Maintenance Increases...

https://streeteasy.com/building/23-west-9-street-new_york/sale/1495679?card=1

Ouch.

Interested in hearing from board members re: increases for 2021.

2021 will be similar to 2020 as main increase is due to real estate taxes. 3.5 percent.

I think you are going to see lot of increases where Coops got used to sources of income other than maintenance.
1) Commercial/retail rents
2) Flip taxes.

I have been warning about this for years now.
https://www.nytimes.com/2020/11/06/realestate/nyc-coops-fees-rent.html

To clarify, I only meant the comment for my coop.

Kept common charges unchanged for 2020, found other areas to cut costs to try to balance out budget. Increasing cc during covid would have caused riots in building. If covid persists into next year, will be required to increase big to make up for not increasing this year. Several owners in building are more than 6 months in arrears. Scary situation actually. Many of those in arrears are independent contractors or those in industries affected by covid. Some owners hoarding cash and choosing not to pay cc even though they can. It’s going to be ugly.

Board pres

Bcp, how is the co-op funding the gap -- borrowing on a revolving credit facility, or cash sitting on the co-op's books?

Bpc, Are you increasing fines for late payment - essentially to something like every month the maintenance is unpaid, fine increases? I understand that you can’t evict right now.

bpcbuyerconfused,
I'm assuming you actually bought in Battery Park City?
For those in arrears a caveat: the deals we bought in BPC there's some sort of special notice which needs to be sent to BPC Authority regarding PILOT otherwise when a bank foreclosed on a unit not only does the Common Charge arrears get wiped out but you also lose out on recouping PILOT fees. Just make sure the managing agent and/or building attorney are on top of this.

I run a condo and yes in bpc. We initially offered payment plans and then resorted to fines. Owners still don’t care so arrears plus fines just add up. Interestingly owners are priotizing and continue to make mortgage pmts. Have discussed at length with managing agent and attys. In reality much trickier to go through process of filing liens and ultimately foreclosing especially in this environment. Legal fees just rack up as number of units in arrears significant. BPCA is not being helpful, typical gov’t agency. Negotiated with union to reduce staff so that helped alot. Went theough expenses and renegotiated utilities, insurance, landscaping, etc. small savings here and there surprisingly adds up. Discussing potentially getting line of credit against super apt or common areas. Like I said next year will be tough and neighboring boards all having same issues. Can’t get rest of board on same page as they not finance people, making emotional decisions. They don’t want to increase cc again next year for fear of getting kicked off the board or attacked by owners

Condos are wonderful until you actually own them

Condos are wonderful until you actually own them

You have to be careful. In the mid-1990s I was selling a condo in Chelsea and after we had an accepted offer the seller's attorney questioned me as to why the price was so low. I said it was because the building had bad financials. The attorney incredulously told me "Condos can't have bad financials." I had to explain there had been several foreclosures and the building had been wiped out of the equivalent of 1 full year's worth of common charges.

I know it's a pain in the ass but don't let it slide. I will say I find it unusual that owners are paying their mortgages but not common charges because historically it has been the other way around. Imagine that eventually they stop paying them too and foreclosures start and usually take a year. On foreclosure that outstanding balance of Common Charges to the Condominium gets wiped out. Add this up for all the units and how much will your Condo Owner's Association lose? My guess is that it's going to be a very big number. I would be trying to encourage these people to do short sales or other workouts, and even though the lien route is expensive and seems futile it can trigger the lender to begin the foreclosure process which would at least cut down on your losses.

30,
“On foreclosure that outstanding balance of Common Charges to the Condominium gets wiped out.”
I have seen that condo can put a lien which is junior to mortgage. If there is money available after paying the bank from the sale proceeds, condo CC lien gets paid.

Generally speaking if the value was greater than the outstanding balance it wouldn't be getting foreclosed on.

But can Condo Board force foreclosure due to second lien? I have seen that at 20 West and Condo got paid with proceeds being more than the liens. More important, condo got new owners who were paying and it signals to people that they will forced out if they do not pay condo cc. Putting a lien on the unit is a big incentive for people to pay up especially if they are current on their mortgage.

