Do you mean a roof deck for residents to enjoy and that is part of a roof replacement may be considered capital improvement?

The answer is yes. A capital improvement is any major outlay of money (usually above $5,000) that improves the conditions of the property. A capital investment may be on new projects or replacement projects such as replacing an old mechanical elevator with an integrated circuit elevator or buying new cabs. Even, the cost of replacing floors or carpets are considered capital investment, unless this is done on a yearly basis, and is then considered a recurrent event.

AdC

get a lwyer on it and ask for buildoing records to see if any similar incidents ahve happendd in the past. this does not sound right since it is techincally not a sale (ie it was never put on the market) - probably just a reassignment of shares to a family member.

This is an outrage!!!!!

There is a flip tax if a shareholder sells, yes! But there should not be a flip tax for a stock certificate transfer to someone in the same family especially if it were willed to you as part as your grandmothers estate.

Hire an attorney at once!!! Any real estate attorney familiar in condo/coop. law will suffice.

Good luck and you should get your money returned. If not because if was right; then because they insitituted a "new rule" immediately after taking your money.

I would fight big time!!!!!!!

Let me know how you do!

Signed
Furious!!!!!!!!

Something is not right.

Call Dennis Greenstein, esq. 212-218-5520, former asst AG in NY.

Before you go on a major battle, you may want to approach the board with great diplomacy. I believe that when people communicate sicerely will get more than yelling or threatening to sue.

If the board reconsidered flip taxes for estates, two or three months after yours changed, it may mean that the board thought about the reasonableness of such a fee and decided to repeal at a later time the rule.

Again, a rule may be repealed by the board or changed without having to reconsider a rejection made two months ago under a rule and now considered acceptable. If you read the proprietary lease, you will find that a board may enact or change rules to preserve the interest of the co-op. This is similar to Uncle Sam; if a certain tax advantage was eliminated in a tax year, if you are late just for one day to take advantage of the old tax rule, well... YOU MISSED IT!

Since co-op boards are sometimes more benign than other institution, you may always act with diplomacy and obtain more because you and your mother are now part of the shareholder family. If not! Be happy that you got your grandmother's apartment w/o much of an investment except for the flip tax which will remain with the co-op for future work in your own co-op!

AdC

Whoa, whoa, whoa, people! Go back and look at the first reply, from AdC.

First, remember that your board is made up of people like you: non-experts who are trying to run a business so that it benefits you.

So if you immediately get into a legal battle, the board will have no other option than to get its lawyer involved. Perhaps you would rather have a conversation with them first, instead.

You could say, "I understand that you have changed / are considering changing the the flip tax rule so that it no longer applies to trust transfers. Of course, I just paid a flip tax in just such a situation. Can you tell me the reason you're going to change it now?"

Second, remember that, as AdC put it, you may have transfered your apartment a few months too soon to take advantage of the benefit. This happens all the time in life -- you're either a shade too early or a shade too late. It is not an outrage, it's the way the world works. So prepare to accept that, in this case, fortune didn't shine on you.

Third, understand that these trust inheritances are a legal maneuver to get around laws and regulations that apply to all of us. (One real estate lawyer told me that in the legal business, the trust inheritance is called Poor Man's Estate Planning.) So realize that all the trust does is transfer shares -- it does not allow you to live in the apartment or to sublet it, unless your board has specifically allowed that.

Fourth, before you get steamed about this, understand that as shareholders YOU are part owners of the business. If YOU don't want to pay in to support the business, then you are expecting your neighbors to shoulder YOUR financial obligation. That's not fair to them. If cooperative ownership is not your cup of tea, you should sell the apartment.

Finally, do talk with a lawyer if you wish, but do so to find out your rights and responsibilities under the proprietary lease (I assume you haven't read it -- almost no one does). Don't let the lawyer start sending letters until you A) understand what you may and may not do in a co-op, and B) before you have had a reasonable discussion with the board.

I hope this helps. You may e-mail me if you have other questions.

does the below also hold true for a coop?

Q & A; Assessments Can Affect the Tax Basis

Published: October 1, 2006

Q -- Can regular monthly payments that are made along with common charges but are listed separately under Capital Reserve Fund be used to increase the tax basis for a condominium when calculating capital gains?

A -- Martin M. Appelbaum, a certified public accountant in Manhattan, said assessments levied by a condominium board for capital improvements, whether paid as a lump sum or in monthly increments, can indeed be used to increase the tax basis of individual units, thus reducing the profit when the apartment is sold.

This assumes that the board has complied with Internal Revenue Service guidelines. Mr. Appelbaum said that under I.R.S. regulations affirmed in numerous court decisions, the board must pass a resolution and notify unit owners that the funds being raised will be used for capital improvements only and not for operating expenses or ordinary repairs.

