The building next door to us suffered a major outage event. To wit, one major section of the sewer line collapsed and thus one wing of the building (21 stories, 165 units) was rendered uninhabitable as the units could not discharge any waste water.

The building moved the affected folks into a hotel for five days, paying for room and board as emergency repairs were made. The owners received no abatement, nor were they entitled to any.

If folks own a home and one room suffers damage from a tree that punches a hole through the roof or wall, does the mortgage company forgive n% of the monthly payment because part of the home is uninhabitable? Nope.

Just because a room is rendered unusable as the coop effects appropriate repairs does not mean one is granted a waiver of some of the maintenance fees. Stuff happens, so just move along.

If as noted by the managing agent the room is rendered uninhabitable because of an event that is the coop’s responsibility, waste pipe in the wall failed, heating/cooling unit (if coop is responsible) failed, etc. The resident may make a claim for abatement if the repairs are not performed in a timely manner. Typically this becomes one of litigation, unless both sides are enlightened. The operative term is timely.

PLease see:
http://realestateqa.blogs.nytimes.com/2009/02/20/how-to-handle-unresolved-repairs/

You should check with your attorney to make sure, but assuming that your Board president was not connected with the sponsor, it's generally within the rules for *anyone* to collect as many proxies as they please. These proxies must be signed and dated by the shareholder(s) of record. If someone gives out more than one proxy -- which does indeed happen -- the more recently dated proxy is the one that counts.

It is decidedly tacky for someone to elect a Board through a proxy-based "palace coup." Unfortunately, unless your lawyer can find some loophole you haven't mentioned, it's probably legal.

We recommend that if a shareholder wishes to vote by proxy, then the proxy and ballot should be returned to the managing agent. This isn't required, but it gives people confidence that their proxies won't be misused.

Ted, We had the same problem.
1-Check the original documents related to the building turning coop... Our Sponsor was only allowed to automatically have a seat for about the first five years.
2-As long as the Sponsor gives his proxies to a SH, in our case, it was legal and for 16 years we had a board domoniated by one SH.
However, two things happened to change this. The Sponsor stopped supporting this SH and eventually sold his shares. Often Sponsors dont care, give thier vote the the first person that ask, or -- believe that this person is helping them in some way. See if you can reason with the Sponsor.
3-After being blocked from getting on the Board, SH voted to expand the board from 5 to 7, changed our voting to non-cumulative, and were abel to ouste the tirants.
EMail Power... Organize the SH, and get everyone in the Email loop, communication, transparicy are the two most important tools you have. Good luck VP

Unfortunately, this is the all too common scenario.

In a handful of my buildings, I manage the sponsors shares as well as the cooperatives shares...
What I have observed however is most of the times in the past where the sponsor gave his proxies to the BP, it wasn’t even out of, or with the intent of specific support, but more out of an apathetic laziness….. As long as everything is going fine, might as well keep it the same mentality… Just giving their proxies to the BP because it is the easiest thing to do….

Many sponsors would consider abstaining from the vote if given a reason and asked to… I have on many occasions appeared so there is a quorum, then abstained from voting to allow a true democratic vote. This seemed to always be appreciated by the remaining shareholders…
You might want to suggest this the next time around….

~AR

Don't your building have a service contract with one of the areas elevator company's?

The elevator company that you contract, and management are chiefly responsible.
The elevator company performs the monthly maintenance, so a "failure to maintain" should never occur.
Management should always be on top of any and all open issues as well such as ensuring that the pit and elevator rooms are kept clean and free of oil, water & debris; plus ensuring that all reoccurring tests and inspections (many rules have changed this year)

~AR

Yes, the board is responsible to ensure that the managing agent, the superintendent, etc. follow all federal, OSHA, state, city rules and regulations.

What do we do?

We spend a few bucks and we hire an outside engineering consulting firm that specializes in elevator systems.

