New York Real Estate Lawyers Blog
Although they are not as prevalent in New York State as they are in other states, Homeowners’ Associations still exist here, and may raise significant legal issues for those who are members, as well as for the Association itself.
The main reason that there are not as many Homeowners’ Associations in New York is probably because of the large number of condominiums and cooperative units in our state, especially in the New York City area. Condos and coops are legal associations which connect owners of various units, usually apartments. In a cooperative, each unit owner purchases shares in the cooperative corporation, rather than actual real estate. The coop unit owner also acquires a proprietary lease allowing occupancy of a particular apartment. A condominium operates similarly, but owners in a condominium purchase the actual real estate, rather than shares, and own their individual units, as well as a portion of the common areas.
A Homeowners’ Association operates similarly, but has differences from a condo or coop. Each homeowner owns his individual real estate, which can be an apartment or, more commonly, a house. Membership in an Association is generally mandated by the Declaration filed for the development in question and referenced in the deed to the property. The Association is a separate legal entity, and is authorized by its by-laws to collect dues. These dues are then used by the Association to pay common charges associated with the properties, such as water and sewer charges and maintenances charges such as landscaping and gardening, pool maintenance, and similar expenses associated with the group of properties which constitute membership in the Association.
Legal issues may arise when a member of the Association fails to pay the dues to the Association, and the Association must raise funds to pay the expenses outlined above. When this occurs, experienced counsel should be consulted to review the corporate by-laws and rules of the Association. This will provide a “road map” of how to collect dues from a defaulting member.
The first step is usually sending a demand letter to the member, outlining the amount(s) due, and setting a date by which the dues should be paid. If the member continues to fail to pay, then the Association usually has the legal right to file a lien against the member’s property. The lien is filed in the County Clerk’s Office of the County in which the property is located, and should detail the amount(s) due to the Association. This lien will prevent the defaulting member from selling her property without having the past due amounts paid in full.
If the member fails to pay, and does not sell his property after a lien is filed, then the Association has the legal right to file a foreclosure lawsuit against the owner. The foreclosure lawsuit would seek a Court order allowing the property to be sold at public auction, with the sales proceeds used to pay off the amount of the lien. Such an action would also name as defendants any other entities which may have potential liens, such as an institutional lender who holds a mortgage on the premises.
Of course, the sales price may greatly exceed the amount due to the Association, resulting in a surplus fund situation. Therefore, a foreclosure sale is generally used as a last resort, and the homeowner can settle the foreclosure proceeding prior to sale by paying the past due amount(s), along with the costs and attorneys’ fees of the Association.
Our firm represents Homeowners’ Associations, and welcomes all inquires relating to such Associations.