When a resident in a shared interest community like a condo, HOA, or co-op consistently fails to hold up their end of the agreements that make multifamily living work, what’s a board to do? Whether the issue is financial or behavioral, if every other effort to correct the situation has failed, can a board vote a persistently problematic resident ‘off the island,’ so to speak? 

The short answer is…maybe, depending on the nature of the dysfunction, the state in which it’s happening, and the rules and bylaws of the community itself—and it’s almost always easier said than done. 

Classifying the Problem

Generally, when the board of a co-op, condominium, or HOA is faced with a member or shareholder who is causing damage or discord, the issue falls into one of two categories: either failure to pay their fees, or failure to abide by the rules and regulations that govern their building or association. Both are serious issues for the community as a whole, and must be addressed as soon as the board is made aware of them.  

A resident failing to meet their financial obligations affects every other member or shareholder, because responsibility for the cost of operating, maintaining, and repairing the property is shared by all members. Arrears can quickly become a burden on everyone else. After all, the utility companies, vendors, and service providers hired or contracted by the community expect to be paid for their work, regardless of whether Mr. Smith in unit 5F pays his common charges or not. 

By the same token, refusal to comply with the social rules of the community also infringes on the right of fellow residents to peacefully enjoy their homes. Ongoing violations of rules around noise, guests, and general conduct can be as corrosive as unpaid bills, and warrant just as much concern from boards.

As fiduciaries, boards are legally mandated to enforce the governing documents of their community, so letting arrears or unacceptable behavior slide for any reason isn’t an option, says. “Unfortunately, boards are forced to deal with the inevitable. How each contends with it differs sharply based on whether it’s occurring in a cooperative corporation or a condominium association. But make no mistake about it, as fiduciaries, they must deal with it.”

Failure to Meet Financial Obligations

One reason for attempting to remove an owner or shareholder is failure to meet their financial obligations to the condo or co-op. Boards draft an annual budget to cover the cost of running the property day-to-day—everything from custodial fees to garbage disposal to periodic mandatory inspections—and depend on each member’s monthly contribution to meet that budget, pay for those necessities, and remain in good financial health overall. Condominium associations, HOAs, and co-op corporations are not-for-profit entities, so when one or more residents don’t pay their share, the financial margins can quickly shrink to nothing, or even go into the red. That leaves the entire community in the lurch when bills come due, and that’s a big problem for everyone.

Condo vs. Co-op

The pathway to dealing with non-payment can differ a bit between states, but is firmly rooted in general legal principals governing foreclosures and related financial recovery methods.  

First of all, it’s important to use the correct terms. A co-op resident can be evicted in the usual sense of the word because co-op residents are shareholders—not owners—and as such hold a proprietary lease, rather than a deed. In a co-op, an eviction is achieved through the termination of the shareholder’s proprietary lease. By contrast, condos are real property, and condo owners can’t be ‘evicted’ from their unit as one might evict a nonpaying renter or shareholder under a lease agreement, says David Stern, an attorney with Las Vegas and Los Angeles-based firm Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP. 

“It’s an unfortunately all too common misconception that an HOA in Nevada has the ability to evict an owner or resident,” he says. “Nevada HOAs do not have the authority to do that. HOAs in Nevada are limited to the authority bestowed on them under Chapter 116 of the Nevada Revised Statutes, the related administrative codes, and the particular HOA’s governing documents. There is no basis in any of those bodies of law that would allow an HOA to ’evict’ an owner, for any reason. It’s not like a typical landlord/renter situation.”

That being said, Stern continues, “The enforcement mechanisms available to an HOA are set forth under NRS 116 and are generally limited to imposing reasonable fines, restricting access to common areas for a reasonable amount of time, and restricting an owner’s voting rights for a reasonable amount of time.”

When It’s Not About Money

Boards are also sometimes faced with members whose behavior is the problem, rather than their failure to pay their bills. It may be their disregard for house rules, severe, ongoing interpersonal conflicts, or chronic litigiousness, to name a few of the more common issues. What are a board’s options in these situations? 

“Whether the HOA community is single family residences or condominiums, it still has the same limitations set forth under NRS 116,” notes Stern. “That is to say that if an owner or resident has committed some act that is in violation of the HOA’s governing documents, the HOA has to follow the same procedures, which typically include calling the owner to a hearing and then determining whether a sanction is appropriate. Any such sanction will be limited by the authority bestowed on the HOA under NRS 116 and the HOA’s governing documents, which again includes restricting access to common areas and voting rights and imposing a reasonable fine. If the behavior constitutes a health, safety, and welfare violation, as defined by statute, more significant fines may be permitted. If the conduct in question violates local laws, a board will typically have to seek aid from local law enforcement.”

