Dealing with delinquencies in recessionary times.

In the current economic environment, delinquent accounts abound. Trying to collect maintenance payments from residents, although part and parcel of a property manager's job, has become increasingly more difficult during these recessionary times. In the properties throughout the City, non-payments have consistently risen in the past three years in buildings which range from middle class to luxury. With the unemployment rate still high, there seems to be no end in sight to the dilemma of dealing with increasing delinquencies.

At AKAM, we have set policies in place which nearly always achieve the objective of collecting payments in arrears and minimizing expenses to the properties. Our credo in the Collection Department is: communication, immediate action, and consistency.

Communication: It's paramount that when a resident falls behind in payments, that he or she be contacted immediately. if a reminder letter is not answered, the manager should telephone or stop by for a visit. If no payment is forthcoming by the 11th of the month following the due date, the resident should be alerted that the matter has been sent for legal review. The most important aspect of this whole process is communication with t4t resident. Over 80 percent of our resident pay their maintenance after the first phone call or visit. They might have been disgruntled about a repair that we were unaware of and so withheld maintenance to get our attention. We talk to these residents, uncover the reason for their dissatisfaction, and respond accordingly. In incidences where the resident is truly having a financial problem, we are willing to structure payment plans. In all cases, we make every attempt to open up the lines of communication with our residents in order to resolve whatever is causing the delinquency.

Immediate Action: We are rigid with our collection schedule. We are serious about getting lawyers involved by the 11th of the month following the due date. If we are not able to resolve arrears situations directly with the tenant, we immediately send the file to our attorneys, since it takes approximately 6-10 weeks to get on the Court Calendar. If we start proceedings after two months, the cases won't come before the Court for another 6-10 weeks, Naturally, settling out of Court is preferable since residents, though responsible for Court fees, rarely end up paying them. Also, typically, New York judges are unlikely to evict co-op and/or condo owners for non-payment of maintenance. But our policy at AKAM is to take immediate action in these situations. It's unfair to the other shareholders when delinquencies are allowed to linger, so we work closely with Boards to institute strict collection policies.

Consistency: Finally, we are consistent in implementing our policies. If we make exceptions in payment policies for one resident, we set a precedent for all the others. Not paying what you owe for the privilege of residing in your home is akin to non-payment of phone bills, electricity, etc. - the penalty is that those services are discontinued. Similarly, the penalty for payments in arrears could result, in extreme cases, in no longer being able to reside in the unit. While we make every effort to work with our residents and assist their financial difficulties, our commitment is to the co-op and condo Boards who represent all the shareholders in the building. Collectively, they are the ones who ultimately bear the burden of delinquent accounts.

Collection is an unpleasant business, but it is business. And there are tricks to the trade which we implement in order to do our job more efficiently. When we alert unit owners in arrears through correspondence, we always copy the bank holding their mortgage. It's embarrassing to know that the bank is aware of your non-payment and, of course, it raises a red flag at the bank which could ultimately jeopardize your mortgage.

These are difficult times and the recession has left no one unscathed. But collection is an integral part of property management and after ten years in the business, we have learned to stand by our policies and procedures when it comes to dealing with delinquent accounts.