Assessments in NYC Co-Ops: The Good, The Bad, and the Unexpected.

Assessments are a crucial part of managing and maintaining co-op buildings in NYC.

They can range from the predictable- like a capital improvement project discussed amongst shareholders in advance, or the unpredictable- as a crisis response to a need for capital.

One thing I’ve learned- they can be a foreshadowing of how the building is managed, and a big part of why some co-ops trade for a premium, while others are harder to sell.

Whether working with buyers or sellers- I always dig into them so that my clients have a plan for how we’ll respond to them during negotiations.

To give my clients context- I always break them down into three groups-

The Good: aka- investing in Your own home

• Capital improvements, such as updating the lobby or heating system, can increase the property's value. Shareholders may bear the cost through assessments, but there's a potential tax advantage when selling the property, as these costs might carried forward to offset future capital gains (consult an accountant for specifics).

The Bad: or- when you didn’t prepare for the inevitable.

• The biggest culprit- NYC’s Local Law 11. It requires buildings over six stories to have their facades inspected every five years for safety. Any discovered issues must be addressed, at a cost to the shareholders if the repair costs exceed the reserve fund.

• One to look for in years ahead- Local Law 97. It imposes carbon emission limits on buildings starting in 2024. Non-compliance could result in fines, pushing co-ops to fund energy-efficient upgrades, possibly through assessments.

• Outdated elevator systems- Especially in older buildings, they may eventually require modernization for safety compliance, there should be a record of the latest safety inspections and notes.

The Unexpected: Surprise, Surprise .

• Income loss from commercial tenants, whether due to lease termination or reduced rent, might necessitate a temporary assessment to bridge the deficit or refurbish spaces for new renters.

• Severe NYC weather conditions can precipitate the need for extensive roof repairs, façade work, replacing damaged windows and other unforeseen items.

While assessments might seem like a financial strain, understanding how these expenses came to be, enables shareholders to better advocate for prudent fiscal oversight within their co-op board.

Still have a question? Please contact me at 917-975-9531 or sturner@bhsusa.com