Outrageous increase in common charges

Get ready for even more increases. The cost to heats these enormous buildings are going to double by this winter. That's why your son is the smart one for renting these costs will fall on the owners with very little being pushed on the renters.

Seriously think about selling and then tell your son to rent from someone else. It would probably be cheaper to rent for all involved in your situation. Good Luck you have a tough decision. Or just raise his rent 18%.HAHAHA. Business is Business.

"with very little being pushed on the renters."

That's a good point dco. While the airlines, grocery stores, condo buildings, and utility companies are raising prices because of fuel costs, landlords will sit back and take it on the chin. These landlords are such philanthropists, always looking to make sure renters pay as little as possible.

mmutsch, don't bother with the managing agent and the board, but you may want to try writing your congressman. Not that it will make any more of an impact, but at least you will be yelling at someone closer to the real issue.

Maybe we should all move to North Carolina where fuel costs aren’t increasing and costs for everyday items are stable?

JuiceMan, I think the point is that if you're a rental tenant, and have signed a guaranteed two or three year rental contract with a landlord for specific annual increases that are fixed or capped, the landlord WILL indeed have to 'take it on the chin' until such time taht the contract expires, regardless of CC increases.

fair enough malraux, but dco's advice was for mmutsch to sell the place and have her son rent somewhere else. Do you think new leases signed in the coming months will consider the increased costs landlords are experiencing or as good philanthropists, they will continue to eat them? Secondly, I don't know for sure but 2-3 year contracts don't seem to be the norm in NYC, your market may be different. Exposure to commodity increases should be limited to a 9-18 month period, assuming some cost increases were factored into the initial rent.

Thanks all for your input. I get that energy costs are going up and I know that North Carolina is not NYC. However, does that mean that if the Board raises common charges 25%, 30%, etc. the homeowners have no vote or say in such decisions. As President of our Association Board in NC, an increase of such magnitude would need a vote by the homeowners. I live in a gated, golf community on the coast where HOA fees can be steep, but 18%.... no consent of the homeownes - effective immediately is shocking!

In making a major investment in a new NYC condo, which of the rules regarding potential cost increases did you and your attorney and agent miss? On top of raising charges to cover increased operating expenses, where are you on the tax abatement in your building. If you have one, brace yourself if you wait to resell for another few years until it begin to expire. You may be shocked at how the costs that reflect the true unabated taxes plus monthlies reflecting increased fuel and labor costs may impact values of the apartment.

Do you have any proposed alternatives for the Board? They can't run a deficit and ostensibly no one is making money off the increases, so what are you advocating?

mmutsch, I am the owner of a new construction condo in Manhattan, and while this is different than a condo conversion, I imagine there are more similiarities with regard to finances than differences. I didn't really want to be on the board of directors for my condo, however we have a small building, and I have a financial background- so I wound up as Treasurer. When I went into contract with the condo, I noticed that the financials reflected an artificially low common charge...obviously to try to sell the building- I wasn't concerned by this because I figured that we would have a dramatic increase in the common charges within the first 2-3 years. I wonder if that was the case in your condo conversion as well. When I reviewed the financials, I noticed that there was no funding for reserves and the budget for heating fuel was a bit low during a time of rapidly increasing fuel prices. I also noticed that the budget for other items seemed like they were also a bit on the low side, requiring minor adjustments along the way. When I took over as Treasurer a year after the sponsers control, I did some analysis on expenses and started looking at putting in place a reserve. My calculations were conservative but the final tally meant an average increase of about 30% in common charges for every apartment. I approached the owners with this- and luckily, every single owner recognized that our existing common charges were artifically low. We wound up passing the 30% increase. I wasn't thrilled that my common charges were going to increase by 30%, but I did know far in advance that this would need to happen. It's now 1 year later since the increase, and I believe that our building common charges are stable for the next year. If energy prices continue to increase, or at least stay at the current levels, I wouldn't be surprised if we had to increase the common charges another 10-15% in 2009.

Relating back to your 18% increase, are you sure the financials were on target in the first place? Remember energy prices have soared- and the northeast is far colder than the Carolina's requiring a far more expensive winter (although this past winter was rather mild). As a past President of a homeowners association and a son that works in the financial markets, you should have no problem making a fair determination of the buildings financials...although of course that assumes the board is releasing enough detailed information to make any determinations (my friend in Jersey City is having this problem).

I wish you the best, and let us know how things turn out.

Cheers

I also forgot to mention that if the Sponsor still controls the building that the owners have little say in management decisions- so they can decide to increase the common charges with no input from the owners. Go back to the offering documents/prospectus and verify this. There should be a section that talks about Sponsor control of the building. In the case of my building, all units sold immediately, so the sponsor only had legal control for the first year- after that, they were ousted, and control was taken over by the apartment owners.

semerun, I went to contract on this apartment in 12/05 and closed when the building finally got their CO in 7/06. I probably bought at the top of the market and this building sold out very quickly (less than a year) due to the low common charges, 421 tax abatement, and the financial district was up and coming. Truthfully, I overlooked whether or not there was a annual cap on the common charges - although, I'm not sure it would have made a difference at the time. Even though the building is only two years running, there is a "healthy" reserve due to the fact that anyone who buys must put in two month's common charges at closing which goes toward the reserve fund.

I know energy prices have soared and we are probably in for even higher prices and if 18% is the number to meet these costs so be it. BUT, what about communication with the homeowners - dosn't the Board and the managing agent represent the homeowners? I believe you were successful in getting a 30% increase due to effective communication. Notice of 18% increase was received yesterday - due tomorrow. And, if history repeats itself, I probably won't see a budget for another 4 - 5 months.

