Assessments are part of life for the owners of co-ops and condos in New York. (MBPROJEKT/Maciej Bledowski/iStock)
As you search through apartment listings, you may come across some condos and co-ops that reference monthly “assessments” for a specific time period. These charges are in addition to maintenance fees and common charges, which are the usual monthlies associated with owning an apartment in NYC. If you’re buying a place, it’s important to understand assessments and how they can impact your monthly cost of ownership.
Why Do Boards Assess Apartment Owners?
Generally, assessments are used to fund capital improvements in a building. Capital improvements can be anything from renovating the lobby to installing a new furnace system to a facade restoration. Buildings will often have financial reserves available to handle small improvements or expected maintenance. However, for bigger-ticket items, the condo or co-op board may decide to assess owners to raise money for these improvements.
It’s important to note that while some capital improvements are cosmetic, such as renovating hallways or the lobby, others are required by law, such as facade work and boiler maintenance. Boards must vote on the work and negotiate with their respective management companies to bid it out and receive quotes.
The decision to assess unit owners is usually not taken lightly. Boards can choose to assess owners in order to pay for all the work up front, or choose to finance the work, meaning that unit owners will service the debt over time.
How Do Assessments Work?
The lifecycle of an assessment begins with a board creating a budget for a capital improvement. Once the board agrees on the specific improvement and the budget associated with it, a timeline will be put in place for financing and project completion. Some projects require significant planning (such as a lobby renovation), while something like a boiler replacement could happen within a week.
If a project is expected to take a year from the moment of sign-off, one can expect that an assessment may be in place over that same time period. If a project is shorter, and the money must be raised immediately, the time frame of the assessment is scheduled accordingly.
How Much Does Each Apartment Owner Pay?
Each apartment owner will be required to pay the assessment. The exact amount will be dependent on the interest of each owner, in addition to the total assessed amount and the duration over which the assessment must be paid.
Here’s a hypothetical example: You own a 2-bedroom apartment in a 90-unit co-op building on the Upper East Side. Based on the number of shares you own of the co-op (generally based on square footage and floor area of the building), your ownership interest in the co-op is 1.5 percent. Imagine that the lobby hasn’t been renovated in more than 20 years, and co-op owners have expressed concern that unit resale values are lagging because of the outdated lobby. The board has decided to renovate and modernize the lobby, which would potentially increase unit values — a boon for every owner in the building. The cost of the renovation is expected to be $650,000. The renovation requires a slew of professionals, and is expected to take exactly one year from start to finish, which means that the money to finance this project can be raised accordingly.
To calculate your share of the total assessment, you multiply the 1.5 percent by $650,000, which nets out at $9,750. However, you will be assessed this amount over an even distribution of 12 months, which means you need to divide the $9,750 by 12. This gets you to a total assessment of $812.50 per month for 12 months. It might be a tough pill to swallow in the short-term, but the long-term benefit of increased unit values will be well worth it.
Do Assessments Need to be Paid?
Assessment are not voluntary. They are mandatory. Failure to pay assessments is no different than not paying your maintenance or common charges. If you fail to pay, the board may file a lien against your property.
Can You Tell If a Building Will Have an Assessment in the Future?
It’s safe to assume that every building will require an assessment at some point. Maintenance, cosmetic upgrades and legal requirements will ultimately require capital improvements. This just comes with apartment ownership, and you should be prepared for it as an owner. An upcoming assessment for a capital improvement shouldn’t hold you back if a property suits your specifications and meets your price point.
Overall
New York City real estate is continuously evolving. Part of that evolution involves new technology for building systems, new regulations to keep buildings safe and environmentally friendly, and evolving buyer expectations. Existing buildings need to keep up with this changing landscape. The only way for buildings to be able to do so is through capital improvements, which often need to be financed by assessing unit owners. Condo and co-op boards are ultimately the parties that vote on these capital improvements and incur assessments on all unit owners.
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