"Our maintenance is too high"!

Every time the maintenance goes up we hear the same complaints, either “our maintenance is too high” or “our maintenance is higher than other buildings our size.” It is almost as if the board were doing something nefarious and was exempt from the increases. But these statements are made on an annual basis.

Before we accept a broad statement like that I would have to know some of the facts about these “low maintenance” buildings. For instance, how many people are on the staff? Do they have commercial income that offsets many expenses? Are they assessing back the real estate tax abatement and adding those funds to the operating income? Is there a line item in the expenses of the budget that refers to a “defeasance” expense or mortgage paydown? Is the mortgage an interest only or is their amortization? How large is the mortgage? Are they adding flip tax income to the operating income? How do they make up deficits? How big are the apartments? Where is the building located? Are they using assessments to offset increases?

All of these factors have to be considered before maintenances can be compared with any degree of fairness. In larger buildings, the major expenses are real estate taxes, mortgage, and staff. These categories may make up 70 to 80 percent of the total budget. Short of trying to eliminate employees and/or decreasing services to the property, there is very little you can do about such increases; outsiders, such as the union and the city, control these expenses.

Buildings usually file tax protests on the real estate taxes, but the rates keep increasing and it is a losing battle. Although mortgage rates are low now, prepayment penalties make it uneconomical to refinance for many buildings. Oh, yes, and something else: the cost of oil has increased so rapidly that even if you made a liberal estimate at the end of 2007 for 2008 you probably underestimated by 20 percent! If you add fuel into the equation, you are easily at 80 percent of costs that are out of your control!

So, please before you make that statement, get me the annual financial statement for that building and we will sit down and compare the data. Hey, maybe they are doing something we are not and we can learn from it. On the other hand, maybe and more likely, you live in a building that is well run by people who care about it.