My building, no maintenance increases "at this time". Assessment will be 3k for me, about 1k less than I thought it would be. I'm not on the board but it looks like we're just treading water right now.

My building hasn't taken a maintenance increase in three years and needs one badly. That can really got kicked into a corner now...

My building, (condo) was completed in 2016 and just had its first CC increase last December. Good timing.

300,
My point is that it is my opinion that Condo Boards need to do whatever they can to "move things along" because they only get worse over time if you just leave them alone. Force a sale, force a foreclosure, foreclose yourself, etc. Yes is can be expensive and time consuming, but the alternative is worse and as you pointed out you need to show owners non-payment is not an option. The problem is that it becomes political with a generally ignorant constituency.

I don't think people have any concept of the potential for disaster here. If you have widespread owners not paying you could see buildings become virtually unsellable. And that happened in BPC back in the 1990s.

Agree.

@30Y: When do you expect to see an impact on RE taxes from COVID? I have to imagine the city is going to try to make up for a massive revenue shortfall here some way or another.

Pretty sure taxes get announced in June. Real Estate Taxes are pretty much the only taxes the city can raise at will (no need for legislation or approval from Albany, the just set the annual rates higher). Where else are they going to make up the shortfall aside from massive layoffs?

Personally I think they should push for an "emergency" cancellation of all tax abatements and other credits.

As always, our building's budget is is pretty stagnant and dependent on how much property taxes go up.
Modest small co-op building, elevator, no doorman.
We do have commercial retail income but it is a pittance as it is a result of a sweetheart lease from the 80s.
We've been fortunate with no arrears.
And we did have to assess for substantial local law facade work this go round.

"will say I find it unusual that owners are paying their mortgages but not common charges"

30yrs , not unusual at all, I think people are just more afraid of a bank than their board.

Banks also have a lovely way of compounding you to oblivion.
Stiffing the bank of $50k for a year seems to turn into $150k when your ready/able to pay yourself out of trouble. Stiffing your building for $20k for that same time period ends up costing you $25/30k.

That is exactly right. That is why buildings should increase the fines and add collection fees for charges overdue more than a month and each month thereafter there is additional fine and collection fee on unpaid amount. And they should put a lien for anything due more than 3 months.

I guess people used to care about responsibility to community over banks.

Personal responsibility? That takes the back seat relative to being being woke, snowflake etc.

> Personally I think they should push for an "emergency" cancellation of all tax abatements and other credits.

Never let a good crisis go to waste. Is there anyone on the Council with big enough stones?

Probably not, but aren't most of them getting term limited out anyway? Why not?
https://www.cityandstateny.com/articles/politics/new-york-city/what-will-outgoing-new-york-city-council-members-do-after-2021.html

I think it probably would have to be done in Albany though.

Ouch. I think abatements are a horrible policy, but is there a legal way to cancel them?

DeBlasio has already taken property tax increases off the table. Once again his self interest is showing. His park slope neighbors would hang him and of course he doesnt want to be subject to higher taxes on his 2 park slope residences.

https://www.habitatmag.com/Publication-Content/COVID-19/2020/2020-September/Read-de-Blasio-s-Lips-No-Hike-in-Property-Taxes

https://therealdeal.com/2020/09/16/de-blasio-raising-property-taxes-off-the-table/

My condo opened in 2014 and we had our first common charge increase of 6% in January 2020. We are fine financially; $250,000 + in reserves and growing.

others are correct about forcing payment/foreclosure through the imposition of liens. You need to control the process before the bank steps in and then you dont get a dime . All of our owners are current . There were 1 or 2 that tried some fuckery with not paying their common charges. after repeated emails from the property manager and promises to pay at 4 months we went about the process of filing a lien; quelle surprise we got an immediate payment of back arrears in a lump sum.

At next board meeting we will vote to add the administrative and attorney costs involved as a penalty to owners who try this crap again.

Flmd, The way to go!! Do. It forget to adjust late fees for board’s time.

Flmd, The way to go!! Don’t forget to adjust late fees for board’s time.

