Doesn't the Maintenance Charge Cover the Cost of Running a Building?

July 14, 2015 — Not always. The importance of having a reserve fund has been coming up with greater frequency in the last few years. This past spring, we began managing a building and it was immediately apparent that the property was a wreck. In the field, our property managers were met with severe problems such as deteriorating elevators that were damaged from years of neglect, cracked sidewalks in need of repair, a leaky roof, asbestos situations in the boiler room and garage, and a temperamental boiler. And, of course, let's not forget about all the local law work that had not been done!

If Murphy's Law was to apply to any building, this was it! The challenge continued away from the building. Over time, we found ourselves receiving legal notices from irate vendors demanding payments. The largest ones came from oil companies because of the high heating costs of recent winters. We had numerous meetings with the board to come to grips with the enormous financial challenge. A more financially sound building would have turned to its reserves to address these issues. But this was not an option here. This building did not have any reserves.

A special meeting had been called to give all shareholders an opportunity to speak. The truth was painfully clear. There was no money for a rainy day. Ultimately, the board decided to impose a special assessment. Because of the magnitude of the financial challenge, the assessment will be a part of their lives for the next four years.

Anastasios Magoulas is CEO of All Area Realty Services.