Why Would a Co-op Not Increase Maintenance Fees Every Year?

July 24, 2015 — How come a co-op doesn't increase maintenance fees each year? Costs go up, right?

The board proudly announces to the community, "There will not be a maintenance increase for the coming year!" The members add, "There has not been an increase for several years." Shareholders and owners might ask, "Is this a good thing or a bad thing?"

Shareholders and owners should question why the maintenance has not increased. Did operating expenses decrease? Is there money going into a reserve fund? What capital expenditures are anticipated? Is the budget balanced by drawing down savings?

A fact about property management that never changes is that everything always changes. Buildings start deteriorating from the moment they are constructed. Therefore, given an aging infrastructure and increased operating expenses, how can the maintenance realistically remain the same? No one wants a maintenance increase. If one is required because of an operating deficit, it will not go away the following year.

Imagine what would happen if deficits were allowed to grow over several years as inflation increases two to three percent per year? Meeting the shortfall by drawing down on savings will eventually require a large maintenance increase to balance the budget and to reestablish a reserve fund. Are boards accountable for their financial decisions? The answer is yes, but shareholders and owners also share responsibility since they receive their accountant's annual report.

It is essential that everyone review the accountant's report carefully. In the short run, shareholders and owners may celebrate maintenance remaining the same; over time it is unsustainable.

Alvin Wasserman is director of asset management at Fairfield Properties.