SOLUTION: A 6 Step Plan For Collecting Arrears

Communication is everything when it comes to collecting arrears. Something as simple as getting on the phone with the resident to ask them if they  are having a hardship of some sort, and then  working out a payment program, can make a world of difference. There are 5 steps to collecting unpaid maintenance fees and common charges effectively:

1)      Notification: The sooner you take action, the better. If maintenance fees are not paid within 60 days, your managing agent should immediately mail a 5-day delinquency notice informing residents of their unpaid maintenance fees, common charges or rent. It should remind residents to either pay immediately or contact the managing agent’s collection department to avoid the following steps listed below. If contact or payments are not made within several days of the notice, the manager must call, email or meet with the resident to get a better understanding of the problem and set up a mutually agreeable payment plan. The managing agent should also give the Board of Directors/Managers a monthly arrears report to keep a closer eye on the uncollected debt.

2)      Warning and Forfeiting Privileges: In many cases, assigned parking is a privilege, even if the resident is paying for their parking space. Residents in arrears should be notified that they are in jeopardy of losing their parking space, or that they will lose access to other amenities that property has to offer. This action will typically result in the resident, at the very least, agreeing to a payment plan to pay back maintenance fees/common charges.

3)      A More Aggressive Collection Approach: If fees are still not paid, non-contractual maintenance services that are not required by the Department of Buildings/Code Enforcement should be withheld. It is necessary that the property manager communicate to the superintendent that residents in arrears should not be provided these non-contractual services. Once the resident has made contact the manager can then set up a payment plan before services are restored.

4)      Late Fee Policy: If a late fee policy is not in place, the managing agent should encourage the Board to create a policy whereby a late fee is placed on the resident’s account when payment is not received by a set date.

5)      Collection Attorney:  If after all attempts have been made and payments have not been collected, the account should be turned over to a Collection Attorney who specializes in collection of common charges and maintenance for coop and condominiums. Very often the attorney will ask the judge for legal fees, so there are no out-of-pocket expenses to the property owner.

Unpaid maintenance fees or common charges hurt everybody. Now, more than ever, a clear set of rules should be put into place so those in arrears are aware of the consequences.

6)      Rent Abandoned Condos To Collect Back Arrears: Abandoned condos are left with a large amount of arrears that accumulate month after month. In the meantime, Sterling starts the legal process so it can be rented until all the monthly common charges/arrears have been paid in full.

Real Property Law permits a receiver to be appointed for the purpose of leasing a vacant apartment and collect rent to apply to ongoing common charges. This is a huge advantage for condominiums so they do not carry the debt of empty apartments that have been left vacant.

When Sterling observes that a condo unit has been abandoned, we immediately go to an attorney, who seeks out a judge for that particular borough. The judge will appoint a receiver. Along with the receiver, the managing agent will make arrangements to rent the apartment to a prospective tenant for short term leasing, whether 6 months or a year at a time.

This is a secret that no other management team knows about – and it was all started with us!
Many years ago, Sterling Management, started testing this solution at Parkchester Condominium – the largest condominium in the United States. They were successful in bringing in over $600,000 in uncollected common charges during their tenure at Parkchester. This strategy continues to be very successful here at Sterling for the many clients we work with.