Non-Payment for Amenities

Q “We have an owner in our condominium association who is several months behind in his fees. He currently has a tenant in his unit. The association pays the bill for his water, sewage, pool and other amenities. Do we as an association have the right to take any of these amenities away from the renter, and would it be possible to have the renter pay his monthly rent to the association until the delinquency is resolved?”

—Concerned about Collections

A “This is not a unique problem in condominium and other common interest communities, especially in distressed economic times when investor owners are more concerned with their own cash flow than that of the association,” explains attorney Wendell A. Smith, with the New Jersey-based law firm Greenbaum, Rowe, Smith & Davis LLP.

“Most “state-of-the-art” governing documents contain leasing restrictions which authorize a tenant to pay rent directly to the association to the extent that common expenses and other charges are due and payable to the association with respect to the rental unit. In addition, all leases are normally required to be in writing and must incorporate a lease rider provided by the association that will include a collateral assignment of rent payments to the association in the event of the unit owner’s default in the payment of common expenses.

“Another remedy available to the association under these circumstances which can be set forth in the governing documents and/or the lease rider is the right to suspend the tenant’s right to use the common recreational amenities such as the pool, parking privileges and certain services that may exist in luxury communities, such as a concierge or valet parking. This right would not extend, however, to the suspension of basic services affecting the habitability of the dwelling unit such as water, sewer, other utilities, snow clearing, or garbage and trash collection. Clearly, the suspension of any non-essential services for common expense delinquencies should incentivize the tenant to pay its rent directly to the association pursuant to the applicable provisions of the governing documents and/or the lease rider.

“In summary, your association should be encouraged after consultation with counsel to implement the collateral assignment of rent and suspension provisions in their governing documents and/or in a lease rider.”