Late Payment of Common Charge Fees by Delinquent Unit Owner Deemed to Be an Admission of Liability: Condo Board Entitled to Recover Late Fees and Legal Fees

Landlords and condominium boards frequently have to sue tenants and unit owners who fail to pay their rent or common charges in a timely manner.  This is an unfortunate fact of life in the real estate world.  In these situations, courts have typically been very stingy when awarding late fees or legal fees to the landlord or condominium board even though the language in the lease or by-laws the lawsuit is predicated upon requires the delinquent tenant or unit owner to pay late fees and reimburse the landlord or condominium board for the legal fees incurred commencing and adjudicating the lawsuit.

In these types of lawsuits, the delinquent tenant or unit owner often pays all base rent or common charges owed just prior to eviction or foreclosure, and then the presiding judge typically strongly encourages the parties to settle and asks the landlord or condominium board to waive late fees and to accept less than half the legal fees owed.  In these situations, if the landlord or condominium board refuses to settle, the judge may end up awarding much less than half of the late fees and legal fees.  This is not a fair result for the landlord or condominium board because it basically results in an interest free loan to the delinquent tenant or unit owner and encourages untimely payment and litigation.

In 2016 (technically December 15, 2015), this office won an appeal that appears to be a game changing decision for condominium boards dealing with this issue.  (Sorry, the decision only applies to condominiums boards not landlords.)  In the case Board of Managers of One Strivers Row Condominium v. Giwa, 134 A.D.3d 514 (1st Dept. 2016), the Appellate Division, First Department ruled that payment of common charges by a delinquent unit owner after a condominium board has commenced legal action against such owner is an admission of liability, which entitles the condominium board to collect late fees and legal fees under such circumstances.  Specifically, the court determined that $42,037.32 in late fees and legal fees was “supported by the record and is not unreasonable.”  This is a departure from prior case law where typically courts have only awarded a clear winner legal fees at the bitter end of a knock-down, drag-out lawsuit.  In the Board of Managers of One Strivers Row Condominium case, the appellate court is stating clearly that the fact that the condominium board even had to commence litigation to collect payment was a sufficient basis to entitle the condominium board to the recovery of late fees and legal fees.

In sum, the new precedent established by this appellate court decision should save condominium boards and their associations thousands of dollars by forcing unit owners to pay on time or suffer the consequences of having to pay the condominium board late fees and legal fees if a lawsuit is commenced.  If a lower court tries to force settlement on these items, there is now a binding appellant precedent, which holds that these items must be paid by the delinquent owner.

 

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Payment Required to Enter Your Neighbor’s Property: New Case Law Precedent Established

More and more buildings are added to New York’s skyline each year.  Frequently, it is impossible for a new construction project or building-wide gut rehabilitation to be completed without the owner who is performing the construction entering upon an adjoining owner’s property.  New York has had a statute in effect since 1968, which addresses the situation where adjoining owners cannot amicably arrange construction access: New York Real Property Actions and Proceedings Law §881 (hereafter referred to as “RPAPL §881”).  A recent appellate court decision has interpreted RPAPL §881 broadly to require the encroaching owner who seeks access to pay fees to the owner of the encroached upon property, even though the statute makes no mention of fee reimbursement.

The original purpose of RPAPL §881 was to provide a legal basis for an owner who could not obtain consensual access to an adjoining owner’s property for the purpose of making improvements or repairs on his or her own property to obtain court ordered access.  The statue provides a specific mechanism for filing a lawsuit and authorizes the courts to grant an access license to the encroaching owner “in an appropriate case upon such terms as justice requires.”  Although the statute is silent on the issue of whether the encroaching owner should have to reimburse the burdened owner for fees incurred as a result of the encroachment, the Appellate Division, First Department recently awarded both license fees and attorneys’ fees to an owner that was sued and compelled to provide an access license to its property during its adjoining neighbor’s construction project.

Are You Kidding Me?! I Have to Pay My Neighbor’s Fees?!

Although some lower court decisions granted license fees and attorneys’ fees to encroached upon property owners, there was no appellate authority awarding such fees until April 2016.  In the case DDG Warren LLC v. Assouline Ritz 1, LLC, 138 A.D.3d 539 (1st Dept. 2016), the Court awarded license fees and attorneys’ fees to the encroached upon property owner because the access license would “substantially interfere with the use and enjoyment” of the property, thus decreasing its value during the adjoining owner’s construction.  The Court also stated that “[e]quity requires that the owner compelled to grant access shall not have to bear any costs resulting from the access.”

Each access case is very fact specific, so although the decision in the DDG Warren LLC case creates a new appellate precedent regarding payment of license fees and legal fees, the real take away from the DDG Warren LLC case is that courts have broad powers to impose license access terms between adjoining property owners.  If you need access to your neighbor’s property, you should try to work out reasonable voluntary access agreement terms before you sue your neighbor under RPAPL §881 because you may not like the terms and fees imposed by a court.  And on the flip-side, if your adjoining neighbor requests access to your property, do not expect him or her to write you a blank check.  In sum, try to cooperate with your neighbors—the shoe usually ends up on the other foot over time.

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