In addition, he said, there should be a separate line item on the monthly bill for the capital assessment. And finally, he said, money collected for the capital assessment should be held in a different account than the one used for other funds collected by the condominium.

"The condo board should consult with its C.P.A. firm to ensure they are following the proper procedure for billing and collection of the funds," Mr. Appelbaum said.

Yes, it holds true. Assessments and general improvements to your apartment add to the original value of the price you paid for your unit and (if the co-op is not your first home that you sold) so, what you get on the sale of the unit is now subtacted to the original price + assessment.

What many times happen is that the IRS provides you a break on the first home that you sell. So, if your profits are not greater than the break you get, you deduct zip.

AdC

If it is a question is Yes. If it is a statement, you have just reaffirmed my explanation. But remember, the IRS give the deducion once. After that, you must declare the profit. So, if you are selling another home that you have owned in a series, then the IRS deduction does not apply; capital improvements become handy to reduce your profit or increase your losses.

AdC

Our 500 unit co-op is forty years old. We have capital improvements every year in accordance with the AICPA required engineering study and capital improvement plan. Our plan says that we need to spend about $15,000,000 over the next fifteen years, in current dollars.

It does not mean we schedule the capital improvement precisely in the year estimated by the engineering study as many year to year maintenance events can prolong the life span of a capital feature.

However, for a number of years we have had a yearly assessment that garners about $1,000 per unit (yes, apportioned by the number of shares), and thus we have an annual capital improvement income stream of $500,000.

In addition our original mortgage was retired without ever refinancing or expanding the principle. In turn, rather than lower the monthly maintenance costs by the like amount, we kept this item in the income stream but change it to capital income and now we use this income for capital improvements. In total, we now accumulate $900,000 a year for capital improvements.

The rationale is that as the building ages, more of the original infrastructure and even some of the newer more recent items need replacement. Thus, we are replacing windows over a six year program without borrowing, we are replacing our central AC (used buy all apartments) chiller devices, we upgraded our lobby, we completely overhauled our elevator systems and cabs, we built a new mailroom, put off street parking decks were completely refurbished, and soon we will replace all wallpaper and carpeting in the hallways of all floors.

The point is that assessments should be a recurring yearly income stream and now sprung on residents as ”specials”. By having assessments as regular yearly event, residents can plan budgets accordingly (in our case) for years to come.

how do cap expenses have to be listed and budgeted to remain deductable when a person sells their apartment? our coop is assessing for "general" purpose of offsetting future expenses without earmarking the assessment for anything.

Essentially, the co-op's auditor should assist in segregating the funds in a separate line item in accou8inting and a separate bank account. Yes, the monthly billing statement should show the assessment as a separate entity.

Has the MA started a legal action? Is the MA still representing your co-op? How were the wrongdoing accusations raised? In a public forum? What is the extent of the damage?...Have you discussesd the problem with your co-op counsel?

AdC

Just an FYI re defamation of character....Libel is written. Slander is verbal. Call your attorney today.

It consists of several public open forum statements accusing the current Managing Agent of wrongdoing which appears to be heading toward his termination. No legal action has been filed, but there is concern that the coop could now be drawn into a libel suit.

if you have facts and evidence of wrongdoing you will be OK.

There's an archived article on this topic. The board member who cannot prove their claim could be sued and then drag your coop into the lawsuit. You should look into your coverage.


June 4, 2000
YOUR HOME; Liability And Boards Of Co-ops
By JAY ROMANO

ON April 11, the New York Court of Appeals, the state's highest court, addressed the issue of whether corporations, including co-op housing corporations, can be required to pay punitive damages assessed against their board members. The court's answer -- a qualified no -- has been unsettling for co-op corporations and their board members.

''I think a lot of people are nervous about this decision,'' said Richard Siegler, a Manhattan co-op lawyer. ''It's going to make people more hesitant to serve on co-op boards, and it will make those who do serve more reticent about making decisions that could be controversial.''

The case in which the court ruled, Biondi v. Beekman Hill House Apartment Corporation, was the final chapter in a legal case that began in 1995.

At that time, a shareholder in the apartment corporation, a co-op at 425 East 51st Street, sought permission to sublease her apartment to Gregory and Shannon Broome. When the board denied the request, the Broomes filed suit under the federal Fair Housing Act and other antidiscrimination laws, charging that the denial was based upon Mr. Broome's race. He is black; his wife is white.

After a jury found in favor of the Broomes, the couple was awarded a total of $640,000 in damages. Of that amount, Nicholas A. Biondi, the president of the board, was ordered to pay $230,000 in compensatory damages and $125,000 in punitive damages. After subsequent settlement conferences, the compensatory damages ended up being paid by the co-op's insurance carrier while Mr. Biondi remained personally liable for $124,000 in punitive damages.

