New York's Cooperative and Condominium Community

Habitat Magazine Insider Guide




Five Easy Pieces of Advice for Collecting Condo Arrears

New York City

Condo common charges, arrears, lien, late fees, foreclosure, money judgment, condo board.
Sept. 2, 2022

Monthly common charges are the lifeblood of every condominium association. They cover operating expenses, maintain common areas and pay the building staff. When unit-owners fall behind on their payments, therefore, swift action by the board is in order.

“A responsive board signals to residents that the board will remain diligent and vigorously pursue payment when there is this type of delinquency,” James Woods, a partner at the law firm Woods Lonergan, tells Brick Underground.

The specific steps a board takes will be dictated by the bylaws. Here are five of the most basic:

Issue a notice of collection and impose late fees. Usually the first step is to issue a notice of arrears or notice of debt collection to the defaulting owner and advise them that late fees will be imposed for non-payment of common charges, typically $50 to $100. The notice of debt collection should provide the amount owed, including a breakdown of any late fees, assessments, parking fees, common charges and other fees. Such a notice might lead to an amicable solution, but it should advise the unit-owner that she has 30 days to comply before the board moves to the next step.

File a common-charge lien. A publicly filed lien serves two important functions: it's an avenue that allows the board to later foreclose on the unit if the lien is not paid in a timely manner; and it prevents the owner from selling or refinancing the apartment without first paying the debt owed to the condo because banks will not approve a buyer’s loan if there is a lien on the apartment. 

“If the unit-owner understands the implications of the lien — that it’s the first step to starting a foreclosure action — they are often incentivized to pay what is owed,” says Lauren Tobin, an associate at Woods Lonergan. 

If the bylaws provide for it, the board can also include late fees, interest and other costs as part of the lien. This means that expenses incurred by the board can be added to the total sum owed by the condo owner, including attorneys' fee, which can be substantial.

Collect rent from a tenant in the unit. If the apartment is being rented out to tenants and the unit-owner is in default, the board has the statutory right to take rent payments directly from the residents of the apartment. The board must provide notice to the tenant and the unit-owner that due to the default in common charges future rent payments must be made directly to the condo until the owner is current with common charges. 

Foreclose on the common-charge lien. The next step would be to start a foreclosure action in court to sell the apartment and recoup the funds. In most circumstances, the first mortgage — that is, the lender — will take priority and must be satisfied before a lien for common charges can be paid to the condo. So in some situations it will be a case of which entity — the bank or the board — begins the foreclosure action. If the amount of the debt owed to the lender is substantial, then it may be advantageous for the board to monitor the bank’s foreclosure, as the condo’s lien will be subordinate to the bank’s mortgage.

Pursue a money judgment. Another option is for the board to direct its attorney to bring a lawsuit for a money judgment, either in civil court or small claims court, instead of pursuing a foreclosure action. This is a less common route, because if the condo owner doesn’t have the money to pay the common charges, it's unlikely he'll have the funds to cover a money judgment. Therefore the condo board will not receive the money it's owed.



Ask the Experts

learn more

Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

Source Guide

see the guide

Looking for a vendor?