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Condo Collections/Non-Occupying Owner

Oct 05, 2018

Jonathan Temchin, Associate, Tarter Krinsky & Drogin

Imagine this scenario: the condominium board has has not received payments for common charges from a unit-owner for over a year. The arrears total well into the thousands of dollars. It's the board's usual practice to file a common-charges lien against the unit and, if necessary, foreclose upon 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 expend 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.


Condo Collections/Non-Occupying Owner  

If a non-occupying owner rents a unit and then fails to make payments owed for common charges, assessments or late fees, within 60 days of the expiration of any grace period following the due date, rental payments from the tenant shall be directly payable to the condominium association. (Real Property Law, Sec. 339)


Luckily, the New York Real Property Law sets forth a relatively simple, inexpensive, and efficient mechanism for the board to obtain monies directly from the rental tenant that it's owed without litigation. That's New York Real Property Law Section. 339-kk.


Specifically, this statute provides the following: if a non-occupying owner rents a dwelling unit to a rental tenant and then fails to make payments due for common charges, assessments, or late fees within 60 days of the expiration of any grace period after they are due, the board shall provide written notice to the tenant and the non-occupying owner provided that commencing immediately and until such time is 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.
If these three prerequisites are met, the board must provide written notice to both the-unit owner and the tenant. The written notice must contain very specific language stating that commencing immediately and until the arrears are made current, rental payments due to the unit-owner are be made payable to the condominium.


So what happens when the arrears are made current? RPL 339-kkb 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 as 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 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 to the unit-owner for failing to make rental payments. 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 and "shall relieve that rental tenant 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.


In addition. the board may simultaneously pursue legal remedies against the unit owner, such as foreclosure of a common charges lien. Clearly this statute is designed to help and assist condominium boards in collecting common charges and assessments and provides a quick, fast, and efficient procedure for suit doing so from a rental tenant.

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