Mr. Biondi then filed a lawsuit against Beekman Hill House seeking indemnification, a form of reimbursement, for that amount. The basis of his claim was a clause in the co-op's bylaws that required the corporation to indemnify board members for any ''judgments, fines, amounts paid in settlement and reasonable expenses'' incurred as a result of their good-faith actions on behalf of the corporation.

In 1999, after a lower court dismissed Mr. Biondi's claim, he appealed to the Court of Appeals. In April, the court affirmed the lower court's dismissal, saying that in this case, indemnification for punitive damages was prohibited by public policy.

''What the court is basically saying is that it is against public policy to reimburse an individual director for capricious, arbitrary or illegal conduct,'' Mr. Siegler said, adding that while this may seem reasonable for conduct clearly undertaken in bad faith, it becomes a bit more murky in situations in which a board member, acting in what he or she may believe to be in good faith, nevertheless crosses the line and does something for which a penalty is assessed.

And it is that uncertainty -- coupled with an increasing number of federal, state and local laws that expose board members to punitive damages, fines or other penalties -- that Mr. Siegler and other lawyers say make it harder to find volunteers to serve on co-op boards.

''I don't think people will be as willing to serve if they feel they won't be indemnified for actions taken on behalf of the corporation,'' Mr. Siegler said, adding that in addition to the potential liability board members face when dealing with federal, state and local laws against discrimination, there are also some less obvious exposures.

For example, he said, failure to comply with the city's window-guard law, the elevator-inspection law and the federal lead paint disclosure law could all subject directors to substantial fines and penalties.

Bruce A. Cholst, another Manhattan co-op lawyer, said that while current and prospective board members may understandably be concerned about the impact of the Court of Appeals decision in the Biondi case, there are subtleties contained in it that could still make it possible for co-ops to reimburse board members for punitive damages under certain circumstances.

''The Court of Appeals held that public policy prohibits boards from indemnifying directors for punitive damages imposed for acts of bad faith,'' Mr. Cholst said. ''But what is significant about this decision is the court's definition of the term 'acts of bad faith.' '' The court, Mr. Cholst said, defined ''bad faith'' as the absence of a ''reasonable belief'' by board members that their conduct served ''the best interests of the corporation.'' In other words, he said, it is still possible for a board member to be reimbursed for punitive damages if he can adequately demonstrate that he was acting in good faith for the benefit of the co-op.

Accordingly, he said, punitive-damage awards, fines or penalties arising from errors of judgment -- following another person's misguided advice, for example -- can probably be reimbursed if a board member can establish that he was acting in the best interests of the co-op.

''The first precaution that should be taken by boards concerned about this issue is to review their bylaws to make sure that all existing loopholes are adequately plugged,'' Mr. Cholst said, adding that if the bylaws do not permit reimbursement for ''judgments, fines, amounts paid in settlement and reasonable expenses,'' they can be amended to do so. In addition, he said, the bylaws can also include a provision permitting reimbursement of legal costs before a final decision in the case.

''If they don't,'' he said, ''then board members who are individually sued are required to pay their own defense costs upfront and then seek reimbursement from the co-op only after the proceeding has been concluded in their favor.''

The bylaws should also contain a provision, Mr. Cholst said, that protects board members from liability to shareholders for anything they might do in good faith on the corporation's behalf.

Finally, Mr. Cholst said, if a board is particularly uncomfortable about the potential for having to pay punitive damages, it should talk to its insurance broker about finding coverage. While New York law bars insurance companies from selling such coverage in the state, he said, it can be obtained from ''offshore companies,'' as they are known, most of them in the Caribbean.

Martin Eveleigh, a manager at P. D. Insurance, in Tortola, British Virgin Islands, said his company offered coverage for punitive damages when they are imposed concurrently with compensatory damages, as was the case with Mr. Biondi.

''We draw a distinction between punitive damages and fines,'' Mr. Eveleigh said, explaining that insurance from his company specifically excludes fines and penalties.

He said that the maximum coverage now available is $500,000 and that the individual or company seeking coverage must also have a standard liability policy. The yearly premium for punitive-damage coverage starts at about $1,500, Mr. Eveleigh said, depending on the deductible and the amount of liability coverage.

There are, of course, some drawbacks to dealing with an offshore insurer. Donald Gabay, a Manhattan lawyer, said that New York's insurance guarantee fund, which protects policyholders if an insurer goes bankrupt, would not apply here. In addition, he said, offshore companies may operate with less regulatory oversight.

Arthur I. Weinstein, a Manhattan lawyer and the vice president of the Council of New York Cooperatives and Condominiums, said that if a co-op determined that punitive-damage coverage from an offshore company was ''affordable and enforceable,'' the board should consider it.

