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Who’s to Blame for a Building’s Financial Struggle?

Real Property

Finding who to blame is not always so simple. The condo owner blames the board, the board blames the management, and the management blames the city. Whose responsibility is it if the condo starts to have financial struggles? Of course it is always based on a case by case basis, but usually when there is physical damage involved, it is the responsibility of the property manager. To avoid having to substantially increase the assessment costs on the unit owners, the property manager must try to secure loans.

In the case of a major oil spill from a tank on a property in North Jersey, it came down to a disastrous situation in which the property manager could not secure a loan to pay for the clean-up. “While all this was going on, most of the 35 unit owners were still living on the property – but eight owners simply walked away from their homes. Another six stayed on the property, but refused to pay maintenance fees.”[1] Homeowners have a lot power when it comes to paying maintenance fees or not. If management companies continually fail to address complaints from the owners, the owners can take matters into their own hands. When the owners stop paying their maintenance fees, they also stop paying the taxes, too. This becomes a huge financial burden, which quickly puts the building in financial distress. Joseph Balzamo, President of Alliance Property Management, says:

“When residents – for whatever reason – stop paying their monthly fees, “You have two choices,” says Balzamo. “You could try taking them to court, but collecting the fees is very difficult. The courts will tell you that the other homeowners have to make up the difference. Instead, what the manager should try to do is legally push the homeowners out…”[2]

The property management team must try every solution before the situation ends up in court. New York is a judicial foreclosure state, which means that owners can live in their condo for years before their home is foreclosed. This becomes a tough issue for the management company, as they cannot just lock out the unit owner. Homeowners end up not paying maintenance fees, yet expect the management company to provide essential services. “In addition, if a management company fails to provide those essential services to residents – even non-paying ones – the company can be fined.”[3] This makes it essential for the board and management team to make sure that they are upfront and honest with their homeowners when it comes to making decisions that will affect the property.

[1]Iannucci, L. (2018, April). Managing Distressed Properties. Retrieved from The Cooperator: Accessed on Sept. 27, 2018.

[2] Ib.

[3] Ib.

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