If you’re looking to buy a co-op in New York City, you’ve probably noticed you have to factor in monthly maintenance fees on top of your mortgage payments. In some cases, they can ratchet up the cost by thousands and be a deal breaker when it comes to affordability.
But, curiously, maintenance fees for two apartments in the same building, with exactly the same floor plan, can be different. That’s because the cost goes up the higher you go in the building.
“Co-op shares are generally allocated by a somewhat arbitrary combination of some or all of the following: room count, bedroom count, floor level, square footage, and view,” says Jonathan Miller, president of the appraisal firm Miller Samuel. “As a result, co-op monthly maintenance charges tend to be higher on higher floors within the same apartment line.”
Other reasons why fees can fluctuate
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Co-op maintenance fees cover the cost of the building's insurance, its mortgage, the property tax and the salaries for employees like the doorman plus the upkeep of common areas. It can also include heat, hot water, utilities, pest control, trash and snow removal and the upkeep of amenities like a bike room, gym, pool, or storage. There are lots of factors that can affect how much you will have to pay each month. It's in a buyer's interests for the building to be covering its costs and be financially secure.
Each co-op will vary but if electricity is included, the maintenance fee can be higher in the summer because of the need to run air conditioning. A larger square footage means you’ll own more shares and will result in a higher maintenance fee.
Chances are your maintenance fee may change during your membership of the co-op. Sometimes this comes down to the need for extra funds for a specific project or repair. If the elevator breaks, there's a roofing issue or the building’s facade needs work, co-op shareholders might be required to dig deeper into their pockets to cover the costs. According to the listing site StreetEasy, costs can rise anywhere between two and eight percent a year.
Check the paperwork
Make sure you find out from your broker what is included in the maintenance fee for a co-op building ahead of signing a contract.
"While boards do what they can to stem the tide of the inevitable increases, the drivers of these increases are often outside a board’s control," says Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas. Shareholders can and should receive the board’s financial statement outlining the annual expenses of the building.
It's worth getting information from the seller on how a co-op board has spent the building's money, whether there have been increases or decreases in the fees or if there are any big projects planned for the future. Making sure the board is well managed is as important for the buyer as establishing financing. Any evidence of board mismanagement is almost certain to lead to a legal headache as well as extra expenses and higher maintenance fees for the building while things get worked out.
Condos have fees too
Generally, condos have monthly costs (known as common charges) that are lower than their co-op equivalent. One of the reasons co-op residents pay more per month is because they own shares in a corporation and the fees include the cost of the building's mortgage and its property taxes, while condo owners pay property taxes on their apartments separately and the mortgage will already have been paid off with the sale of the units.
It's worth remembering the total cost for condo owners will likely be higher once the property tax is included. Miller points out the average costs for condo owners is expected to continue to rise over the next several years as the tax abatements for new condos expire.
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