Is There a Normal Increase for Monthly Charges?
Habitat Magazine, June 26, 2018
Every conscientious co-op and condo board strives to minimize increases in monthly maintenance or common charges. A few manage to keep them flat. But with costs constantly rising – including taxes, energy, and payroll – most prudent boards acknowledge that annual increases are inevitable. Is there such a thing as a “normal” increase in monthly charges?
Proprietary Lease Specifies Maintenance Amounts
“According to nearly all proprietary leases, the amount of maintenance that can be charged must be equal to the cost of operating the building – paying for repairs, fuel, staff members, real estate taxes, and mortgage payments,” attorney Kevin R. McConnell, partner at Himmelstein, McConnell, Gribben, Donoghue & Joseph, tells Brick Underground.
The average maintenance fee increase is “a few percentage points,” according to the Daily News, while StreetEasy pegs it at 2 to 8 percent. Of course, the jump can be pushed higher if a co-op undertook major repairs in the previous year.
Non-Recurring Items Reduce Budget Control
“The average does not take into account non-recurring items, such as repairs, capital improvements, and legal fees,” says attorney Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas. “While boards do what they can to stem the tide of the inevitable increases, the drivers of these increases are often outside of a board’s control.”
Shareholders and unit-owners have a right to understand the calculations behind maintenance common-charge hikes, and each year, they should receive an audited financial statement from the board that outlines the building’s expenses.
Financial Statements Tell The Story
“In my experience, most of the time it is actually easy to figure out what is going on by looking at the financial statement of the building from year to year,” says Deanna Kory, a broker with Corcoran. “The financial statement shows what money is coming in from the shareholders and what the expenses are, and therefore what money is being paid out.” Under New York Business Corporation Law, co-op shareholders are entitled to see financial statements upon request.