Was Board Entitled to Appointment of a Receiver?

A lien may be placed on a condominium unit if the owner fails to pay common charges. And, as a recent case illustrates, the Board may be entitled to the appointment of a receiver in an action to foreclose the lien.

The Board of Managers of the Residences at Worldwide Plaza Condominium filed an action to foreclose on a lien for unpaid common charges on residential condominium unit 2Y at 393 West 49th Street, owned by Lourdes Villegas.

Pursuant to Section 6.7 of the condominium’s by-laws, in any action to foreclose on a lien for unpaid common charges, “the Unit Owner shall be required to pay a reasonable rental for the use and occupancy of his Unit and the plaintiff in such foreclosure action shall be entitled to the appointment, without notice, of a receiver to collect the same.”

The Board asked the Court, pursuant to RPL §339-aa, to appoint a temporary receiver of the unit and set a reasonable rent for the receiver to collect. Villegas opposed the motion.

Under Real Property Law RPL §339-aa, the appointment of a receiver and the collection of rent in the event of a default on common charges is proper where authorized under the by-laws. Nevertheless, as an exercise of its equitable power, the Court retained the discretion to deny the appointment of a receiver.

In this case, it was undisputed that the condominium’s by-laws provided that the Board may apply for the appointment of a receiver regardless of the adequacy of the property as security. Villegas had not paid common charges in four years and had defaulted on the payment of a mortgage on the unit. And the Board alleged that Villegas’ default in payment of common charges had caused the condominium to incur a shortfall in income that the other residential unit owners had unfairly borne.

Villegas did not demonstrate that denial of the appointment of a receiver was an appropriate exercise of the Court’s discretion. As such, the Board established its entitlement to the appointment of a receiver of the unit. And also demonstrated that a reasonable rent for the apartment was $2,500.00 per month.

Accordingly, the Court appointed a Temporary Receiver who was granted with the usual powers and directions of a Temporary Receiver for the benefit of the Board of all the rents and profits then due and unpaid or becoming due during the pendency of the action; authorized the Temporary Receiver to take charge and, if necessary, enter into possession of the apartment; and directed Villegas or any other occupant of the premises to pay to the Temporary Receiver the sum of $2,500.00 per month commencing December 1, 2021 and on the first of every month thereafter.