''It is always in the best interest of the co-op to get the maximum amount of insurance it can reasonably afford for its directors,'' he said. ''How else are you going to get good people to serve?''

* Copyright 2006 The New York Times Company

I asume from your posting that you have a sponsor or investor.

If you have one and it has not said a word about past assessments,in fact, it has paid for the assessments without giving you problems, then you should not worry. The sponsor has given its blessings.

re: "issued shares" - I believe that a sponsor has no say in the matter (yay or nay) . it merely seems to be a rul that , as long as he has shares, there may be no assessment over 15k.

2) can you define what is meant by "issued share"?

Last night I checked my proprietary lease and ours is more generous. It limits the sponsors position to only 28%.

In other words, if the sponsor in the builidng has equal or more than 28% of the shares, our board needs to request authorization of individual shareholders (issued shares)v. sponsor (unassinged shares). Luckily, we passed this number and the board is now free to assess without consulting first the sponsor for its blessings.

This measure protects the sponsor from high cash demands by the co-op that it did not plan for during a given fiscal year. So, a board needs to first count with the sponsor's blessings because the sponsor may block the assessment by voting against it and by speaking out at the special meeting. As you probably know well, if there is a vote on an assessment, there are individual shareholders that will oppose it and you will end up borrowing from your reserves to patch your operating budget.

As I said previously, if your sponsor has gone along with the assessment without invoking its powers, it has given its blessings. However, if you prepare to raise a large reserve through assessment, make sure you explain it to the sponsor the reasons so that it sees your point. Since you are usually communicating with a management representative of the sponsor, then give sufficient time for such a plan so that the management representative may convey it to the owner.

AdC

you will see that it says all shares. approval of ALL shares.

No need to re-read, but here I go again!

If you are technical about it, it was not illegal that you did not try to obtain a vote from your shareholders. It only meant that you should first count with the sponsor to make sure that it is in posiiton to provide your support or not. If not, then, you need to look for the support of the rest of the shareholders.

In your case, the sposnor is in control even if it owns one apartment or one share to sour your proposed assessment. If you wish to assess, you need its blessings. This is why, äs long as it owns a share, an assessement requires the vote of the shareholders." However, if you remove the shareholder, i.e., it does not say a hoot or it has sold or its assets, the assessment is valid.


You may argue that this is not what the language suggest. True... if you have not encountered oppositions, then it means all the shareholders have given their blessings as well. Otherwise, they could say, well! what about the sponsor...it owns shares; is it happy about the assessment?

Recommendations: now that you know what to assess means in your builidng, then you should look for an amemndment of your proprietary lease to give you more flexibility to impose assessments as needed or before you adopt one (for fear of being challenged) you should follow to the T what your proprietary lease says. Let the sponsor know what is going on and let them challenge your assessmen.

AdC

No need to re-read, but here I go again!

If you are technical about it, it was not illegal that you did not try to obtain a vote from your shareholders. It only meant that you should first count with the sponsor to make sure that it is in posiiton to provide YOU support on your assessment. If THE SPONSOR DOES not AGREE WITH YOUR PROPOSED ASESSMENT, then, you need to look for the support of the rest of the shareholders TO REMOVE THE OBJECTION.

In your case, the SPONSOR is in control OF THE DECISION TO ASESS, even if it owns one apartment or one share OF YOUR BUILDING. IT HAS THE POWER to sour your proposed assessment. This is why, äs long as THE SPONSOR owns a share, an assessement requires the vote of the shareholders." HOWEVER, IF THE SPONSOR AGREES WITH THE ASSESSMENT, YOU HAVE INDEED REMOVED THE NEED TO GO TO YOUR SHAREHOLDERS AT LARGE.

You may argue that this is not what the language suggestS. True... if you have not encountered opposition FROM YOUR SHAREHOLDERS AT LARGE, then it means all the shareholders have given their blessings as well. DON'T THEY HAVE A COPY OF THEIR BY-LAWS AND PROPRIETARY LEASE TO RAISE THE OBJECTION? What about the sponsor...it owns shares; is it happy about the assessment? WE NEED TO VOTE.

Recommendations: (1)now that you know what to assess means in your builidng, then you should look for an amemndment of your proprietary lease to give you more flexibility to impose assessments as needed or before you adopt one (for fear of being challenged) you should follow to the T what your proprietary lease says. (2) Let the sponsor know what is going on and find out if there are any obejctions to the assessment for which a general vote may be required. (3) Ask your attorney for a deeper interpretation of your proprietary lease / bylaws in regards to this clause.

