Q: I am on the board of a 10-unit brownstone co-op in Harlem. We want to keep maintenance fees low and count on every shareholder to pay on time. I've lived here for 11 years and there is one shareholder who never pays on time. We have to hunt him down to remind him of that. He's a nice guy, but he's an adult and doesn't lack money. His behavior is frustrating and unfair to us. We feel we have exhausted the personal approach. Can we require him to set up automatic pay? How can we legally force him to pay?
A: In a smaller building like yours, a chronically delinquent partner can have a greater impact on the building's finances.
“There must be some consequences if he always pays late,” said Michael J. Ciarlo, a partner who handles real estate litigation at Nadel & Ciarlo, PC, in Manhattan.
Check the co-op's lease to see if the building allows late fees to be charged.
New York State real estate law currently allows cooperatives to charge up to 8 percent of monthly maintenance costs as late payment interest if the lease allows it, although there are exceptions for income-restricted cooperatives. (Generally, a co-op cannot impose conditions such as automatic payment on a shareholder if the lease does not permit it.)
If your condominium lease does not address late fees, the board can begin the amendment process, which would require approval from a portion of shareholders. A new provision should say late fees can be considered additional rent in the lease, which would allow the board to apply to housing court for possession of the unit, Mr. Ciarlo said. It should also provide for the highest fee amount permitted by law, not specifically 8 percent, so that the board does not have to change the provision if the law changes.
Another approach would be to send legal demand letters every time maintenance fees are not paid on time, counting the legal fees the co-op pays to draft the letters, said Steven D. Sladkus, partner at Schwartz Sladkus Reich Greenberg Atlas LLP in Manhattan.
If this doesn't get that shareholder's attention, the co-op could issue an objectionable behavior notice and call a special meeting to consider whether his continued rent is unwelcome. This could result in termination.
“I would assume that a chronic defaulter is guilty of offensive behavior,” Mr. Sladkus said, but warned that it could be legally difficult to enforce the termination.
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