Condos Collecting against Owners with Assets
New York condominiums have a variety of ways to collect amounts owed by unit owners. If demands and being nice do not cause owners to pay their obligations, then condo boards have tools available to cause owners to pay.
If the unit owner is renting the unit, the condo can send a notice to the renter and demand that the renter pay its rent to the condominium until the arrears are paid. Some renters comply after receiving the notice but others do not because they are fearful of retribution by their landlord unit owner (which is prohibited by law). The condo can escalate the matter and bring suit against the unit owner and the renter to force the payment.
If there are common amenities, condos may be entitled to withhold those amenities until arrears are paid. So lack of access to health clubs, pools, parking, etc. may be just the medicine that the unit owner needs to clear their arrears. Careful consideration of the condo governing documents and applicable laws should be done by an attorney to make sure the condo is within its rights to withhold certain amenities.
Condo governing documents also usually contain a provision allowing the board to escalate the payment of a whole years worth of common charges. Certain notices are required and then the entire remainder of the year becomes due and owing by the unit owner. Concerning over this happening could cause a unit owner to pay.
Under governing documents, condos typically have an automatic lien over the common charges and other amounts due by owners to the condo. To put the world on notice that the lien exists, condo boards usually record a common charge lien against the offending unit in the land records. They’ll need to do this if the board decides to foreclose that lien. After recording, sending a lien to a unit owner sometimes is enough to get them to pay or at least start a dialog about a payment plan if the board will allow such a plan. Some do with terms built into the agreement like interest on what is essentially a loan, a confession of judgment which means that the condo gets judgment if the owner defaults on the agreement without having to go through a full blown court proceeding, and other terms that are favorable to the condo.
Another route for a condo board is to bring a money judgment action against the non-paying unit owner. At the end of the lawsuit which can be in a variety of courts depending on the amount due, the condo can get a judgment for money. Having the judgment in and of itself could convince the unit owner to pay or enter into an agreement regarding payment. Judgments are good for 10 years so the likelihood of collection spans a long period of time. Unlike the common charge lien which is against the condo unit only, the money judgment can be used to go after other assets owned by the unit owner.
Collecting against a judgment could be as simple as looking at the last check that the unit owner wrote to the condo and serving a restraining notice against that bank. Unit owners who don’t want to pay and have done some research on collection, may have already closed that bank account. Some try to evade collection by paying with money orders or in ways that do not disclose a bank name and account number. There are restrictions on restraining notices that have to be followed. If the condo doesn’t know which bank the unit owner uses, there are strategies to find them. Once restrained, the bank account can be executed upon and if owned with others, turnover proceedings can be initiated.
Other avenues for collection include going after non-liquid assets such as brokerage accounts and stock ownership, or from a business owned by the unit owner (NY Marshals can place a levy on the business, stopping the unit owner from collecting draws, bonuses, interest without paying the debt to the condo).
If the unit owner is working, their wages can be garnished. A NYC Marshal can garnish up to 10% of the owner’s wages. Just faced with the possibility of garnishment and their employer learning about their debt may cause an owner to pay his or her arrears with the money they are keeping under a mattress.
Another approach to collection is finding other real property owned by the unit owner and making sure the money judgment lien is recorded against the property in the land records. It’s similar to a common charge lien on the condo unit (which has higher priority that money judgment liens). The money judgment lien can be placed on other real property and foreclosures of that property can be pursued.
If the unit owner transferred assets to others to evade recovery, there are tactics to reverse transfers that are fraudulent conveyances and seize the assets to pay off the amounts owed. If money is owed to the unit owner by others, we can cause that money to be seized from the others persons or entities.
Another target for collection is personal property. I can’t tell you how many times a board member advises, the person is in arrears but they are driving a brand new car. The car could be leased and thus owned by a leasing company, but if the car, boat, motorcycle, art, jewelry or other personal property of value is owned by the unit owner then it is fair game for collection.
If all of the above doesn’t produce money to pay the arrears, discovery can be taken to learn about assets or other ways that collection can be successful. We can serve written questions that must be answered under oath. We can obtain a court order that they appear for a deposition to answer questions about their assets or employment. We can subpoena documents from them or others related to their assets.
Navigating the above is tricky and should be done methodically by experienced counsel. What’s nice about condos is that the condo governing documents generally contain a provision allowing the condo to collect attorneys’ fees and costs of collection. So the time and effort needed to collect ends up being charged back by the condo to the unit owner and is collectible as provided in the governing documents. Once unit owners realize this, they often want to cut their losses and resolve in some way that is favorable to the condominium.
