Controlling co-op/condo costs.It's been said that the only sure things in life are death, taxes, and - for shareholders and unit owners of co-ops and condos - an annual increase in maintenance or common charges. After all, in addition to being residential properties, co-ops and condos are also corporations. And like all corporations, coops and condos must meet certain financial obligations.
While the cost of some of these obligations are somewhat fixed, many of them, such as payroll, insurance premiums, professional fees, and fuel, typically increase with each passing year. Because co-ops and condos are communal environments in which each investing participant must bear his/her fair share of the "cost of doing business," the increases in these expenses most often manifest as increases in maintenance and common charges.
There are, however, several ways for coops and condos to keep variable costs in check, thereby reducing the levels of maintenance and common charges increases or possibly eliminating them altogether - at least for a while. Here are a few ways in which savvy, proactive co-op and condo boards can avoid too-frequent increases, head off shareholder/unit owner unrest, and simultaneously enhance their property's value and its bottom line.
Establish and Implement An Aggressive Arrears A sum of money that has not been paid or has only been paid in part at the time it is due.
A person who is "in arrears" is behind in payments due and thus has outstanding debts or liabilities. Policy
The smooth and ongoing financial operation of any co-op or condo depends almost exclusively on the timely and complete payment by shareholders and unit owners of their monthly maintenance/common charges. Failure to meet this obligation on the parts of only a few shareholders or unit owners can lead to a property's failure to meet its own obligations to vendors and contractors, its inability to initiate and/or complete major capital projects, and, in the worst case scenario
Worst Case Scenario is a reality show aired on TBS in 2002 in the U.S.. , in mortgage default, which can result in foreclosure foreclosure
Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. of the property and the loss of investment for everyone who has bought into it.
As elected representatives charged with fiduciary fiduciary (fĭd`shēĕ'rē), in law, a person who is obliged to discharge faithfully a responsibility of trust toward another. responsibility to the properly, boards are well-advised to establish an aggressive arrears policy designed to discourage late and non-payment of maintenance and common charges, and to effect timely collection. Boards of the best-run buildings clearly communicate their late payment/arrears policy to management, and then empower empower verb To encourage or provide a person with the means or information to become involved in solving his/her own problems and rely on management to implement this all-important policy as a matter of course.
Keep the Property Structurally and Mechanically Sound
An ounce of prevention is worth a pound of cure. Nowhere is this more true than with regard to the integrity of your property's physical and mechanical operations. Working in cooperation with management, boards can establish and implement an ongoing Preventive Maintenance The routine checking of hardware that is performed by a field engineer on a regularly scheduled basis. See remedial maintenance.
preventive maintenance - (PM) To bring down a machine for inspection or test purposes.
See provocative maintenance, scratch monkey. Program designed specifically to prolong pro·long
tr.v. pro·longed, pro·long·ing, pro·longs
1. To lengthen in duration; protract.
2. To lengthen in extent. the useful life of the property's structural and mechanical components.
An annual calendar of activities, such as summarizing and winterizing the boiler and beating system, and periodic maintenance of roof ventilation motors and the water tower, should be computerized computerized
adapted for analysis, storage and retrieval on a computer.
computerized axial tomography
see computed tomography. by management into a "tickler A manual or automatic system for reminding users of scheduled events or tasks. It is used in PIMs, contact management systems and scheduling and calendar systems. " system so that the management agent, board, superintendent, staff, and even residents, know exactly what is being done, and when, to keep the property functioning optimally. Such a program will go a long way in reducing capital expenditures and engendering a sense of confidence among residents by demonstrating to them how their maintenance or common charges payments are being used for the benefit of the property.
File Annual Certiorari certiorari
In law, a writ issued by a superior court for the reexamination of an action of a lower court. The writ of certiorari was originally a writ from England's Court of Queen's (King's) Bench to the judges of an inferior court; it was later expanded to include writs Appeals
Certiorari, or the act of challenging property's annual real estate tax assessment, is among the least understood ways in which a property can keep it costs down. The basis of certiorari filing is the fact that the City often makes mistakes in property valuations. Left unchallenged, these mistakes can go on forever, resulting in the overpayment o·ver·pay
v. o·ver·paid , o·ver·pay·ing, o·ver·pays
1. To pay (a party) too much.
2. To pay an amount in excess of (a sum due).
To pay too much. of real estate taxes for as long as the building stands.
Several reputable rep·u·ta·ble
Having a good reputation; honorable.
repu·ta·bil firms throughout the metropolitan area specialize spe·cial·ize
1. To limit one's profession to a particular specialty or subject area for study, research, or treatment.
2. To adapt to a particular function or environment. in filing certiorari appeals for co-ops and condos, with fees for this service most commonly based on a negotiable NEGOTIABLE. That which is capable of being transferred by assignment; a thing, the title to which may be transferred by a sale and indorsement or delivery.
2. , contingency percentage of the real estate tax reduction obtained. Since there is no penalty for filing a certiorari appeal, and since in most cases properties are under no obligation to pay professional certiorari fees unless a reduction is realized, there is nothing to lose and everything to gain by undertaking annual certiorari appeals.
Invest the Time to Investigate Rates
As with all industries, the vendors, contractors, and service providers within the co-op and condo industry demonstrate a wide spectrum of fees and prices. So it pays to solicit comparative bids from several of those companies qualified to do the work or to provide the service in question.
Specific areas to which boards should pay close attention with regard to terms and pricing include but are not limited to: mortgage rates and lines of equity/credit; insurance coverage/premiums; fuel and utilities; laundry facilities providers; and elevator elevator, in machinery
elevator, in machinery, device for transporting people or goods from one level to another. The term is applied to the enclosed structures as well as the open platforms used to provide vertical transportation in buildings, large ships, , boiler, and other mechanical component maintenance contracts.
Remember: Quality must cost more initially, but will probably save your property money in the long run.
Boards may also want to investigate engaging contingency fee-based specialists who will review utility bills and water usage to determine whether or not the property is being over-charged, and who also will do the necessary paperwork to recover any overpayment. In addition, boards should also establish on-site vendor logs to keep track of how long vendors and contractors actually spend in the building, especially where an hourly labor rate applies.
While it's nice to think of your individual co-op or condo unit as home, the reality is that it is also part of a larger community that needs to be run as cost-effectively and efficiently as possible to retain its value, and to grow in value over time. By using the techniques outlined here and coming up with some creative ones of their own, boards can keep maintenance/common charges down and enhance their properties' value without comprising quality of life.