Why Should I Care If a Co-Op or Condo Has a Lot of Arrears?

Aug. 6, 2015 — There are a multitude of reasons why sizable arrears should set off a series of alarms for owners and prospective buyers. Broadly, uncollected arrears signal that the board and management company are not focused on the property's fiscal or physical health.

Arrears may suggest an underlying physical impairment to the building, causing owners to withhold payment. If this is not the issue, uncollected arrears are a clear display of poor management. This also indicates that the board of directors is not fulfilling its fiscal responsibility to shareholders/HOA members by not utilizing all legal means to collect the funds.

Regardless of the reason, arrears undermine the financial stability of a property, potentially jeopardizing its ability to satisfy financial commitments to the mortgage holder and other creditors. Should this condition exist, the board may be forced to dip into the reserve fund to satisfy property debts. Further, banks and appraisers frown upon poor financials, often denying financing for prospective buyers. This makes selling more difficult and lowers the value of the property

Arlene Waye is broker and president of Awaye Realty.