AdC

So your friend's building never raises the maintenance? Or they do raise the maintenance and then assess when there's a deficit? The bottom line is, prices go up. I think it's better to budget in a surplus (i.e., raise the maint. when necessary) rather than cross your fingers and hope you won't have to assess to make up the difference.

they only assess when absolutely nesessary but they keep their eye on the maintenence like hawks. the key thing to remember is that a mntnce increase is permanent. If there is an operaitonal budget shortage for a given year, they assess over a few months to make up the difference then they remove the assessment, carefully keeping the mantaience at as reasonable and appealing a level as possible and also honoring the tempprariness of the assessment.

The cost of living rises every year. So who are we fooling? Assessments are for capital expenditures.

In view the slight of hand tricks show a complete misunderstanding of fiduciary responsibly, AICPA accounting rules, etc.

Please search this forum for other comments regarding maintenance as there are some prescient thoughts.

are you saying that our building should not be assessing for a vague reason such as "to help keep done future mntnce"? (they are doing this now to balance the annual tax abatement) - are you saying it it illegal to assess for anyting other than cap improvements?

a very respectable building does what I described - assesses when the annual operating cost does not meet budget - it does seem like a very very good strategy to keep mantainence from being raised.

creative thinking and ideas - as threating as they might seem to some (people are scare of change) is often nothing but a better idea.

It seems that you have already made up your mind on the matter and aren't open to other peoples' opinions.

How do assessments really keep down future maintenance increases? Expenses rarely stay flat from year to year. By assessing rather than increasing maintenance, you're only fooling people. You're fooling them into thinking your building is more appealing (your words), and your fooling yourself by thinking that constant assessments don't affect a potential purchaser's decision.

that is s dismissive thing to say. obviously, if they are asking this question, obvioulsy they are open to new ideas.

there are many ways to reduce maintaience such as negotiating w/ your insurance company and taking a bit of time to shop around.

in general, it seems there istrange board censosrship atitude sometimes on this discussion group everytime someone mentions new thinking about mntnce increases, essessments, etc.

MM or anonymous or whoever... You asked for peoples' opinions and you're getting them. And you're criticizing those people who aren't too thrilled at the idea of assessing rather than doing a needed maintenance increase.

Of course there are ways to reduce costs. But in the end, you get what you pay for.

PD you are jumping allover someonw wihtout making constructive suggestions.

In general, there is no guarantee operational costs will increase a year after an assessment ot fill a deficiet a board may have though of a clever way to reduce some costs, commericial income may increase, it is too general of a statement to say that "costs go up" without giving a due consideraion to this idea.

Very OT: you've now posted under 3 different names (anonymous, mm and td). If you'd keep the same identity instead of pretending to be 3 separate people, I might take you more seriously.

Back on topic, please see AdC's response above.

you are the kind of unproductive, petty person the website does not need. seriously.

we have had costs remain constant in some year and NOT go up - also you cna work on lowering them via energy effieicent utility changges, negotiating with your insurance co, etc.

This has been discussed in the past at length and the conclusion is the same as being offered here. Your maintenance has to go because of inflation. If you postpone it too long, you may find yourself raising it in larger increments down the line or with incrasing assessments every year.

Obviously, all boards look for ways to cut expenses. This is part of your fiduciary responsibility. However, cutting expenses shall not mean compromising your services to building systems and shareholders. Delayiing important services on essential systems may end up costing more. Postponing a repair may duplicate its price when it becomes an emergency. So, your "good savings" may end costing a mighty fortune.

AdC

The idea that property value decreases when the maintenance fee increases has no basis in economics.

Here's an oversimplification. Your co-op is a corporation. It sells a safe, pleasant place to live. When the corporation charges more to live in one of its apartments, residents may choose to pay it (by continuing to live there) or they may choose not to pay it (by selling and moving away).

Here's where the economics come in. When the apartment goes on the market, will the owners sell it for more or less then they would have they day before the maint increase was made public? How much will it sell for? My guess is the increased maintenance will have little to do with the selling price (I'm assuming the fee isn't, say, doubling.)

Frankly, in New York's co-op market, if your building does not have enough money to a) perform necessary maintenance, b) pay for capitol improvements, and c) cushion a comfortable reserves account, your property value will still increase -- but NOT as much as in those buildings that DO increase their maint regularly (or institute assessments) to cover inflation and to compete with all the other buildings out there that people can choose to buy into.

Skimping on maintenance is like telling your boss, "Hey, I don't need that raise, I'm just going to cut my expenses for the next few years." If you did that you would soon find yourself living a less pleasant lifestyle.

Remember, the co-op is a corporation, and YOU own part of it. If it's not financially healthy, YOU are not financially healthy. And if, like most of us, your home is your biggest financial investment, you want the co-op to be financially healthy!

Usually, a co-op applicant submits financials for the board to review. The candidates ability to afford to reside in the building is carefully evaluated.

The board also with foresight factors in reasonable increase over time and at an affordable rate to most shareholders.