This engineering firm inspects our elevator systems quarterly and writes a report that we then forward to our elevator maintenance firm. Small firms have merged (been acquired by large firms) so there is no real competition. But do be aware, all firms are cutting corners and costs and even if you scream, there is so much business due to consolidation of service companies, that they don't care.

It ain’t pretty, but if something happens we have our engineering report as the basis of a lawsuit.

We complained about the poor quality of work to our elevator service firm and the VP of the service firm retorted: “Go elsewhere, we don’t need you”.

But, with so few firms, there aren’t qualified alternatives with staff that can respond 24x7.

And, many parts, such as door rollers that seem to fail quite often, are made in our favorite manual labor state: China.

Alas, this is the state of the elevator world, it isn't all up, very unfortunately.

I work as a Resident Manager, I make sure that my elevator company inspects the elevator twice a year and they have to sign off on it. Also every 5 years at my previous building which was pre-war, I recommended to my board to hire an engineer independent from our elevator company to inspect it and to give a full report of any necessary repairs, I thought this was a good idea, for the reason that if I were to ask the elevator company they would of found laundry list of problems were the engineer has nothing else to gain ($$) except an honest report. The managing agent should be much more pro-active, as far as the board goes they only know what the super and the manager want them to know, unless they start asking questions.

Thank you Joseph for sharing this... This is exactly what the protocol should be.

I like your comment about the Board only knowing what the super and manager want them to know because it is very true; and this is exactly why it is the managing agents responsibility to ensure continued compliance in these areas. This is something that needs to be (if not already) in every management contract.

~AR

Fleetwood Lock and Alarm Yonkers Ave Yonkers. Ask for Mike.

Time value of money?
I am sorry, but that is a typical self serving response by people who do not wish to take responsibility and wish to push things off into the future, just look around you today and see how well that opinion has done for people. Only a person with short term goals and little to no foresight would favor an IO loan (either personal or corporate)... Suck up the few extra dollars, add some to it, pay it bi-weekly (regardless of what they say, you can do it)and amortize that debt paying less interest and on a shorter term... that’s value... not paying someone interest and receiving nothing in return...

You are going to pay about 5% interest only I assume? How much is that a year that you are paying to the bank without amortizing any of your debt? now, what could you do with that amount of extra money every year if you were debt free? roof deck, gym, amenities, reserves, lower maintenance, etc...

I apologize if I appear a bit opinionated about this subject, I am opposed to working against your financial stability nd freedom...

Best
~AR

I completely agree with AR. As president of a financially sound building, currently with no mortgage, we have a policy against IO loans for individual shareholders and our board would not consider an IO loan for the building if and when we need one.

At current interest rates, you are certainly going to be paying out more in interest than you will be receiving on your investments, so there is no time value to be found there.

Tell the board they should reconsider and rework that loan for one that amortizes...

And do consider a fully amortized, no ballon payment, loan. That is what we have in our building. It was setup before I bought but it was a nice feature. A fully amortized loand will increase shareholder value

Has anyone found any lenders offering refinancing of underlying mortgages (self-liquidating) under 5% APR for 20-30 years

Not sure what the current rate(s) are but can't believe underlyings are below 5%. Check out Josh Rhine @ Meridian Capital. Don't have the # with me but they are in lower Manahattan.

Now that there has been opinions presented that are against interest only underlying building mortgages, are they any pro opinions?

And for those who gave opinions, what are your compelling arguments for these opinions.

Thanks!!!!

Jay... Here is a hypothetical scenario (there are several I can give.. but this comes to mind first):

The building refinances a 2 Million dollar loan interest only - 30 yr Am with a 1o year balloon.. this means that your monthly payment is $9166.67 for 120 months = $1,100,000.04 in interest that you paid and you still owe 2,000,000… So, in essence, it cost you a million dollars to do nothing other than push a 2 million dollar debt into the future…
NOW…
Refinance 2,000,000 at the same 5.5% with the same 30 year Am, but fully amortizing the loan.. your payment now is 11,355.78 per month (note that it is only about 2K per month difference) .. at the end of the same 10 year period, your remaining debt is about 1.6 million. If you add to the principle or pay it biweekly you can then cut it in half..
Here’s my point… Year ten… Your debt is less, equity is more and the value of your stock is worth more.
Year 20-30 when your debt free, your worth even more. Your way, the only way the stock value would increase is to count on the real estate market index and inflation to boost the value of the edifice… this way, you get the best of both.


