Here's Why Condo Common Charges Are All Over the Map

Q: A one-bedroom condo apartment in Manhattan has an asking price of $399,000, needs significant renovation and has a $1,941 monthly common charge. Two other apartments in the building are also for sale; they're comparable in size, on a higher floor, have already been renovated, have asking prices of $620,000 or more — and yet have lower common charges of about $1,750. Why the discrepancy? And what goes into calculating common charges?

A: To a buyer, it might seem strange that a condo's common charges don’t match up with the condition of the apartment, replies the Ask Real Estate column in The New York Times. But each unit’s share of these costs was very likely established when the condominium was formed, so current renovation needs wouldn’t be reflected in them.

New York’s real property law outlines the ways that the percentage of common interest can be calculated for each unit in a building. The percentages, which determine monthly fees, are set forth in a document called Schedule A in the condominium’s offering plan, and they do not change over time unless the affected unit-owners consent.

“All future common charge increases and assessments over the entire life of the building use the schedule as a building block for consistency,” says Mark Levine, owner of three property management companies in New York City and principal of EBMG.

While the sponsor or developer needs to set percentages within what the law allows, they do have flexibility, adds Laura Mehl Sugarman, a partner at the law firm Benesch.

There are four methods for setting this percentage under the law, and typically the size of the unit and the floor it’s on play a role. But other factors can be considered, such as if one unit has advantages over others. The law also allows for assigning an equal percentage to every unit, or an equal percentage to all units within a class. The condominium’s documents will describe which method was used.

If percentages were set amid a conversion to condos, renovations in one unit may have justified a higher percentage of common interest at that time. If renovations occurred after the conversion, however, they may not lead to a higher percentage of common interest. 

Before a purchase, it’s a good idea for buyers to examine the Schedule A document to see the common interest percentage for the unit they’re interested in, and how it compares to others in the building. That way, the buyer will have an idea of what to expect when it comes to any future increases. And she'll have a better understanding of why condo common chargers are all over the map.