Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
It’s no secret. Co-ops have a particular reputation among New Yorkers. They are known for being exclusive and people consider them a status symbol if you choose the right community. However, the price can be a drawback. While they may be more affordable upfront, monthly maintenance fees can become unpredictable and may even push you out of the range of affordability. If you want to make sure your income is stable, you need to know what to expect in Co-op Maintenance increase. This can prove to be difficult, depending on the co-op you want to join. Before you sign on the dotted line, it’s best to learn what you need to know about maintenance fees and how you can plan. We will discuss what co-op maintenance fee includes and the average co-op maintenance fee increase in NYC.
As a reminder, when you buy in a condo building these fees are called common charges (plus a separate property tax bill). When you buy in a co-op building these fees are referred to as maintenance (which includes your apartment’s share of property taxes).
When you buy a co-op, you are getting a share of a building. This means that you are going to be in charge of maintaining the building and paying its bills. This is where the fees come in. Co-op maintenance fees are meant to cover all the money-related aspects and labor aspects you may incur. These include:
This all depends on the co-op, but most of them are determined by size. The larger the co-op, the more fees you will have to pay.
Most current estimates put the average maintenance fee between $1.40 to $5.90 per square foot for the five boroughs. If you have a 1,000 square foot co-op, you will need to expect to pay $1,400 to $1,900 in monthly maintenance fees. If that price tag seems a bit too much for you, don’t panic. There are plenty of co-ops that have maintenance fees under $1,000 per month. Of course, they tend to be a little smaller than a typical co-op is. It’s a trade-off that’s worth considering.
Like most other things in life, co-op maintenance fee prices increase to keep up with inflation. This means that you should expect an annual increase. Most of the time, the increase is nominal and proportional to both inflation and the needs of the building. This is the most common schedule of increases, but it’s not the only one. Some co-op communities may also choose to do special assessments to avoid the annual increase and still meet needs. If your co-op does special assessments, then fees will increase temporarily for bigger ticket projects. This keeps the price of maintenance down and helps prevent your fees from becoming too high. Special assessments often happen between two to five times a year.
As with most costs in your life, over time these expenses will generally grow with inflation. Increases of 2% to 5% per year are typically the normal increases. When auditing historical increases over time, one can look at units in the building on StreetEasy and determine the average annual increase over a long period of time. Small consistent increases are generally viewed positively verus large changes. Don’t overly stress out about maintenance and the building financials because after an accepted offer your attorney will have the opportunity to review the building financials to determine the general financial health.
For most buildings, this means that your maintenance fee will increase by 2 to 5 percent each year. If your company does special assessments, then they will explain how your contribution will help a co-op goal and price the goal item accordingly. The pricing is a set number of payments (rarely over $100 per month).
Some buildings avoid permanently increasing common charges by doing special assessments for larger capital projects. This will keep maintenance low and also potentially have beneficial tax implications by increasing your cost basis in the apartment (versus normal maintenance will not). Some subscribe to the idea that keeping maintenance lower and doing special assessments keeps the building honest about runaway maintenance.
While NYC co-ops are unpredictable, there is some good news on this front. Most of the time, co-op board members are fairly transparent about the maintenance fees. In fact, you can almost always find out what you should expect in terms of maintenance fees by asking your real estate agent directly. To get the full story, you can also check a co-op’s income statement. The income statement will explain how the Bord spends the maintenance fees, how much the co-op took in from tenants, how frequently they raise the prices, and other important factors. A quick look at the income statement can help you figure out if the increase is reasonable or if this is a co-op to avoid.
Co-op maintenance fees in NYC are at the sole discretion of the co-op’s board. Each board has its own bylaws and processes that they use to determine whether or not fees need to increase. Some are done as a standard increase, almost automated. Others, however, go through a full voting procedure with co-op’s residents. To find out how each co-op board determines maintenance fee increases, you can take a look at the co-op board’s bylaws. These are typically available in a packet provided to you by your real estate agent. You can also ask the co-op board about the process too since most are fairly transparent about making their decisions.
You might’ve heard of some co-ops in Manhattan that have astronomically high maintenance fees. It’s not just an urban legend. Some co-ops really have that issue, and it actually has caused people to sell off their co-op shares simply because they couldn’t afford the fees every month. There are two primary reasons why this happens.
The first reason why your potential co-op could have such a high maintenance fee is that their building is on a land lease. Similar to mortgages, some buildings don’t actually own the land the building sits on. For example, many buildings in Battery Park City have land leases with the City of New York. This is an additional cost covered by the co-op and can lead to higher maintenance payments. Since the co-op doesn’t own the land, they often have to pay rent on the land.
This drives up the maintenance fees’ price immensely, primarily because buying land in New York City is astronomically pricey. Sometimes, it isn’t so much the land lease as it is the heavy emphasis on amenities. Many co-ops pride themselves on acting like quasi-resorts when it comes to their amenities. Things like having a luxury gym, on-site childcare, and a private movie theater can add up fairly quickly, even if it’s a large building.
Most co-ops in New York are known for running efficiently and spreading their dollars carefully. Not all do. Some co-ops are poorly managed and suffer from “runaway maintenance fees.” This leads to a lot of maintenance fee bloat without much function to all the extra money funneled into the funds. While it’s okay to make profits from a co-op, it’s still not okay to bilk buyers out of their money for no good reason. If a co-op gainbad management reputationent, it’s best to listen to the reputational warning and back away.
New York City’s co-op communities offer a lot for the right person, but that doesn’t mean there’s a co-op for everyone. If worry about maintenance fees would keep you up at night, it is better to look into condos or rental living. That’s one of the best parts about living in New York. The options you can enjoy are endless, and there’s always a new opportunity to live the lifestyle you want around every corner!