Just how limited condo and HOA boards are when it comes to even truly egregious violations can be illustrated with what Stern calls an “extreme hypothetical.” 

“Imagine there is a homeowner named Reggie who purchased a single-family residence within a Nevada HOA,” he says. “Reggie gets into a dispute with his neighbor Mark, and then later confronts Mark in the HOA’s common area clubhouse. The confrontation gets heated, and Reggie brandishes a firearm and opens fire at Mark. Even under those extreme facts, the HOA cannot evict Reggie from his home. What the HOA can do in this situation is one, call local law enforcement; two, issue a violation notice and call Reggie to a hearing based on a health, safety, welfare violation; and three, following the hearing, the board can impose sanctions on Reggie that likely include restricting his access to the common area club house, restricting his voting rights, and impose a fine that is commensurate with the aberrant conduct.”

Now, “Suppose the board imposes a $5000 fine against Reggie and Reggie refuses to pay the fine,” Stern continues. “The board can send Reggie’s account into collections and, ultimately, if Reggie does not pay the fine, the collections company acting on behalf of the HOA can start the process for a non-judicial foreclosure. However, even if the HOA takes all of those steps, if Reggie pays the amount of the fine (and any applicable fees associated with it), it will halt the foreclosure process and Reggie will keep his home.” 

The Co-op Side

In a co-op, according to New York City-based attorney Stuart Saft, “While not a common practice, objectionable conduct on the part of the shareholder or other residents in the apartment provides the board with the basis for terminating the shareholder’s shares and evicting them from the building.”

What qualifies as objectionable in the legal sense can range from more mundane quality of life issues like excessive, ongoing noise or smoking odors to verbal or even physical abuse of staff and neighbors. 

Mark Hakim, a partner with New York-based law firm Schwartz Sladkus Reich Greenberg & Atlas notes that the right of co-op boards to terminate proprietary leases for objectionable conduct is the result of the landmark 2003 decision in 40 West 67th Street v. Pullman—often referred to as ‘the Pullman case’ or simply ‘Pullman,’—“In which a court held that a NYC shareholder had been so disruptive, and his actions so persistent, pervasive and objectionable that the court permitted the board to terminate his proprietary lease and evict him from the building. As a result, boards have used that case, which remains good law, as a basis to go after disruptive shareholders who violate the provisions of the lease.” 

Of course, a board can’t just give a shareholder a pink slip and tell them to get out. In some cases, a co-op’s governing documents may stipulate that a vote by all shareholders is required to terminate a proprietary lease; in others, the board may act unilaterally to put the process in motion. Hakim is quick to note that regardless, “These types of actions are neither quick nor cheap. They take time, patience and good record keeping to commence, maintain and prevail.” 

After a co-op board makes the decision to commence eviction proceedings against a shareholder, according to Saft, the corporation may commence an action in Housing Court to obtain possession of the apartment. After gaining custody of the unit, the cooperative may then auction off the shares and lease, and reimburse itself for its fees and other related expenses owed to the corporation. “In addition, the corporation would also give the balance to any bank holding a mortgage on the apartment, with the remaining capital going to [the evicted shareholder].”

For condos and HOAs, which represent the vast majority of multifamily residential communities in Nevada, Stern repeats that again, “Removal is not ever an option. An HOA simply does not have the legal authority to remove an owner from his or her property—at least not in Nevada. People need to stop viewing HOAs as a separate entity that is like a local government. In Nevada, an HOA’s board of directors consists of a group of volunteer homeowners within the HOA community. They are not paid and they do not have the authority to act as law enforcement agencies. They are there to represent, to the best of their ability, the common goals and needs of the community.”

Do it By the Book

In the end, whether a resident is a co-op shareholder or a member of a condo association or HOA, removing them is a long, costly, frequently acrimonious process for everyone involved, even when the situation is cut-and-dry in legal and financial terms. Documenting the problem thoroughly, working with qualified counsel, and understanding the extent and limits of your own governing documents are all key to resolving one of the tougher situations your board may have to navigate. 

A J Sidransky is a staff writer/reporter for CooperatorNews, and a published novelist. He may be contacted at alan@yrinc.com.