Condo Carrying costs: offering plan vs actual?

Lofty, which condo? Inquiring minds want to know where you finally ended up.

As treasurer for my condo, I upped our common charges by 30% when I took over from the sponsor. Interestingly enough, not a single owner objected to the increase. The bulk of the increase was to account for energy costs (the offering plan was written in 2005, we moved in early 2006, and I took over in 2007) and to create a reserve fund- which the offering plan did not have. Most other costs seemed pretty close to be in line.

Haven't ended anywhere yet. I'm renting in the neighborhood - an excellent way to find out which blocks you like etc. And very convenient for popping over to look at things, and for walking the street at many hours of day and days of week. Who knew Roebling was arumble with skateboarders on their way to McCarren Park at 4 pm every school day?

Seme, when did you take over? Was that after 2 years?

I took over after 1 year- I believe 2 years is the norm though.

Semerun, is it typical for condos to have a few hundred thousand dollars in a reserve fund? I've heard that many condos have no reserve fund and that some buyers have had difficulties getting a mortgage because banks don't want to lend for condos without a reserve fund? Also how do condos select their managing agents for the building?

I thought there was some sort of legal regulation in regard to projected maintenance charges vs. actual. Possibly only for the first year? Sponsor's liability if it goes above prospectus projected?

The sponsor is definitely going to lowball the CC as much as possible. Definitely check for a reserve fund. Condo will have lower maintenance than a co-op though because there is no building mortgage. Also it may have a tax abatement depending on the location

lobster - sponsors are typically LLCs comprised of people that have worked on more than one project together. They'll most likely work with a managing agent that will give them the lowest price, that they've worked with before, and will do exactly what they say.

ph41 - there is some percentage 20 or 25 I think where you can get out of contract if projected maintenance changes before the closing. I think this is stated in the offering plan.

i've recommended this book before: The co-op bible by Sylvia Shapiro. It was so helpful in answering numerous questions that I had about buying a co-op or condo in nyc

Lobster, I can only comment on my building. I was a first time home buyer purchasing in a small new construction condo building. I have a finance background- and when one of the other owners told the others I was quickly nominated for the treasurer role. In our case, we also became a self-managed building real quick- because the sponsor wasn't doing their job and wanted out (we were 100% sold prior to receiving the permanent Certificate of Occupancy). The sponsor was supposed to be our managing agent for the first year- but since I was doing much of the job they were supposed to, we didn't renew the contract for the second year. I learned a lot, made a few mistakes along the way, but since I saved the owners so much money and put us on solid financial footing in very short time, no one raised hell. It was getting too time consuming for me, so we finally did hire a managing agent- and it was like shopping around for anything else.

In our case, I budgeted for 11% of our annual budget to be allocated toward a reserve fund. I felt that I wanted to strike a balance between keeping our common charges low and building a reasonable reserve fund. We now have about 8 months of expenses in our reserve fund.

Lofty, I think it really depends on the sponsor/building. In general, I would err on the side of understating, as they're obviously in the business of attracting buyers, and lower monthlies generally means more interest. However, there are certainly cases where they're accurately stated. In my building, common charges were exactly as stated, and looking at the budget, they actually overestimated electricity (which is a considerable expense). That said, they definitely started us out with an incredibly cheap management company and super to help keep monthlies low, probably knowing that we'd change them as soon as possible. We haven't raised the costs, but I think it's inevitable.

Thanks, this is really helpful.