How can I tell if my building has major structural problems like the condo that collapsed in Miami?
There should be very clear signs in the financial statements and the minutes of your building that money is being spent on capital repairs to keep it structurally sound.
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How can I tell if my building has major structural problems like the condo that collapsed in Miami?
Unlike Florida, New York does not make it a requirement for buildings to have their structural integrity re-certified every 40 years, but there are many Local Laws that require elements of a building to be inspected and, if necessary, upgraded.
“There are a smattering of laws that require periodic self-inspection, so although there’s nothing that requires a complete building analysis and certification, it’s something co-ops and condos should be doing anyway—spending money for improvements and capital projects,” says Steven Wagner, a partner at the Manhattan law firm Wagner, Berkow & Brandt who represents co-op and condo boards and owners.
“There should be very clear signs in the financial statements and the minutes of your building that money is being spent on capital repairs to keep it structurally sound,” he says.
Reviewing your building’s financial statements and minutes
To find information about structural issues, you’ll want to look at your building’s financial report. Under the cash flow analysis, you’ll find details of the money being spent on capital repairs. This will typically identify the capital projects that are being worked on as well as repairs and upgrades carried out in the recent past.
“You can also ask to look at the minutes of monthly board meetings,” Wagner says. In the minutes, you will see discussions of building issues like leaks, roof replacements, facade work, or Local Law 11, gas line inspections, and the changes needed for energy efficiency. If there are no records of conversations about upgrades or capital improvements, that could be a sign that the building’s infrastructure is not considered a priority. Another red flag would be to see discussions about leaks or mechanical issues that are never resolved.
Wagner notes that while condo and co-op boards allow prospective buyers to look at the minutes of meetings carried out throughout the year, some boards may give you a hard time and claim the Business Corporation Law doesn’t allow shareholders or owners the same access to this information, but you can push back against this and demand access.
Visual inspections
You can learn a lot just by looking at your building, Wagner says.
If you see cracks in the facade or cracks in the ceiling of your apartment or if the doors are not closing or seem out of plumb, all of these are signs that there may be some major structural issues with the foundation or the building alignment.
Similarly, “if there are a lot of leaks or the heat goes on and off—these are issues that can be identified even by a casual observer—you don’t necessarily need to be an architect or engineer,” Wagner says.
You need to bring these issues to the attention of the management and the board and follow up to find out what they plan to do about it.
“Doing nothing because funds are not available is an inadequate answer,” Wagner says.
A well-funded capital plan
An important clue to your building’s structural integrity is whether or not there is a capital plan and the budget to fund it. For conventional co-ops and condos, there is no requirement to have reserve funds to pay for emergency repairs, although the industry standard minimum would be three months of maintenance or common charges.
“Running a co-op or condo is in fact running a business—a real estate business—and as with any business, you have to invest in it,” Wagner says. “Otherwise by virtue of depreciation you are liquidating the company. You don’t want to liquidate the place where you live, you want to invest in it.”
Co-ops formed under the Private Housing Finance Law, such as Mitchell-Lama co-ops, have reserve fund requirements and there is a law that if the building is converted there must be a reserve fund established by the sponsor. However, Wagner says, in most cases co-ops and condos may operate with practically no reserves and simply raise the common charges or assess when they need additional funds.
"That’s not great management but some residents would rather have the money in their own accounts than sitting in a bank account earning no interest for the co-op or condo,” Wagner says.
If there’s no current capital plan, your board should get one in place as soon as possible. In his role as an attorney for co-op and condo boards, Wagner recommends getting an independent architect or engineer to conduct a survey of the building as a first step in establishing a capital plan.
Hiring an independent architect or structural engineer reassures shareholders and apartment owners that they are getting an accurate report and “it also protects the board from liability, provided they take the necessary steps to address any issues that are raised,” Wagner says.
Some buildings have their own in-house experts determine what needs to be done.
“That’s certainly something to be considered, but if the board is reluctant to make repairs and wants to keep maintenance or common charges low, the information you get from them, about what needs to be done, is probably not going to be as accurate,” Wagner says.
New York City real estate attorney Steven Wagner is a founding partner of Wagner, Berkow, & Brandt, with more than 30 years of experience representing co-ops, condos, as well as individual owners and shareholders. To submit a question for this column, click here. To arrange a free 15-minute telephone consultation, send Steve an email or call 646-780-7272.
