Creative Ways For Co-op and Condo Boards to Balance Their Budgets

In their quest to balance budgets, many co-op and condo boards rely, with reluctance, on one of two unappetizing options: raising monthly charges or levying an assessment. But there are more palatable ways for boards to balance their budgets. Here are three examples:

1. The Cooperative and Condominium Tax Abatement. Recently extended to 2026, this beloved abatement reduces the property taxes of eligible co-op and condo owners in order to bring their taxes in line with those of single-family homes. Boards typically allocate the amount indicated by the Department of Finance for each unit as a credit on the shareholder’s monthly maintenance — and will often simultaneously assess back the entire amount on a per-share basis in order to raise funds. The building's coffers grow with no pain to shareholders or unit-owners.

“Raising the assessment against the co-op abatement is an ideal way to balance a budget and minimize maintenance increases to shareholders,” says Carl Borenstein, president of Veritas Property Management. But, he cautions, “funding a smaller capital project this way is maybe an option, but not any type of larger capital project, because that would just be the equivalent of a regular assessment.” And that, Borenstein points out, would defeat the whole purpose of slipping in an assessment in an easily digested way.

“Boards can make the assessment a little bit larger and utilize that differential for [small] capital improvements,” agrees Mitch Unger, controller and partner at the real-estate management company The Lovett Group. “Is that the best route to take? I think boards need to take the pulse of their shareholders and then make a decision.”

2. Contractor Cooperation. Some contractors are willing to help finance your project, from providing interest-free loans to creating payment plans. One such contractor is Dan Kilduff, director of business development at K Restoration and Roofing. 

“We have an Upper East Side building that is only capable of raising half of the contract funding within the first year,” Kilduff says. “We presented an option for fixed payments throughout the second year. We will complete the job in full within the first year, and the building will pay out the remainder during the second year at 0% interest. So that's just one example of offering an advantage to our clients.”

3. Capital Contributions. A third way to feed the reserve fund is to set up a mechanism called a capital contribution.

“Buildings determine on average what they're going to need every 10 years or so, then divide that number by 10,” says A.J. Rexhepi, chief executive at Century Management Services. As an example, a typical 100-unit building can expect to pay about $1 million every decade on various capital projects. In this example, $100,000 would be raised each year by adding a fixed amount each month to maintenance or common charge fees, and then putting this capital contribution into reserves. “It becomes part of the budget and residents eventually get used to it,” Rexhepi says. This method relieves the board from having to repeatedly announce unpopular maintenance increases or assessments.

How is a capital contribution different from an assessment? “It's not,” Rexhepi concedes. “It's just that assessments have got a start and an end, whereas a capital contribution to build the reserve fund for capital improvements doesn't have an end.” And that, paradoxically, lessens the pain of making the capital contribution.