When unit owners in a New York condominium fail to pay their common charges, the condominium board has powerful remedies under the New York Condominium Act (Real Property Law Article 9-B). Chief among these is the ability to file and foreclose a lien against the unit, similar to a mortgage foreclosure. Understanding the process, best practices, and common hurdles is essential for boards and their managing agents.

 

1. The Statutory Framework

 

A. Creation of the Lien

Under RPL 339-z, unpaid common charges automatically constitute a lien on the unit. The lien is perfected by filing a notice of lien in the county clerk s office where the property is located.

 

B. Priority of the Lien

The condominium lien has priority over all liens except:

• Tax liens and certain governmental charges.
• First mortgages of record (though the condo lien has super-priority for common charges accruing in the six months immediately preceding foreclosure by the first mortgagee).

This limited super-priority is often a point of contention between lenders and condo boards.

 

C. Enforcement by Foreclosure

Once filed, the lien may be foreclosed through a judicial foreclosure action under Article 13 of the Real Property Actions and Proceedings Law (RPAPL), much like a mortgage foreclosure.

 

2. Best Practices for Condo Boards

 

A. Prompt Action

• Monitor arrears closely: Early intervention (e.g., reminder letters, payment plans) can resolve delinquencies before foreclosure becomes necessary.
• File liens without delay: Delay risks loss of priority to subsequent encumbrances.

 

B. Clear Policies and Documentation

• Adopt written collection policies to ensure consistency.
• Maintain accurate ledgers showing monthly charges, late fees, assessments, and interest.
• Provide timely statutory notices before filing and during litigation.

 

C. Communication with Lenders

• Notify first mortgagees of the arrears and lien filing. Some lenders may advance funds to protect their security interest.
• Coordinate with lenders during foreclosure to maximize recovery.

 

D. Consider Alternatives

• Negotiate settlements or payment plans where feasible.
• In cases of chronic nonpayment, foreclosure may be unavoidable, but sometimes a deed-in-lieu arrangement is more efficient.

 

3. Common Hurdles in Condo Lien Foreclosures

 

A. Competing Mortgage Interests

Because first mortgages typically prime condominium liens, boards often face the reality that foreclosure proceeds will be consumed by the lender. The six-month super-priority window provides some protection, but rarely covers the full arrears.

 

B. Length of the Foreclosure Process

New York foreclosure proceedings are notoriously slow. A condo foreclosure can stretch years, especially if contested. Boards must budget for litigation costs and delays.

 

C. Bankruptcy Filings

Unit owners may file for bankruptcy, triggering an automatic stay. This halts foreclosure proceedings and may require motions for relief from stay, adding complexity and expense.

 

D. Collectability After Foreclosure

Even if the unit is sold, arrears beyond the super-priority period may be uncollectible if proceeds are insufficient. Boards should weigh the cost-benefit of pursuing personal money judgments against owners.

 

E. Procedural Defenses

Owners often assert defenses such as improper notice, accounting errors, or challenges to board authority. Detailed recordkeeping and adherence to by-laws help mitigate these risks.

 

4. Practical Takeaways

• Be proactive: Early intervention reduces arrears and legal expenses.
• File liens timely: Preserve rights and priority.
• Communicate with lenders: Sometimes they will step in to protect their interest.
• Budget realistically: Foreclosures are slow and costly; boards should expect delays.
• Document everything: Accurate records are the strongest defense against procedural challenges.

 

Conclusion

Condominium lien foreclosures in New York are a critical tool for boards seeking to enforce payment obligations, but they are rarely quick or simple. By adopting strong collection practices, acting promptly, and preparing for lender and procedural hurdles, boards can maximize recovery and safeguard the financial health of the condominium community.