What is a “capital contribution fee” in NYC real estate?
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I decided to write a quick blog post on this concept after we saw this new term emerging from the New Construction jargon. In fact, several buyers using NestApple asked us what exactly a capital contribution fee in NYC means. Sometimes, people call this “capital contribution fee” an “HOA capital contribution fee.”
What precisely the capital contribution fee in NYC means?
A “capital contribution” remains a one-time charge generally associated with the transfer of title on a property. It remains part of a condo or homeowners association, and the buyer or the seller typically pays the fee at settlement to the association.
Therefore, this contribution gets usually deposited into the capital reserves to fund future maintenance items. This fee varies by building, and the buyer or seller can pay for it.
However, with NestApple, your real estate cash back rebate can pay this fee and the closing costs!
Are capital contribution fees legal?
Yes. In fact, they’re extremely common, although not every HOA community has them.
However, that doesn’t mean there are no limits. Some rules regulate how HOAs can charge an HOA capital contribution fee. According to New York law, all fees must be stated beforehand in your community’s governing documents.
If your HOA wants new members to pay an HOA capital contribution fee and its governing documents don’t explicitly allow this, the HOA would first have to amend its governing documents to allow this practice. The HOA would also have to follow its governing documents’ requirements for amending the document. For instance, the HOA may have to get the consent of the majority of its board members before amending its governing documents.
In a new development, sponsors list this fee as closing costs for the buyer.
It typically represents a few months’ worths of the apartment’s common charges. Some developers sometimes charge buyers two separate fees.
- The first one, usually a few months’ worths of common charges, represents the “traditional” way the building builds up its capital reserve fund.
- The second fee may be a per-unit charge to help fund and pay for the live-in super’s apartment.
Call your real estate listing agent in New York to get your real estate cash back rebate.
Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.
