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With Assessments Looming, Will Residents Push Back?

The coronavirus pandemic is squeezing co-op and condo finances from numerous angles. With apartment sales slumping, revenue from flip taxes has largely dried up. With many businesses completely or partially closed, rental income from commercial tenants is spotty. And with countless shareholders and unit-owners suddenly unemployed, their ability to pay monthly maintenance and common charges is beginning to come into doubt.

As a result, some boards are considering imposing assessments – traditionally a method of paying for an unforeseen capital project, but now increasingly seen as a way to overcome temporary income shortfalls and keep the budget balanced. But what if residents push back?

“The most important thing a board can do when faced with a major expense is to keep the unit-owners or shareholders informed,” Bonnie Reid Berkow, a founding partner at the law firm Wagner, Berkow & Brandt, tells Brick Underground. If shareholders or unit-owners know why a major expense is required and understand how the board has come to its decision, she adds, they are more likely to accept it. If a sufficient number of people are concerned or opposed to the assessment, the board might consider calling a special meeting to explain the income shortfall that made it necessary.

But first things first: a board should check the bylaws to make sure it has the power to impose this type of assessment. “Generally,” Berkow says, “the board has the authority to impose an assessment on apartment owners to pay for necessary building expenses, and its business judgment will not be reviewed by a court.”

One way to soften the sting of an assessment is to offer payment options. Sometimes the board will provide the option of paying the assessment in one lump sum or allowing payment to be made over a number of months, with a small discount if paid in a lump sum. This lightens the financial burden on people who may have less financial resources or are on a fixed income. Boards need to remember that all residents do not have bottomless pockets. It is generally helpful to conduct a survey to know in advance how many people would be interested in paying upfront in one lump sum.

Berkow stresses the importance of a board operating on firm legal ground: “A lawsuit to challenge an assessment imposed by the board will not likely be successful unless the board did not have the authority under the bylaws.”

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