Individual Rights in a Co-op

I own in a small walk-up with about 8 owners.  A couple of owners have been late and delinquent in their monthly maintenance, making the bulding’s overhead mortgage late and underpaid. Now we owe a substantial sum in late fees and interest.  The bank is threatening foreclosure.  I have paid on time, even extra, and in full every month that I’ve owned.  Do I have any rights as an individual owner in case the bank does foreclose on the entire building?  Thank you!

hpk4871

in Co-Op Related 12 years and 8 months ago

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hpk4871 | 12 years and 8 months ago

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Yes, we are self-managed.  Your thoughtful and informed answers are much appreciated, thank you Brownstoner community!

brokelin | 12 years and 8 months ago

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Meaning, in buildings of this size, there is often not much distinction between who is elected to the board, or not. Where a larger coop would have board meeings, meetings in small coops, and decision making, is often and open to all who own there – it just makes sense in small buildings, where everybody has to pitch in to maintain the place.  If the original poster is not on the board, they need to get involved to get the situation fixed.

brokelin | 12 years and 8 months ago

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I was assuming the coop was self-managed, as most, if not all, 8 unit ones are. Original poster needs to work with the board members, and other paying members, on this, rather than asking about individual rights – it isn’t about individual rights, a coop is a corporation – in this size, usually run more like a collective.

curiositykilledthecat | 12 years and 8 months ago

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You haven’t indicated either way, but if your coop employs a management agency, this is exactly what you are paying them for.  They should know the law, your by-laws, and should be on top of taking action on the non-paying owners.  Good luck.

brokelin | 12 years and 8 months ago

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You other owners would be wise not to let the bank foreclose on the underlying mortgage.  I think you would be wisest to pony up the extra money needed to stay current on your mortgage – perhaps by raising the maintenance across the board for everybody, even if only some of you are paying – because everybody will owe it eventually (assuming there is enough money to go around after foreclosure or other sale of apartments of owners who don’t pay up happens.)  You can always lower it again later if stuff eventually gets straightened out.  Hopefully, those paying are the responsible parties elected to the board, which makes the decisions about raising maintenance.  I would think you would have wanted to do this before you got to the place where you weren’t paying your underlying mortgage in full and on time.  You as an individual don’t have rights, but the board has rights.  Definitely check with your building’s attorney about what to do about the owners who are not paying…and safeguarding the coop’s rights in the event of foreclosure by individual owners’ lenders.  There is no reason the rest of you should suffer through foreclosure of the building’s underlying mortgage, and you can likely prevent if you act quickly.  Ask your attorney exactly what happens if the coop’s lender forecloses on the coop’s mortgage. You might also see, if you can raise the funds immediately through an assessment (from those who are paying) if the bank will accept a lower lump sum to get its interest and late fees paid off.  You might want to assess enough to pay off the bank, and also raise maintenance sufficiently to be able to keep the mortgage payments up in the future with what you collect from those who are paying, while taking action against the non-payers.

fillmanmike | 12 years and 8 months ago

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Have the coop contact them and take action.

cm | 12 years and 8 months ago

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One other thing, assuming the non payers have mortgages on their units, the coop would have signed a recognition agreement with their respective lenders where the coop agreed to notify them if they don’t pay their maintenance. Iif the coop does so the individual lenders will act to protect their interests by going after the individual borrowers.

cm | 12 years and 8 months ago

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Unfortunately not. You’re going to have to assess for the late fees and interest amongst the paying members. The coop can then bring an action against the non-payers to terminate their proprietary leases if they don’t pay up.