It will be interesting to see how many other buildings in NYC will experience similar circumstances due to increased energy costs.

mmutsch, in my building there is no vote for increases in common charges. With labor and energy costs over budget, we received a notice that common charges would increase (I think it was close to 12%) and there wasn't much debate about it. When I looked at the budget, it was pretty clear why it needed to happen. As for assessments (elevators, boilers, lobby renovations, etc) those are discussed in more detail, but there are certain things the board will just do if it is deemed necessary.

Where in NC are you? I married a Tar Heel and have lots of NC ties. LOVE the coast.

mmutsch, how many apts are in the buliding ?

Why not ask some questions of other owners maybe they agree with you; then check the budget of the board to see where the money is going.

I moved to Wilmington, NC, from NYC about 8 years ago. Wilmington is growing by leaps and bounds with people moving here from NY, NJ, CT and DC. The weather is great about 10 months a year, taxes reasonable, housing along the coast is expensive but a very good "quality of life". The real estate market has been terrific, however, we have slowed down because so many people can't sell their homes up North. However, back to NYC - my building has 103 units and I believe I made a fairly good investment. But if the common charges continue to jump 18% or more a year - perhaps not such a great investment!!!

I look at Streeteasy.com all the time to keep abreast of what is going on in the real estate market, but I have never posted a comment. Thank you all for your thoughts.

You mentioned it is in the financial district, do you have a landlease building?

mmutsch, check the offering document - the building probably had maintenance subsidized by the developer for the first two years. A common practice.

Since it's a condo the property taxes are probably assessed directly against the unit, but being a nonresident owner you can't claim the Starr reduction.

You have a legal right to review the financials. That's the first thing I'd do. Unlike JuiceMan's nonsensical comment about "taking it on the chin," you may want to go to my favorite website, nybits.com, and try to identify an equivalent market-rent building to see how much rents are. Because if you sell you may have to take a loss - conveyance taxes are extremely high in NYC - and if your son leaves and you rent to someone else, you may not be able to recover your costs. Just because costs go up does not mean that landlords can charge more rent to cover those costs. (I wish JuiceMan would learn this simple economic principle - he just started another thread about it!) Your apartment will bear only what the market will bear, and the market right now is Bear, much of it caused by Bear.

Isn't that poetic? ;0

OP -- is this building 15 broad ?? (starck)

yes, go to nybits.com and find all of the no fee, luxury penthouse 3/2's for $2500/mo. Just don't look at apartments over $4000, because those aren't really $4000/mo, they only seem like they are $4000/mo. The only apartments people rent in NY are under $2500 which prove to you that renting is half as expensive as buying.

Oh, and when you are doing a rent vs. buy analysis, include principal...um wait, don't include principal.....um wait. hmmm I'm not sure. Anyway, 2x. That is all that matters, show me some numbers different...., oh.. not those numbers, show me other numbers. 12x, errrrr I mean 15x. No, you cannot break even on renting vs. buying, oh wait a minute.....you can, but only if it is around $1000 /psft. um yeah, that's it. $2000/mo for 5000sqft with a park view on nybits.com. Did I mention no fee? Did I mention buying is 2x more expensive than buying? but not all the time, actually I can only find one or two extreme examples and only if I take extreme liberty with my numbers....17x. yes. Or is it 15x? hmmmm

JuiceMan, you've gone apopletic! What a hilarious post! You're having a nervous breakdown right in front of us all! OMG!

At this point, JuiceMan, you must admit you have a severe character flaw - besides that funny thing you just posted, now you're ascribing quotes to me that I did not make, or mixing them up, or whatever.

"find all of the no fee, luxury penthouse 3/2's for $2500/mo."

Never said they existed.

"The only apartments people rent in NY are under $2500 which prove to you that renting is half as expensive as buying."

Never said that. However, nybits does show 737 records found under $3,000 in Manhattan, and 707 over that, with of course duplicates at the $3,000 level.

"when you are doing a rent vs. buy analysis, include principal...um wait, don't include principal.....um wait. hmmm I'm not sure."

Using the white paper we were discussing, principal does not figure into the equation. It may figure into other equations, but as yet you have not given me the one you want to use.

"Anyway, 2x. That is all that matters, show me some numbers different....,"

Yup, that's all that matters.

"oh.. not those numbers, show me other numbers."

Which other numbers? The ONE apartment you found where the figure wasn't 100%, but 27% overpriced? An apartment selling for $1000 psf, exactly 40% below the median? Comparing it to a brand-new rent-stabilized building 4 blocks over in a much better neighborhood?

Please.

I did the NY Times slide thing, came up with the same answer.

"12x, errrrr I mean 15x"

As I said, 12x is normal, 15x may be a good entry point given that the benefits of ownership accrue upfront, whereas the benefits of renting accrue toward the end, all things being equal. I've always said that.

"No, you cannot break even on renting vs. buying, oh wait a minute.....you can, but only if it is around $1000 /psft. um yeah, that's it."

Show me one where you can. $800 psf is the breakeven point. Perhaps malraux's $17,000 per month fantasy that you can rent a virtually identical one a few blocks away for $8,500?

"$2000/mo for 5000sqft with a park view on nybits.com"

Never said it.

"Did I mention buying is 2x more expensive than buying? but not all the time, actually I can only find one or two extreme examples and only if I take extreme liberty with my numbers...."

No, actually, not only is it the norm, it has been demonstrated by many people (including me) comparing the exact same apartment for both rent and for sale.

"17x"

Not a number I used.

LMAO.

This is the next disaster to hit the economy and common charges. How are people going to pay to heat their houses or buildings. It is going to be a matter of survival for most people. There will be nothing left over at the end of the month for any discretionary spending. This economy will sustain a very deep and long rescission.

http://www.optimum.net/Finance/AP/Article?articleId=423760&categoryId=18