Bulk Buying: A Primer
There are many other ways to use collective creativity and imagination to save your building money The power of bulk purchasing is one tried-and-true method. And in light of the tremendous pressures on budgets, bulk purchasing should not be considered an option, but a necessity. Here are four prime areas: electricity, appliances, insurance, and cable television.
- Electricity
Start by looking at how your building is billed. Most co-ops and condos are either master-metered or directly metered to an electricity provider. If it's the latter, that means each resident pays for his or her electricity directly to the provider. The board has little or no involvement in this process, other than providing access when requested.
In the master-meter situation, the board is very involved in the delivery and payment of electrical services. Here, the building is actually purchasing the electricity used by its residents, is billed through a single master meter, and pays the bill.
Some boards with master-meters are attempting to implement submetering . This means that the building is still charged on its master-meter for electricity, but the cost is then billed back to the residents based on their usage. Advances in technology in the past decade have made submetering a viable option for many. In addition, since the energy savings are significant, New York State has several programs, such as NYSERDA, that provide grants and loans to encourage submetering.
According to Public Service Commission regulations, a master-metered residential co-op may submeter if a majority of shareholders vote in favor of it. A board will need to check whether its proprietary lease and bylaws need to be amended to allow it. If so, many of these documents require a two-thirds affirmative vote.
- Appliances
Many buildings have each used its purchasing power in order to obtain significant discounts on appliances. For example, the board of one co-op in the midst of a large façade project was concerned that many of the shareholders’ through-the-wall air conditioners — rusted, old and very heavy — could damage the new façade. The board contacted many local A/C dealers and was able to negotiate a tremendous discount on new air conditioners for the shareholders. In addition, the board offered to have the new units installed at cost by the maintenance staff — and everyone saved money on electricity since the new units were energy-efficient.
- Insurance
Over the past few years, many boards have begun requiring that shareholders or unit-owners maintain homeowner's insurance. In order to help facilitate this situation, some co-ops have actually negotiated with insurance brokers in an attempt to get a discount on the premiums. As a side benefit, the level of service is generally better for these shareholders since they are now part of a group, and not simply a single account.
- Cable TV
Most shareholders in co-ops enjoy substantial savings on their cable bills thanks to a bulk billing (“shared savings”) agreement between the corporation and the local cable provider. These may last up to three years and usually provide for a deep discount off the cable bill, sometimes up to 33 percent, as long as a certain number of apartments are signed up. The co-op may be responsible for paying the cable company directly and then charging each shareholder the divvied-up amount. Be forewarned, however, that the number of users goes below the stipulated amount, then either the board must make up the difference or the shareholders can lose their discount and have to pay the published rate.
Geoffrey Mazel is a partner at Hankin, Handwerker & Mazel.
Adapted from Habitat February 2008. For the complete article and more, join our Archive >>