~AR

So folks want a balloon mortgage, e.g.; interest only, to then stiff the owners five years hence.

In effect the board is proposing to have five years of freebies (lower monthly maintenance rates) and then when they leave, they want the residents who remain in the building to pay for their less than honest fiscal policies.

Quite frankly, any board that proposes to employ interest only mortgages for “n” years has abrogated its fiscal responsibility.

Co-op must have an axiom, pay as you go. There will always be capital expenditures, so if one pays for past capital expenditures in the future (balloon mortgage) what will finance the capital expenditures in five years? Will it be another balloon mortgage?

Inevitably, the residents in ten years will be faced with a mortgage market that refuses to lend anymore, the building will have at-risk facilities that demand immediate relief via high value capital expenditures with no money to fund the work. Next the building will be deemed uninhabitable….unless of course the residents pay off all outstanding mortgage balances in one fell swoop, by underwriting their pro-rata share of the outstanding co-op debt via personal mortgages.

Yes a very ugly picture, but one that can become a reality in due time.

My view is that any board that floats interest only mortgages has abrogated its fiduciary responsibility and thus should be deposed or sued for breach of fiduciary responsibility.

I’ll bet none of these folks has obtained an engineering study for capital expenditures for the building as required by the AICPA.

Just to give ya a swag….try this for size.

Using the “swag” number $40,000 per unit, this is the estimated capital expenditures most buildings are facing over the next fifteen years for capital expenditures outside unforeseen emergencies. If you can’t believe me, then ya need to do your own homework and tell us all what it is. So, if the co-op has 100 units, the estimated capital expenditures over the next fifteen years is $ 4,000,000; not adjusted for inflation which should bring it closer to $5,000,000.

Sure you can argue whether its $30,000 a unit or $50,000 a unit, but regardless it is a “big number”. So is the assessment program organized to bring these funds into the coffers? Bet not!!

So can ya pay off the balloon mortgage and do required capital improvements? I don’t think so?

But go ahead live cheaply today and stiff future owners.

After reading SK’s comments, I second her/his views.

As the value of the building declines due to delayed or deferred capital improvements and as the credit burden increases, the crossover occurs and the co-op maxes out its credit rating and worthiness.

This is no different sadly than folks maxing their credit cards. Then, there is no more credit and the image of debt overwhelming the individual is truly a tragedy.

What if as SK poses, an emergency occurs and there are no funds. What will you do? The inevitable is that residents receive emergency assessments in thousands of dollars payable in ninety days to extract the co-op from its filthy debt ridden mire. Hundreds won’t hack it, thousands is more like it. It may even be $15,000 or $20,000 a unit due within ninety days. Who has such pocket change?

What does the board say to the irate shareholders then? We didn’t know!!

Very sad indeed!

Amen SK...

They can always hope for a bailout package in 10 years!

~AR

We are within a few years of a ballon mortgage and have started discussing assessments to pay a portion of the outstanding balance down upon it coming due.

I'd suggest that you DO NOT consider a self liquidating mortgage as the prepayment penalty; usally the Yield Maintenance Formula, is a killer if you ever need to refinance.

I'd recommend a 10 year balloon with a 25 or 30 year amortization schedule. You are paying interest on money without gettting any benefit of a reduction of priniciple. The goal is to get rid of the mortgage not have it for life.

Most people think that having a mortgage is a tax deduction. This is crazy. Think about it... You give the bank $100 in interest and the Gov't gives you back $30. Does this make sense? If so send me $100 and I'll give you $30 back. Mortgages are nothing more than Ponzi schemes..

I believe it is better to pay off the mortgage and permanently reduce the maintenances then to carry a mortgage for 50 years and never pay a penny towards the priniciple.

