Budgeting in Self-Managed Buildings Can Be Terrifying

Preparing the annual capital budget in a self-managed building can be a terrifying task, especially for uninitiated co-op and condo boards. But it doesn’t have to be overwhelming. One thing to remember is to expect the unexpected and set aside ample money for local laws, upgrade regulations, wish-list items, and unpleasant surprises, especially at older buildings. 

White Oak West, a 51-unit condo in Elmhurst, Queens, has managed to do constant repairs without raising common charges for four years. But board president Alex Schtakleff was still surprised when the building was hit with a $50,000 bill for fixing sidewalks from the Department of Transportation. “We’ve got a pretty good handle on doing our budget, but that’s why you have a reserve fund – for unforeseen events,” he says. 

At the her 10-unit Tribeca co-op, which was built in 1879, treasurer Judy Levine says the board has learned to write a certain amount of money for repairs into the budget. “There are only so many times you can patch the sidewalk before you have to bite the bullet and do a major capital repair,” she says. 

As for biting the bullet, boards have to face the inevitable when the bottom line comes up short. “You absolutely can’t be afraid of raising maintenance or common charges,” says Rebecca Poole, executive director of Big Apple CAI, an association of board members, property manager, and business partners. “Budgeting for a negative income is a disaster – you’ll build up payables, you won’t be able to pay your vendors, and you could end up getting hit with lawsuits.”

Resorting to dreaded assessments doesn’t always solve the problem, she adds, especially in smaller properties. “If there are people who can’t pay the fees, that will have a much greater impact on a building with 10 units as opposed to one with 50,” she adds. “Boards should avoid assessments if possible. If it isn’t possible, they should try to spread them out over two years instead of just one to ease the burden on shareholders or unit-owners.” 

The good news? There’s a range of resources that make it easier to learn on the job. The Community Associations Institute website has an open forum where members can ask questions and swap information with property managers and accountants. Poole herself teaches a three-session program, Self Management 101, at the Council of New York Cooperatives & Condominiums website, which includes step-by-step instruction on preparing operating and capital budgets.

The CNYC also offers seminars on specific topics, which Glory Ann Hussey Kerstein, a former treasurer at a 15-unit Housing Development Fund Corporation (HDFC) co-op in Manhattan Valley on the Upper West Side, found invaluable. “We learned the hard way that if a shareholder dies without a will, it takes months before things get straightened out, and during that time you can’t collect maintenance,” says Kerstein. “Everyone makes mistakes at first, but you don’t have to be left out there swinging on your own.”