Maintaining a residential cooperative or condo association does not come cheap. Shareholders and unit owners contribute regular maintenance payments, to be sure, but that only covers so much. What happens in the event of a rainy day? Well, there are reserves – but what happens if it rains again, a month and a half later? The truth is, an association can use every penny it can get. That said, it also cannot stand to put undue burden on its residents, who could rightfully push back should they feel as if the board is constantly asking for more and more dough. Thus, it’s on the board to find fair and reasonable ways to accrue a surplus without alienating those who would contribute thereto.
One fairly common way to guarantee a little extra scratch is to implement a transfer fee. While there are nuances and variances at play, the basic implication of a transfer fee is that a seller or a buyer will pay a certain added percentage upon the transfer of a unit, money that will then most likely be used to finance a major project or repair down the line. And it’s always presented in an open, straightforward fashion – never as some fine print “gotcha” charge upon closing – so as to ensure that no party involved is caught off guard.
The Brass Tax
This past November, Carl M. Cesarano, a partner with Cesarano & Khan, P.C., an accounting company in Floral Park, was asked to co-lead a discussion on this very subject at the Council of New York Cooperatives & Condominiums’ (CNYC) Housing Conference. For a brief overview as to how transfer fees have emerged as perhaps the best option a co-op has for revenue generation, Cesarano has the following to say:
“Because the co-op has limited sources of revenue, other than revenue from its shareholders, it is challenging to develop a strategy to accumulate funds for capital expenditures. The following ways may be considered:
• increasing maintenance charges on all shareholders and creating a line item in the budget for future capital expenditures;