Good Luck...

The roof deck and replacement are two seperate things regardless of timing.
Both items are a capital improvement as per IRS; however, I do not believe the roof deck qualifies for a j-51 (I could be wrong on this).

~AR

“A rent increase for work performed in the common areas of a building is permitted only if the work qualifies as a ‘major capital improvement’ ” as defined by the state’s Division of Housing and Urban Renewal.

To qualify for such an increase, Mr. Dobkin said, the improvement must be buildingwide; it must be for the benefit of all tenants; it must be for the operation, preservation and maintenance of the structure; and it must be deemed depreciable under the Internal Revenue Code.

“Before an increase can be allowed” by the division of housing, Mr. Dobkin said, “tenants must be given an opportunity to review and comment on the owner’s application.”

Acceptable grounds for opposing an application for a major capital improvement include that the work was incomplete or shoddy, that the owner failed to apply within two years of completing the installation or that there is a buildingwide rent reduction for an uncorrected existing violation, he said.

“The installation of wall-to-wall carpeting, covering the entire expanse of the common area, which is or was carpeted, may qualify for an M.C.I. increase if an owner can show that the useful life of the old carpeting has expired,” Mr. Dobkin said.

Although the Division of Housing and Community Renewal has not established a specific “useful life” for carpeting, an owner may satisfy the requirement by submitting the manufacturer’s specifications for the expected lifetime of the old carpeting and “before” and “after” photographs.

ST... You lost me...
What does DHCR have to do with it?

Are we talking about a Coop or Rent regulated apartment building?

Nevertheless, I assumed the aim and focus of the inquiry was for tax purposes and not raising a regulated rent via an MCI application.

Did I miss something?

~AR

Yes. read carefully - this is a coop question. is a roofdeck considered a capitol improvement so tha tyou may deduct costs form the profit when you sell your apartment.

DHCR has lots to do with it according to what i posted. stop think read.

ST –

Although all the information you posted is correct in its context... DHCR has nothing to do with the sale of an apartment, the taxes paid or anything having to do with the posters question.

The posters inquiry, although vague, indirectly questions the tax consequences, if any on a possible capital improvement.. The only factor that would effect this would be, or could be the details behind the roof deck such as if it was assessed for or not, if it is for all residents – 100% of the time and is it permanently affixed to the roof… The answers to these questions effect the valuation of the stock. How, can be viewed on the annual financial statements provided by the Accountant.

Now, just to ensure that I was not misinterpreting, or misunderstanding anything, I ran this question and your response by my in house CPA & Attorney, who were both puzzled by your response. Consequently; and with all due respect, possibly you can enlighten us as to how and why what you are talking about has anything to do with a cooperative sale? I would like to learn this.

~AR

is it very very simple. when you sell your apartment and make a profit you can deduct all capitol improvement contributions over the years you ghave lived there - things that the coop has paid for like a new roof - from the capitol gains basis. very simple. this includes capitol improvements that the coop has made. like a new roof, pointing, windows, etc. However, a roof deck might be a grey area. how can you not understand what I am asking??

Unfortunately I do not believe you know what you’re saying… Now you state something different and at the same time pose that you’re asking a question??

What you most recently wrote is common sense and not the issue, or the area of misconception.

The question I had for you is what the heck does the useful life of carpeting, DHCR and MCI rent increases have to do with it? According to your posts DHCR has some say in this and the useful life of carpeting and the possible rent increase a landlord may take has some effect on all this… maybe you did not realize what you cut and pasted?

A roof deck, and its qualification as a capital improvement was addressed in my last post.

The original poster BAJ should have also clarified his question so this off beat dialogue wouldn’t have gone this far… nonetheless, I apologize to the readers who have followed this!

~AR

AR oh for god's sake - you are like my passive agressive sister - you cant just answer the question and keep attacking the well-meant person trying to get a 100% answer. - I mean did you check withthe IRS? Who did you check with ? If you are not sure then just be a strong person and say so and stop trying to attack people. It is not helpful.

