Question: I am considering buying a co-op unit in West New York, NJ, and I found out that the building will refinance its mortgage next month. It also plans to replace a boiler at $120,000 this winter (which, by the way, was repaired for $110,000 last year). How can I find out whether this will incur any increase in the co-op fees (i.e., the maintenance charges), or an assessment?
— Watching My Pennies in West New York
Dear Watching:
Benjamin Franklin famously quipped that there are only two certain things in life: Death and taxes. Had the founding father lived into the modern era, he most certainly would have added “maintenance fee increases.”
Maintenance fees always go up. Maybe not every year. Maybe not for a two- or three-year stretch. But they will go up over time. You can bet on it.
That said, let’s look at your specific situation. You say you are considering buying, so ask the seller. They may be willing to share some information. Likewise, you can contact the building manager and ask. You already have some back-channel information, so your source may be helpful, too.
All of your questions about the financial health of the building will be contained in the co-op’s annual reports. You can learn the amount, if any, in the reserve fund. If there are multiple years of reports available to you, you can learn about past increases, which should give you at least an idea about what may come in the future. (Read the footnotes. That’s where you’ll find the most information about fee increases and the overall health of the place.)
Some sellers may be reluctant to share financial information before you make an offer and they accept it. A financial review, which your attorney should conduct, is a fairly standard contingency in any offer. If your lawyer finds the building isn’t financially sound, you should be able to take back your offer without penalty.
Two final notes: Co-op refinancings have their own pitfalls. Find out the terms of the new deal. Also, are you sure they spent $110,000 on the boiler last year and are getting reading to spend another $120,000? That sounds squirrelly to me. Either the super or the manager doesn’t know what they’re doing, or the board’s a bunch of patsies. Either way, caveat emptor!
David Crook is a veteran journalist and author of The Complete Wall Street Journal Real-Estate Investing and Homeowner’s Guidebooks. Do you have a question about anything real estate-related in NYC? Write him at askus@streeteasy.com. For verification purposes, please include your name and a phone number; neither will be published. Note: Nothing in this column should be considered professional legal advice. If you have a legal issue, consult an attorney.
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