Teachable Moments: Finding Hidden Financial Revenue
Dec. 10, 2013 — One of the biggest concerns for co-op boards and condominium associations alike is securing sufficient revenue without charging residents more than they reasonably can handle. Yet more often than one might think, extra revenue can materialize simply by scrutinizing accounts already in place — whether it's making sure your commercial rents are being calculated properly or finding that your building's electricity bill is too high because some apartment are freeloading off the building's juice. In this latest installment of our Teachable Moments series, two veteran property-management pros relate their personal, firsthand experiences with just this kind of cash-flow scrutiny.
Anton C. Cirulli
Managing Director, Lawrence Properties
When you have 87 years of management experience you become smarter just because you've already jumped eight decades' worth of hurdles, and you see everything through wise eyes. Because of this, we were able to reveal several crucial, undiscovered issues for a new client. For 10 years, individual owners were benefiting from improper wiring, and the building was paying for their electricity. We corrected the wiring and collected the money — all 10 years' worth. We also found an excess $12,000 in an escrow account because the bank held more money than was required. The lesson we teach is the importance of awareness.
Timothy Grogan
President, Grogan & Associates
We manage a 50-unit co-op where the sponsor had retained the commercial space under a master-lease situation. When we took over the property and were preparing the first year's financial budget, we found that the commercial rent was low. We then went back and looked at the master lease and recalculated what the rent should have been from the inception of lease up to the time that we had taken over the property. The net effect ended up being a $160,000 windfall for the corporation. (We calculated for six years, which is as far as the statute of limitations allows.) Following that, the additional rent that the corporation brings in has also increased because the base rent has been increased. This wasn't picked up by the building's accountants, the board or anybody else until we came on. The real lesson behind this is knowing how to address commercial leases and having commercial lease abstracts put together so that you know when your commercial leases are up, what escalation charges are out there, how to charge them, and when they need to be charged.
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