How often do co-op maintenance fees increase in New York City?
We will demystify this topic in the following video.
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Most co-op buildings in New York City raise their monthly maintenance fees by 3% to 5%
per year which is in line with general inflation as well as annual increases in New York City
real estate taxes.
Unlike for condos, co-op buildings pay real estate taxes directly to New York City on
behalf of all owners.
If when, by how much and how frequently a co-op raises its maintenance is at the discretion
of the building's board of managers, also known as a co-op board.
The decision to raise the co-op buildings monthly maintenance is both operational and
stylistic in nature.
While some buildings are culturally opposed to permanent maintenance increases and prefer
to levy special assessments to cover any income shortfall other buildings may prefer to raise
maintenance more frequently and aggressively in order to build cash reserves over time.
Because of the unique nature of the cost structure for each co-op building, it's certainly possible
that some co-ops may experience annualized maintenance increases which are below or above
the typical three to five percent range.
However, the largest expense for most co-ops is New York City real estate taxes and they
have been going up considerably over the past few years it's therefore important to recognize
that a considerable percentage of a co-ops annual expenses are largely outside of the
buildings direct control.
The maintenance figure for a specific apartment in a co-op is based on the number of shares
assigned to that apartment relative to the total number of shares in the building.
When comparing apartments in different coops maintenance figures will vary based on unique
cost structure of each building.
So, it wouldn't make sense to draw conclusions when comparing the share count for co-op units
in different buildings.
Why do some co-ops have significantly higher monthly maintenance?
If you see a fairly inexpensive co-op for sale and the maintenance is considerably higher
than for other units in the area, it's highly likely that the co-op is on a land lease.
This means that the co-op does not own the land on which the building sits. Instead, these
co-ops make large land rent payments which are part of long-term leases of 50 to 99 years.
The additional costs associated with the land lease is reflected in higher maintenance payments
paid by unit owners.
A co-op may also have higher expenses and higher maintenance payments if the building
itself has a high debt servicing cost by way of having a large amount of financing in place,
particularly if the interest rate or rates are high.
In other cases, a co-op building may have higher expenses simply by its very nature
of being a high amenity or white-glove service level building.
The cost of additional staff and operating and maintaining various amenities would give
a building an inherently higher cost of operations.
What are the pros and cons of co-op special assessments versus maintenance increases?
The main benefit of a special assessment compared to a permanent maintenance increase is that
a special assessment can be added to the cost basis of the property and this helps reduce
the amount of any capital gains tax due upon a sale.
This is not the case for maintenance increases, even if the primary purpose of a maintenance
increase is to pay for a specific capital improvement project.
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