Will Co-op Owners Be Able to Afford Their Maintenaces in 2009?

funny, I have tongue in cheek over the last year, expressed to my broker, "how will it go over at a coop board interview when I ask to see financials of all the other share holders". She simply says that won't happen. But the reality is, I am more worried about them than they should be worried about me.

The more things change... This was one of the reasons that apartment prices tanked the last time in the early 90s. People walked away because they couldn't afford the maintenance or their neighbors couldn't afford the maintenance (making the building behind on its bills and deteriorate).

The same thing can happen to condo owners down the road once their tax abatatements expire. Just curious, when do abatements begin to expire for condo owners?

I've also been wondering about the increased common charges for new construction. I have read on this board that those prices are sometimes set low to attract the buyer and once they move in the charges can go up dramatically. Many are currently tax abated, but one day taxes will kick in also. Won't the high costs of carrying these apartments decrease their value over time?

The tax abatements tend to last between 7-25 years- obviously the later in areas that really needed stimulus in the first place. I think the Financial District had special 2 and 3 year abatements shortly after 9/11...but I am sure someone else can confirm or deny that.

My building in West Harlem has a 25 year abatement, and we are approaching year 3 into the program. My abated taxes are $3/month- and unabated are $27/month.

NYRENewbie, you are describing exactly the case of my building- our common charges were artifically low to attract buyers. When we were able to take control from the sponsor after the first year, As Treasurer, I immediately recommended a 30% increase in common charges to build a reserve fund and to account for my expectation of dramatically rising energy costs- which were the only two issues underfunded in the budget. Luckily, all the buyers in the building realized that our common charges were artificially low and I was able to pass the increase on the first vote. As we are now approaching the 2 year mark of a realistic budget- we are in extremely healthy shape and I believe we can keep the common charges stable for at least another year- at which time we will re-evaluate the climate. Regardless, our carrying costs are below $500/month for most units in my building- and should remain reasonable in the foreseeable future.

Oddly, one of the few things that can loosen some (not all) coop boards up is (an) owner(s) being in arrears in maintenance and needing to sell. We bought in a 20% down building in 1995, and only put 10% down with fairly shaky financials, and the coop board was happy to see us under the circumstances. They would have laughed at us in 2006, although no buyer would have accepted a bid with those financials in 2006 either (and we were never late for a mortgage or a maintenance payment, so go figure).

More pressing point seems to be how much will delinquencies rise in NYC, as city unemployment levels spike and assumed future income streams are permanently impaired? How do jointly liable co-op owners react when these situations arise and sales at much lower values undermine their own equity? When do co-ops start changing terms (% down req's that have recently moved HIGHER) to attract buyers? I wonder what % of manhattan owners are underwater?

Lipmix- As it relates to maintenance, what % of a building's usual maintenance is labor/staff? What's the wage increase annually in their union contracts?

aj202, my building is a condo- so common charges apply rather than maintenance. It's a small building with only 12 apartments- so we only employ 1 part time porter- non union. With the exception of a large back yard that is rarely used by residents, we have very minor common areas requiring cleaning/maintainence- so most of the work for the porter revolves around garbage and recycling. We recently learned that we are paying far above market value for the labor (we are self managed and are not professionals at property management)- but we are paying about 20% of our common charges to pay for the part time porter. Compensation will be frozen for awhile now that we know just out of whack the salary is. If the porter needs to be replaced- it will be at a signficantly lower amount or alternatively at a similiar rate, but someone that can/will perform broader responsibilies inclusive in the compensation.