My point is that, most applicants/boards approve a move to an site that is affordable.

There is nothing so terrible about living on a budget and curtailing certain luxuries if it cannot be afforded. That is sound economics and common sense. A co-op board should not expect to charge 62 & York Avenue maintenance prices if actually operating within the location and budget of a coop in the heart of the Bronx (no matter how luxurourously you promote it. I'm not berating the Bronx. I love it here. I bought my place because I could afford it. And -- I'd hate to lose my cute and cozy abode because of a luxureous fantasy housed in our board president's head. Location is important, which is why the city provides an annual property (& tax) value appraisal (which is viewable online). Sometimes less is more... if you can manage keep what you have during the hard time and celebrate during the good.

If such an apartment was placed on the market (overpriced maintenance)... it would sit for years UNSOLD! However, using this rational - let's suppose that if the coop maintenance increases to the cost at which numerous shareholders are spiraled into default-- then the increase is counterproductive to the health of the corporation. Maintenance increases must be reasonable and affordable for the majority of coop shareholders.

Agreed! Otherwise the wealthier shareholders could squeeze out the less wealthy ones. Massive selling of apartments is never a good sign in a co-op.

I hope you become the president of your co-op so that you can pass your secret formula to maintain the maintenance that may attract potential shareholders.

Admissions Committees or boards doing screening should know what takes financially to carry a unit in building. Therefore, they should screen with this consideration in mind.

Reality is a board president does not necessarily has to be "the wealthiest" of all the shareholders. The board president does not have to be on an ego trip to make the co-op the most luxurious of all the builidng on the block.

Interesting enough, when a board raises maintenance, they also need to pay maintenance; thus, board members are affected by their own decisions. There are tons of board presidents who know their shareholder population and understand the needs of the building and the financial responsibility they accepted. Consequently, the board decisions they lead are taken with the best business judgement in mind, not to evict other shareholders of their apartment for lack of payment.

Finally, when you share the secret on how to keep maintenance low, do not include ano or all of the following ideas:

1. Convice your fellow shareholders that the boiler must be kept in summer until December 15 or temperatures go down to 30 F; if temperatures rises beyond 42 F, heat will not be provided

3. Convince shareholders that they should fire the superintendent and any helpers and instead, shareholders should do rotational work to clean up, pick up the garbage, etc with their own cleaning products.

4. Convince shareholder to cancel all insurances on your builidng.

5. Convince shareholders that water should not be heated as it is deleterious to your health.

6. Convince shareholders to restrict their showers to 2 minutes a day, never flush the toilet unless extremely soiled, and unplug their gas stoves and only do takeout food with paper plates and plastic utensils.

7. Convince shareholders that they must pay for plumbing insfrastructure that breaks behind their walls and to repair the walls on their own.

8. Obtain the cheapest elevator maintenance contract or do without one. Use the stairways unless you are handicapped.

Good luck!

AdC

These postings are not worthy of you. They are bitter and sarcastic and unhelpful. I agree that maintaience should not be raised unless things are dire as such raises are permanent. Yes, costs rise BUT there are many things a buiding can do to trim costs.

1) Negotiate your insurance policy. Do comparative and full research first.
2) Reduce ulility costs. Get a free audit form NYSERDA.
3) Do not increase fees to management despite their requests for a riae. Just don't do it. Examine all charges such and messenger costs, long distance phone etc. What are monthly costs that are questionable? Even small ones can add up.
etc.

A few more ways to keep maintenance down and cut costs:

I accidentally hit the "send" key too soon, sorry. More ways to keep maintenance down...

FIRST - Find ways to save money:

1) Read monthly reports and question costs for messengers, paper/stationery, postage, supplies and "miscellaneous". A lot of excess gets buried under "miscellaneous".

2) Turn off lights in places that don't need them 24 hrs a day - laundry room, storage rooms. If the lobby's bright enough, you don't need a lot of lamps on during the day.

3) Save on paper/printing by not distributing every memo to every unit. Maybe some can just be posted in the mailroom or lobby, or by the elevator on each floor. Save on postage by putting letters under doors instead of mailing them.

4) Eliminate unneeded phone/fax lines. Most documents can be e-mailed now instead of faxed. Pay only basic charges + a maximum amount on calls for super and maint staff phones. If they frequently call relatives/friends out-of-state or out-of-country, why should the coop pay for all that?

SECOND - Find other ways to raise money:

1) If you have fines/penalties for not adhering to coop rules or policies, bill owners for them! Don't go overboard but a lot of money is lost this way. And be sure to check monthly reports to make sure they've been billed.

2) Consider putting in a candy or laundry product machine as sources for income. A soda machine, especially where moving/delivery men and Fed Ex/UPS men pass through, can bring in a good chunk of change, especially in summertime and in large buildings.

