A Co-op Forgot to Send the Storage Bill — for Eight Years. Must the Resident Pay?
Balancing the rights of one shareholder against the co-op collective can be tricky when a big clerical error is made.
Q: I am the president of the board of a tight-knit, 15-unit co-op in Manhattan where residents feel like extended family. We recently discovered that one of our shareholders hasn’t ever been charged for his storage space, which costs $40 a month. His eight years of missed fees add up to about $3,800. Board members are divided about how to proceed: Some think we should bill him for the whole amount; others think we should split it with him; and others think that he isn’t liable since it was the building’s error. Ethics aside, what are our legal responsibilities?
A: A co-op board has a responsibility to protect the financial interests of the entire corporation, not just the interests of one shareholder who did not pay for storage space for eight years. Collecting money that is owed would not undermine the familial nature of the community. Rather, it would uphold the idea that everyone in the building should pay what they owe — no one is above the rules.
The shareholder is liable for up to six years of unpaid storage fees because of the statute of limitations, according to Peter R. Massa, a real estate lawyer and a partner at the Manhattan law firm Gallet Dreyer & Berkey.
In situations like this one, where no bill was ever sent, boards often waive any interest or late-payment fees. Someone on the board should explain to the shareholder what happened and, if necessary, propose a payment plan to ease the burden of a large one-time sum.
The shareholder could fight the charges in court, but the board would have a good case. “If everyone else is being charged, the shareholder should have known better,” Mr. Massa said.
Take this misstep as an opportunity to review the building’s billing procedures. What went wrong? How did no one notice the oversight?
Make sure no other income has been lost over the years and prevent such an incident from happening again.