Q One of the tenants in our small condo (it’s only six units) has been underpaying his monthly dues since August of 2012. The total amount he owes our building is just over $8,300. Two weeks before our annual unit owners meeting in June of this year, our manager—who also takes care of our books—was notified of this discrepancy, but he never brought the matter to the board’s attention. Consequently, the underpaying tenant’s maintenance was again underpaid in July and August. I am on the board and I personally spoke to the tenant about the issue. He assured me it would be taken care of.
As of this month, this tenant is still underpaying his fees, after four months of the problem being common knowledge. The underpayment is not only unfair, but it deprives our small building of much-needed revenue—particularly since we were presented with a 20-percent maintenance increase late last winter because of the record snow removal and high fuel costs. Our manager says that collecting this tenant’s arrears is not his responsibility, and our board president continues to assure me that it will be resolved, but the problem remains. What can I do as a trustee? Do I need okay’s from my fellow board officers or other directors to take action? This seems to me to be a simple managerial task but no one is willing to undertake it. I would appreciate any legal advice you might offer—or maybe just some plain common sense.
A “Several issues are evident here, the most glaring being the managing agent's response that collecting tenant's arrears is not his responsibility,” according to Stewart E. Wurtzel, a partner with the Manhattan-based law firm of Tane Waterman & Wurtzel, P.C.
“Collection of rents and management of arrears is probably management's primary responsibility. The failure of the manager to attend to this matter allowed this unit owner’s arrears to build to an unsatisfactory level, and may even constitute a breach of the management contract or the agent’s fiduciary responsibility to the association.
“As a trustee, you are probably not authorized to direct commencement of the action against the defaulting unit owner without approval from either the president or a majority of the board of trustees. The president has the actual and apparent authority to direct commencement of litigation on his/her own, but an individual trustee does not have that power. Clearly, a majority of the board can direct commencement of legal action.
“The reluctance to take legal action against the resident in order to give the defaulting owner an opportunity to make things right is a very common mistake made by many boards. Often, trustees hesitate to commence a non-payment proceeding against a unit owner fear that their treatment will be deemed harsh or punitive to the resident or make it impossible for him or her to remedy the default. The board, however, has the fiduciary obligation to the association as a whole to collect all monies owed to the building. The mere commencement of a non-payment proceeding does not preclude the association from entering into a mutually beneficial payment arrangement with the defaulting resident.”