FORGET the DHCR posting. (actually if you read it you will see how it defines Capitol improvement and a deck may just be a luxury item - that is the entire reason it was posted. )

Hello - the dryer should be no more than 25 cents for each 7 minutes . Do not use the machines aht wont let you elect by the 7 minute blocks.

All your washing machines, and i mean all - should be front loading.

anyhow PLEASE get proposals from other companies. For the good of your building.

Yes, of course, We have proposals from HiRise,Automatic Indutries, Spincycle, Hercules, and Coinmac. Waiting to hear from Sebco. SDI didn't want to bid and Mac Grey never called back. Coinmac is our current vendor.

So yea we are not just going to one vendor

WE have them land are very happy with the operation.
I believe our dryers are metered at 45 minutes.
We have the card system and don't use coins.
How many units in your building? Coinmach will negotiate on contract terms.
I can give you a lot of info if you go further with them.

this guy may work for Coinmach. i find that i completely dry a large load of laundry at 28 minutes. NOT 45. That is when you fry your clothes as over-drying can create cause considerable wear and tear. 45 minutes is EXCESSIVE. VERY IMPORTANT - GET DRYERS THAT OFFER 7 MINUTE INTERVALS AT 25 CENTS PER INTERVAL.

I agree that there should be $0.25 meter rates, though the vendors I've talked to all want to only give 5 minutes for $0.25 ($1.75 wash) I know everything is negotiable

Question is how good are the dryers? I know that in a new 60K btu/hr ADC dryer I can dry a set of sheets in 15 minutes. Will the LG driers work as well? ON the same or less gas?

Some of the responses have misunderstood your question. I think your answer is in the specs. If an ADC dryer puts out 60K BTU/hr, compare that with what the LG puts out - same BTU rating should give you the same drying power and the same gas consumption.

FYI, we changed our laundry rooms a couple of years ago. The triple loader washers were LG - beautiful washers but we eventually had to replace them with Maytag because of reliability problems with the digital control system. Maybe the newer models have overcome the problem but it would not hurt to ask your vendor.

"This guy" doesn't work for Coinmach. "This guy is the President of a co-op with 100 units in Manhattan and has extensive experience negotiation with laundry companies.
We haven't had one individual complain about fried clothes.
Try drying your clothes on "permanent press" or "delicates".

by fired clothes I obviously mean over-dried clothes. it is not great for them. why waste all the electricity an money overdrying eveyrthing? 18 minutes does it.

because the building will pay for electricity and water, the machines must be the most energy efficient out there. Here is what Consumer Reports likes in LG's ( yours should be comparable - oh yes and do NOT pay more than 25 cents for a 7 minute cycles and no 5 minute cycle. Just negotiate and they should renovate your laundry room for free. tiles on floor, etc.

LG Allergiene WM2688H[WM]A
Front-loading models
$1500

78
95
LG WM0642H[W]
Front-loading models
$900

78
95
LG WM2016C[W]
Front-loading models

I see the conversation is going sideways here... To answer your question, LG is very reliable and efficient.
LG Corporation is on the fast trac to being a #1 manufacturer (I purchased LG for my personal washer & Dryer)

And no, I do not have stock in the company!
~AR

Check your proprietary lease. For our co-op, each shareholder (whether it's me or the sponsor) is required to keep their apt clean and free of interlopers. If the board determines that the shareholder isn't taking care of the apt, the board can clean the apt (and hire an exterminator) and charge the owner.

So read the contract!

bedbugs are not about being clean. they are not related to dirt. that is a misconception. in rental apartments, the landlord must pay to get rid of them - the coop is the landlord - so...?

You're right -- and I didn't intend to imply that the two were related. What I meant to write was that our proprietary lease requires apartments to be both:

A) Clean, and

B) Free of pests.

Same rules apply. Same answer, too: It's in your own proprietary lease. You can't take someone else's word for it, just look it up yourself. It's that easy.