3) If you allow subletting, what's your sublet fee? A lot of buildings let this go for years without increasing it. Standard today in many coops is a fee equal to 2 months maint for a new sublet and 1 month maint for a renewal.

4) Enact what buildings call a "coop administration fee" or "administrative transfer fee" on unit sales. A flip tax requires shareholder vote/approval, but this only requires a board resolution (double check this with your attorney!). Typical fee is equal to 4 months maint (2 paid by seller, 2 paid by buyer) at closing, and the board can decide where it goes - for operating costs or reserves.

5) Re-evaluate if coop money markets or other investments are in the best places earning the most money.

Maint inevitably has to go up, but there are ways to save and/or raise money if you keep alert to them.

I agree... a temporary assesment is the key. It is much more appealing to a prospective purchaser/seller. An assessment begins and ends at a set period of time - and is usually targeted toward a specific need. On the other hand, it is very rarely that a increase in maintenance is retracted or decreased - even after the circumstances that justified the increase has been satisfied or no longer requires additional financing.

Right. Seems as if many of coop board members just lie passively back and let costs go up. NO. STOP. Get active, inspired and determined!
Here are some good ideas (esp selling a super's apt if you have space in the basement for a new one):


Slashing Operating Costs

One way to diminish building costs is by eliminating unnecessary staffing. “If your elevators are manually operated, modernize them by removing the elevator men,” recommends Marcia Taranto, president of Taranto & Associates Inc., a property management company in Manhattan. “And, if a staffer is talented in some area, hire him to do some jobs on his own time if he desires. Use employees instead of outside contractors to do minor plumbing, painting or repairs. However, unless there is an emergency, the only person that should ever work overtime is the doorman (if the scheduled doorman doesn’t show), and there shouldn’t be overtime without prior management approval.”

Taranto doesn’t believe in ordering supplies in bulk. “The price is not that much better, and it’s wasteful. If you have lots of supplies lying around, it’s too easy to abuse them or use more than you would otherwise, and it’s harder to inventory,” she explains. “With smaller amounts, management has a better idea of how much is actually needed by properties.” Taranto adds that staff shouldn’t buy anything without a purchase order. She suggests reviewing bills if they seem high, and to keep in mind that some suppliers offer a one percent discount if you pay within 30 days.

John Janangelo, president of Bellmarc Property Management Services, Inc. in Manhattan, suggests monitoring utilities by both cost and consumption. “Look for major fluctuations in bills to identify problems,” he says. “Sometimes an electric company charges the wrong rate—large users are billed differently than small users—or gives you the wrong building’s reading.”

Bellmarc will occasionally consult an electrical engineer for an itemized breakdown of consumption for a building’s major mechanicals to assure billing accuracy and locate unusual drains on the building. According to Taranto, it also helps to keep the boiler and burner in good operating condition. “Have heating pipes insulated, change the steam trap, and install thermal (double) window panes to save heat,” she advises. “And, if your building has a cooling tower,” she says, “make sure it’s separately metered from the building’s main house meter for water consumption.”

Sewage charges are based on your building’s water consumption, explains Warren Liebold, director of metering and conservation for the New York City Department of Environmental Protection (DEP). “Even though cooling towers release little waste water (mostly through evaporation), properties are billed for that water unless the cooling tower makeup water line is metered according to DEP specifications and the building has applied for a Cooling Tower Waste Water Allowance. Applications are available from the New York City DEP.”

Also make sure commercial tenants aren’t on unit owners’ water meters. “When buildings have astronomical phone bills that aren’t related to business calls,” says Janangelo, “check the lobby phone and the super’s phone to see who was on duty when the excessive calls were made. Note where the calls were going if out of state or abroad.”

Planning with Foresight

Board president Michael Baughen can boast that his 44-unit co-op near Manhattan’s financial district hasn’t had a maintenance increase since 1994 (when they raised maintenance eight percent), and he’s doubtful there will be an increase next year. He claims no great strategy, just conservative management and planning by the board. When scaffolding was up on Baughen’s co-op for parapet repairs, they had the building surveyed by an engineer. This way, any other problems could be detected before the scaffolding, which is significantly expensive to erect, came down. “In addition, the board knew two years ago that the building’s elevators would need repairs, so we planned for the expense,” adds Baughen. In fact, the board could have actually reduced the maintenance but decided not to in case a major expenditure arose.

A Lower Interest Rate

Another way to keep maintenance costs level is to refinance by paying off the building’s existing underlying mortgage with a new one that has a lower interest rate. To choose the mortgage terms best suited for the property, you need to balance the amount unit owners are willing to spend on maintenance against how soon they want the mortgage paid off. “When you’ve narrowed it down to two or three options, call an accountant who specializes in co-op or condo work to help you choose which mortgage is best for your building,” advises Robert Altamura, CPA, a partner with the Park Slope accounting firm of Smolin & Yavel. A mortgage broker can also be very helpful in determining what mortgage is best for your building, and in securing the loan.