DeBlasio can say all he wants that RE Taxes won't be raised by the money to fill the ?$4 billion? gap has to come from somewhere. I think he's still praying the Federal Gov is going to come up with it, but I'm hearing "Read my lips - no new taxes" with the same results.

I think City will have to borrow for now and look at adjusting the tax increase caps for 1-3 family. They are already adjusting the assessed value for the amount of renovations much more aggressively. Ideally they should be looking at pension overtime abuses and wasteful programs as well but that is not happening.

I expected 4% in my co-op , right in line with previous years
Well run building

My building raised nearly 25% and advised another 10% next year.
They made a bunch of excuses that prior years raises weren't enough (average 3%), inflation, needing to increase savings.
On reviewing the financials it looks more like - old board left them a building running a ~10% surplus & swung it into ~10% deficit... for a -20% swing.
Appears to be a combination of changing a bunch of vendors to new higher cost ones, unexpected repairs, some "fun project" spending, and labor costs.

They now need to raise dramatically just to plug the hole they blew in the reserve fund, actually pay the bills for all the ongoing costs they've tacked on, and actually have enough income to cover their spending.

This is about 2x my "whats the worst they could do" scenario when I saw the maniacs that had been elected.. not happy.

Around 2010 at the annual shareholders meeting of my prior Coop I pointed out that the Coop was running at a deficit. The Board (60% of which were selling their units and incentivized to keep maintenance artificially low) denied it. The managing agent denied it. The accountant denied it. The Board President made fun of me asking if perhaps my calculator was broken and told me to write to the managing agent and they would show me the correct calculation. I wrote to the managing agent and never received a response.

The next year the annual meeting kicked off with the totally new Board stating "WE discovered that the maintenance wasn't covering expenses" and announced a large maintenance increase. When I pointed out that I had said that at the previous meeting and was made fun of I also asked that the accountant be terminated for not only stating at the annual meeting that it wasn't happening but also failing to note it in the annual financial statement to shareholders the new Board President declined because the new board saw emails between the accountant and the old board warning the of the situation.

I think more than a few Coop shareholders/condo owners are in for some future shock from increases due to Local Law 97, deferred maintenance, etc hit in the next few years.

My coop did 3.5 percent increase mostly due to real estate taxes and we always run small surplus of a couple of percent of maintenance. Facade work, if major, is handled via assessments so that we don’t dip into cash reserves in a significant way. This gives every one full transparency and incentive for coop board to manage the facade repair budget tightly.

I absolutely agree with financing capital projects by assessments. It's also good tax planning because you can add those assessments to your basis.

4% increase in my building as of January 1 2022 citing increased property taxes
5% increase in the prior year
much lower in prior years
my building does not charge assessments, instead the building has a reserve for capital projects which are planned well in advance

1% effective Jan 2022. Compared with 3% in Jan 2021, 3% (I think*) in 2020, and 3% in 2019 (*can't find my 2020 notice). Capital projects are not assessed. Reserve fund of circa 1.5m. Early 1970s building, well maintained (new efficient water chiller/heater units last year, yay!).

Aaron, That is pretty impressive. How did your building manage to keep it so low? Did the real estate taxes go lower? I am guessing staff got at 5% increase in pay.

Aaron .... looks like a great co-op to live in

Board is on top of the Capital projects and financial responsibilities.
Are there any Local Law 11 projects coming up ?

LL11 is in progress (or maybe just completed?), and was funded (along with a chiller replacement and a couple other projects) through a $5m second loan (3.49% fixed) (on top of existing $10.8m (3.5% fixed) mortgage - they'll be combined in 2025 when the mortgage matures in 2025). Interest on mortgages represents about 7% of maintenance, payroll is ~20%, taxes are ~60% ($5.6m in 2020). The 1% maintenance increase in '22 is unusual -- looking back at my records, it's been 3% every year I've been here, and was 3.75% in 2016.

The building valuation was challenged, and we got a reduction in value that will save us about $300k over the next 5 years.

We do assess owners for their real estate tax abatement -- owners get their abatement credit, then an assessment for approximately the abated amount. For most it's a wash, except for those with units that are not primary residences (not a majority of units), or combos of 3 or more units (maybe 1 or 2 of those?).