Don’t Put Off the Inevitable: Raising Maintenance
HABITAT MAGAZINE – SEPTEMBER 2023
Don’t Put Off the Inevitable
Boards often delay raising maintenance for fear of angering residents.
Eventually they, and other shareholders, will have to pay the piper.
By Daniel Wollman, CEO, Gumley Haft, New York
Q&A:
Boards have a responsibility to make decisions and take the necessary actions to maintain their building. How do you deal with boards that are reluctant to do that?
It’s our job to get them to understand the significance of projects and the importance of doing preventive maintenance as well as ongoing building maintenance. Boards should look at their buildings as a whole, and get shareholders and unit-owners to do the same. People can’t just say: “My unit is perfectly fine. I live on the fifth floor and the roof is on the 15th floor, so why do I have to be part of the process if the roof needs replacing?” Better-run buildings and those in better physical condition ultimately yield better prices when units are sold. Buyers and attorneys scrutinize the financials and board minutes, and neglecting maintenance and not making timely decisions can have an impact on the property’s value and marketability.
What do you say to boards that feel uncomfortable raising maintenance or common charges?
Some of them do look at this stuff as a popularity contest, so we tell them that it’s good policy to raise maintenance every year at least a couple of points to stay with inflation. For example, at condos the payroll is roughly 60% of total expenses, so if payroll is going to increase 3.5% based on the union contract, you need to raise the common charges almost 2% if everything else stays flat. But insurance costs have significantly increased, and while fuel prices have gone down, they could spike up again. So, if you don’t increase maintenance for, say, three years, in all likelihood you would have to dip into your cash reserves to operate the building. And in three years, you’re going to need a 7% or 8% increase. That’s not a position you want to be in.
Do you have an example of a board that is forward-thinking and proactive?
We have a 48-unit property where the average age of the residents was probably 70 years old. The board, understanding that apartments were going to be turning over at some juncture, decided to spend its money building a gym and eventually other amenities, including a roof desk, which it thought was going to help attract younger buyers and a bigger group of prospective purchasers in general.
It’s management’s role to guide boards into being more progressive, and it can be frustrating when clients don’t follow our advice. But at the end of the day, as in any other business, the board is the final arbiter. The best we can do is advise on what other buildings are doing, how to add value to the property, and why we believe that whatever we’re proposing is the right thing.
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