Sunday, June 3, 2007

When It's Time to Pay the Piper

New York Times
June 3, 2007

ASSESSMENTS come in all sizes, none of them custom-tailored. Though apartment owners in straitened financial circumstances or on fixed incomes may be tempted to throw themselves on the mercy of the board, they shouldn't expect much.

"If the board wants to voluntarily allow nonpayers to slide, they can do so," said Aaron Shmulewitz, a real estate lawyer at Belkin Burden Wenig & Goldman, a Manhattan firm that represents more than 250 co-op and condo boards in New York City.

A board can allow the amount owed "to sit on that person's account, accruing interest or late charges, until the person sells or wants to refinance," he said. "But in the vast majority of cases, boards don't."

In the worst-case situation, a co-op has the right to begin an eviction proceeding. (In a condo, it's a foreclosure proceeding.)

Of course, most boards recognize in advance the need for some breathing room and stretch payments over several months or, in a major assessment, for years to reduce the sting. Owners are usually also granted the option of paying promptly in a lump sum, at a slight discount.

Another option for those who have built up enough equity in their apartments is to refinance their mortgages or to take out a home-equity loan. Many co-ops have relaxed their attitudes toward these loans in recent years at the same time that more banks, for a variety of reasons, have become more willing to make them.

"It's not as hard as you think, not anymore, because boards know there's a lot of equity in the apartments," said Andrew Hood, a vice president of NCB, a national bank that lends to co-op owners. "Co-ops aren't just the old 'Fifth Avenue pay cash or don't live here' variety."

NCB started making home-equity loans to co-op owners in late 2004 and has found the demand for them has grown an average of 21 percent each quarter since. Its rates on variable-rate home-equity loans for co-ops currently begin at 7.25 percent.

Finally, if the assessment is for the sort of property damage or liability covered by an individual homeowner's insurance policy — fires, vandalism or a slip-and-fall lawsuit, for example — owners may be able to recover part or all of the assessment through their insurers. Blue-chip insurers tend to have generous limits built into their policies — Chubb, for example, will pay up to $100,000 — but a loss assessment rider can be added inexpensively to other policies.

"We tend to recommend $10,000 to $25,000, at about $100 per year, but not everybody takes it," said Blaine Ward, a sales associate at the Doyle Partnership, a property and casualty insurance brokerage in Westport, Conn., that insures many Manhattan co-ops and condos.

Some owners count it among the best investments they ever made. TERI KARUSH ROGERS

No comments: