A laundry room is one amenity that many New Yorkers simply won't live without. And considering that they're free to install, adding one to your condo or co-op building seems like a no brainer. (If you're a renter without laundry facilities, may we suggest sharing this with your management company?)
Here's what you need to know:
How does it work?
Companies called laundry room operators, which act as middle men between buildings and washing machine manufacturers, will actually install washers and dryers, paint and tile the laundry room, and often throw in folding tables and laundry carts for free--in exchange for a cut of future revenue.
The revenue-splitting deals worked out by laundry operators like Hercules, High-Rise Laundry, Automatic Industries, and SEBCO Laundry Systems amount to either a flat fee or percentage of the proceeds, paid monthly or quarterly. Buildings generally receive more than 50 percent of the collections.
Can my building make money on this?
Exactly how much a building can bring in varies widely, since some have lots of apartments with in-unit machines, while others have residents who do a lot of laundry in communal rooms. Likewise, the amount a building charges per wash or dry often depends on building demographics, but can range from 75 cents to $3 a wash, though many hover around $1.75 in the city.
"Some buildings see their laundry rooms as opportunities for revenue, almost like a piggy bank, and others see it just as an added tool to bring people into the building," says Mark Eisler of Hercules.
If you assume that each month, each apartment is responsible for about 10 loads of laundry (washing and drying included), total monthly collections for a 200-unit building could reach around $3,500. Of that, the building would get about $2,000 a month. In a 40-unit building, using the same approximations, total monthly collections could be somewhere around $700 a month, with around $400 going to the building.
How much space do I need?
It's not hard to find the room for a laundry facility, says Seth Breitman of SEBCO. "A laundry is generally in a common area in the basement. ... In new construction, I've seen them by the roof deck. Alternatively, where space is an issue there could be even a small closet on every floor with a washer/dryer combo in it," he says.
In short, he adds, "if you have about 28 square inches of floor space, utilities, a drain and a good place to vent, you're good to go."
In fact, laundry vendors are just as happy installing a laundry unit in a big building as they are in a small one, Eisler says. "There's no job too small. We find sometimes that the smaller jobs have a higher load factor," meaning that more people use the machines more often.
And don't think the place has to look like a dungeon. More personalized laundry rooms are becoming more common, says Breitman, and "we can do artist murals and subway tiles and we can go with certain themes."
Of course, the cost of upgrades like this do get passed on to the building one way or another.
"If I’m going to do a $12,000 tile job, I might need another year added to the contract, or I’ll need to rework the revenue share a bit," says Breitman.
Also, you'll have to get your plans for a new laundry room approved by the city, as well as pay the applicable fees, he says.
"In most agreements, the laundry vendor is going to say that the room has to have certain electrical capacity and venting. You need to know in advance what’s required," says co-op and condo attorney Scott Greenspun of Braverman Greenspun."You also want to make sure the company will do a lot of it--plumbing, electrical and duct work--to make sure it's all up to code."
What do I need to know about a vendor contract?
Most contracts cover a period of seven to eight years, though they can sometimes be for as many as 10. To protect your building, have your property manager and lawyer review and negotiate the agreement.
Here's a quick overview of what should (and should not) be part of the deal:
1. Keep automatic renewal out
In the past, in their contracts, laundry vendors tended to have automatic renewal rights and right of first refusal, meaning that they could match any other offer if a vendor gave a better deal to a building."That issue has become more negotiable these days, and it's something you want to keep out of your contract if possible," says real estate attorney Karol S. Robinson of Norris McLaughlin & Marcus. Otherwise, you may find yourself stuck with a vendor you're not happy with even after the current contract expires.
2. Specify that you want new equipment
"If it's not in the contract, then there's nothing precluding [the vendor] from using refurbished or used machines," says Greenspun.
3. Make sure the vendor has the right insurance
"The vendor's insurance should name the building, the owner, the agents of the buildings and the employees, officers and directors as additional insureds under the vendor’s policy," advises Greenspun.
4. State how often you want to see profit reports
"Now that there are smart card machines and the process is much more digital, we typically put in a provision that vendors have to put in a report to the management every time they collect from machines, so it's clear how much money is coming through," says Robinson.
5. Specify how often maintenance will be performed
"One of the other things we push hard for is service," says Robinson. "Some vendors will agree to have someone come every day, especially in larger buildings. But in your contract, you want to be sure to include response time requirements and penalties."
Sometimes, she says, "we put in something that says if the company doesn't come in to fix a problem before X amount of time, the co-op can bring someone in at the vendor's expense. The vendors usually push back, but sometimes we can get the language in there."
Additionally, she says, "we may ask for a small stipend for the building staff to clean the machines, and remove lint. This actually helps the vendors, because it helps avoid breakdowns."
6. Figure out who's on the hook if something goes wrong
An indemnification clause provides protection to a party for any wrongdoing. "Let’s say a washer explodes and a vendor sues the building, you want the vendor to be responsible," says Greenspun. He recommends keeping an indemnification clause in the contract, and specifically stating that certain issues are not covered only by insurance.
7. Set up your agreement as a license, not a lease
Ideally, you want to license the machines from the vendor, not rent them. That's because "a license agreement--versus a lease--is easier to terminate for breach of its terms and makes it clear that there is no landlord-tenant relationship between the parties," says Robinson. "A lease may be seen as subject to housing court where the termination process can be more cumbersome and lengthy."
8. Don't let the vendor renegotiate the fees
Robinson recently worked on a contract where the vendor added a provision that let them change their percentage of the collections if their compensation fell below a certain threshold. But you want to avoid that kind of language. "I think it gives too much control to the vendor rather than the board," she says.
9. Protect against your contract getting passed on to another vendor without your OK
"You want to try to get a provision that they won’t be able to assign the contract without your permission if they sell their business to another company," says Greenspun.