We hired a jewel of a superintendent (non-union) through a recommendation of our HVAC vendor. Yes, we asked several of our vendors: electrical, plumbing, HVAC, etc.

Questions:
1-What is the benifit of a non-Union Super?
2-If we already have a union Super (and staff), can we (we like our present super, in the future) change?

You answered your own question. What is the benefit of a union super??? We have been non union for 20+ years with no problems other that the super having a family and needing more rooms/benefits.

I have great success with Graigs List for non union employees, or if you place an ad in the weekend NY Times, you will also get at least 200 resumes to filter through.

It's an arduous task, but well worth it. plan on reading 200-400 resumes, interviewing 20, re-interviewing 3-5, final 2... perform your background checks, then hire...

There are many good workers seeking positions right now so you should not have any problem.

~AR

They have a jobs board

http://nycsta.org/

If the leak came from a co-op pipe, then the co-op is responsible for the damages. (If you want to double-check, look at your by-laws or proprietary lease.) The property manager must notify your insurance carrier immediately of the leak and say that the co-op may file a claim to cover damages. Then the co-op should move as swiftly as possible to clean the apartment.

Notify your own insurance carrier.

Yes, the co-op is required to clean and then repair any damage.

But one’s lease may stipulate that the co-op need only repair the floor, but that any improvements, such as carpeting is the onus of the resident and thus the resident’s insurance carrier.

Most likely the problem took place on the 1st floor. This may be a warning (depending on the age of the building and other problems in apartments below) that the main lines should be cleaned on a periodic basis to prevent similar problems in the future.

Harvey and other respondents are right!

AdC

ADC.just curious as to why you think the problem comes from the first floor? The unit where the water came up through his sink in 2. Beneath him is a duplex on first floor and basement, and that unit is the only one that has a bathroom on this line--two in fact, basement and first floor. The reason I'm interested in your reference to the first floor, and it may have no bearing on the flood issue, but that first floor unit has a very problematic shareholder with lots of OC, arrears, etc. We are taking very serious steps with her, and wonder if there is some "housekeeping" issue down there that could have caused this line to back up. There are many cats and dogs being harbored there. Any thoughts?

There a few reasons for a backup that causes water to flow back into a toilet or sink.

Typically the water needs to be from somewhere, usually above the sink that experiences the flood. But, except for opening a faucet the apartments above are not the cause of the blockage.

So the blockage is either below the sink that experiences the backflow or adjacent. In our building, the kitchens are back-to-back and so the adjacent apartment can be the cause of the blockage and outflow as has occurred when some folks operated their sink disposal units and did not use a sufficient supply to water to flush the materials onto the waste line. This caused an impairment to the flow and caused water to backflow into the adjacent kitchen sink.

In the case of other buildings, with a single sink per floor emptying into a waste stack, the impairment needs to be below the sink that experiences the backflow. This is probably the case in your building.

Impairments could be anything, e.g.: accumulation of waste (a waste dam), pipe collapse downstream, insufficient waste flow, e.g.: undersized waste pipe (if folks illegally attach washing machines)

You'll need to check your Proprietary Lease, but most leases explicitly state that the coop is *not* required to repair or replace any damaged furnishings, rugs, wallpaper, or the like. That's covered by the shareholder's own insurance. The coop only needs to repair floors and to repair and replaster walls and ceilings.

An excerpt from our own lease's Paragraph 4(a), "Damage to Apartment or Building":

"Lessor [the coop corporation] shall not be required to repair or replace, or cause to be repaired or replaced, equipment, fixtures, furniture, furnishings or decorations installed by the Lessee [shareholder] ... nor shall the Lessor be obligated to repaint or replace wallpaper or other decorations ...."

This sounds harsh, but actually makes sense. Why should the entire coop corporation be on the hook for massive damages if a shareholder decides to paper the walls with priceless medieval tapestries, and they are destroyed in a flood? The coop is obligated to restore the structural integrity of the apartment; the shareholder's insurance policy takes care of the rest.