With today's uncertain economy and the prices of everything from gas to insurance on the rise, maintenance increases may be on the horizon for thousands more co-op and condo owners this year. Shelling out money is never a pleasure, but those increases do not always have to be painful. With a board that plans ahead and shareholders who are keyed in to the issues, those rising rates can be a simple, necessary adjustment, not a financial headache. The key, the experts say, is communication.
The decision to raise maintenance fees is seldom an easy one, but more often than not, the increases are unavoidable, incited by circumstances beyond the board's control. "Lately, it's been energy increases for oil, gas, electric or steam," says Dan Wurtzel, chief operating officer for Cooper Square Realty in Manhattan. "Insurance is also a factor as are real estate taxes and the increased cost of labor."
According to David Khazzam of PRC Management, "Increases stem from unforeseen circumstances and increased operating costs, as well as a need to bolster reserves." Most board finances are subject to specific guidelines - including reserves, which have suggested minimum levels. Those levels are important to maintain for financial stability. "Your budget might be running in the black, but if the reserves are below the recommended level, you might have to raise maintenance fees to replenish those reserves."
Increased maintenance fees differ from assessments in large part because of purpose. "Assessments are used to cover non-operating expense items such as capital improvements," Wurtzel says.
Khazzam says that's the way it should be. "Special assessments should only be used for one-time capital projects."