fees, and interest, the board’s new attorney sought to have the court appoint a receiver, who would have the power to set and collect rent from Wozencraft. If he didn’t pay, the receiver could have him evicted under rental laws, which is not as lengthy a process as foreclosure.

This ability – inherent in existing law but essentially never confirmed by a court until now – means that the receiver, on behalf of the condo association, has the right to evict a unit-owner simply by using the standard eviction court process. The receiver then has the right to use city marshals to physically escort the unit-owner off the premises, change the locks, and rent out the apartment. In order for this method to be utilized, a foreclosure proceeding must already have been initiated. After the rental eviction takes place, the foreclosure case will continue because the board still wants to collect its arrears and see the apartment sold to a new buyer.

But – and this is critical – in order for this technique to work, the bylaws must provide that if the condo forecloses on a unit-owner, it is entitled to the appointment of a receiver. The Heywood’s governing documents contained such a provision, and so a receiver was appointed. When Wozencraft failed to pay his rent, the receiver moved to evict. The courts granted the request. Wozencraft appealed. Finally, in January of this year – in a closely watched ruling – a five-judge appellate panel unanimously rejected Wozencraft’s appeal. He remains in the apartment pending another appeal.

The Heywood’s attorney, Steven Sladkus, says the case provides a road map for other condo boards: “File the common charge lien, move to foreclose, seek a receiver to collect the rent, and if they don’t pay the rent, eject.”

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