“With a good interest rate, you can refinance for a bit more than the last mortgage to build up your reserve fund for use on capital projects,” explains Altamura. “You can cover the five to seven percent costs of refinancing—including bank fees, lawyer fees, sometimes finders fees or commitment fees and a mortgage recording tax—and still reduce maintenance. But that usually means a longer amortization, which is the length of time before the mortgage is completely paid. “Sometimes [real estate] brokers call to ask how much maintenance is tax deductible,” Altamura continues. “If I say 35 percent, they ask, ‘Why so little?’ They should realize that a low deductible means the co-op is paying low interest or low real estate taxes. Higher mortgage payments are better in the long run if it means the mortgage will be gone sooner. You’d be surprised how quickly 15 years can go, and a co-op with no mortgage—or a low mortgage—is a strong selling point.”

Stephen Beer, CPA and partner with the accounting firm of Czarnowski & Beer in Manhattan, adds, “A high deductible looks good to a less sophisticated buyer; but in the ’90s, prospective buyers look at financials. They want to know the amount of debt per unit because they realize that if a property’s deductible is low, the unit may ultimately have a higher market value.” Beer notes that refinancing will be beneficial only as long as interest rates stay low. But once you’ve locked in your rate, you’ll keep it for the life of the mortgage.

Making a “Profit”

If you treat your co-op as a “for profit” corporation, rather than just a residence, it may yield a higher return. View the basement as a source of potential revenue. “Build and rent out storage containers,” advises Beer, “or refurbish the basement into an apartment for the super. It will cost $100,000 or less, while the super’s old apartment can be sold for hundreds of thousands of dollars.” Janangelo proposes evaluating the super’s apartment for refinancing, especially in a condo. “Many banks won’t refinance it, but some will. We have a co-op that gained $24,000 a year towards mortgage payments this way.”

Many co-ops and condos now charge tenants an up front “move in/move out” fee. “Extra staff time is needed during moves,” explains Janangelo. “Elevators have to be padded, floors covered, and there’s hallway wear and tear.” These expenses aren’t necessarily deducted from tenants’ security or damage deposits, so the move in/move out fee goes into the reserve fund to offset those costs. “Maximize your building’s laundry contract with the vendor,” he continues. “Buildings get a commission from that contract. Reevaluate it to be sure you’re still getting good service at competitive prices.”

James Gerb has been board president of a 225-unit Park Avenue co-op in Murray Hill since 1995. Maintenance has not increased for two years, and none is projected for next year. Gerb believes in aggressive cost-cutting except when it comes to property managers. “We’ve had two mortgages consolidated and refinanced. We apply for all available J-51 tax rebates for things like the boiler replacement, roof repairs and elevator automation. We also challenge tax assessments through our certiorari attorney and we don’t let commercial space stay vacant,” he says.

Gerb’s building also levies late fees on residents who are more than 60 days in arrears on maintenance. He also believes in settling lawsuits instead of letting them drag out because “legal fees are murder.” Years ago, when a unionized staff member sued the co-op, says Gerb, their former management agency used a private lawyer, not knowing that the co-op’s insurance carrier offered free legal counsel. A lot of money was unnecessarily wasted. In fact, James Berg, executive vice president of The Realty Advisory Board (RAB), a private association in Manhattan for property employers, states that in many situations, if management has a dispute with a union employee, the RAB will represent management at no cost using funds from membership dues, and will pay the employer’s share of the arbitration fees.

These are just some of the creative ways successful co-ops and condos have lowered costs and raised revenue. You can follow their suggestions or find ways of your own. One thing that all buildings have in common is that co-op and condo residents feel lucky when they elude maintenance increases. So go ahead: Make their day!

Rather than hire a consultant to find ways of doing things differently and improving board-shareholder relations, I'd brainstorm with your board and mgmt, talk to other boards, and research articles for Habitat, The Cooperator and the CNYC first. This might save you money that could be better spent elsewhere. Also, I'd wonder if shareholders would question a need to spend money for a consultant and if the board/mmgt aren't knowledgeable or creative enough to come up with approaches/idea on their own. Just my opinion.

Seen this advertisement in Habitat for Eric Kornfeld, Consultant...917-991-8127; www.erickornfeld.com.

Mr Rutherford,

I think your building is fortunate to have someone like you
take over. You have come into your new position with the
proper attitude. "How do we do it better"
I have been on my Board for 15 years, 10 as President, I am now retired and would be happy to share my experiences with you! In any case I wish you the best of luck! Best RBG