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Raising Revenue in Co-ops and Condos
Could your building use a facelift? Have you contemplated better-fitting windows, new carpet or an updated elevator, but the board's answer was always "There's not enough cash." From renovation and moving fees to renting out roof or basement space, resourceful co-ops and condos are finding ways to increase revenue. Adding revenue-producing amenities—like an on-site gym or roomy storage bins—can also improve residents' quality of life and increase the marketability of the building. Read More
Co-op to Condo Conversion:
Last summer, a financially beleaguered 47-unit cooperative at 30 West 90th Street in Manhattan made news when it converted to condominium status. That was not the first time a co-op converted to condo. A Teaneck, New Jersey co-op underwent the process two decades ago, and others—although not many—have done likewise over the years. But, it was the first time ever for such a metamorphosis in New York State. Read More
Making Ends Meet
This is the time of year when many boards are engaged in the budget and planning process. Unfortunately, this Read More
What Will 2007 Bring?
Mortgage financiers are gearing up for a different
lending landscape in 2007. To succeed in the coming year, lenders will need
to pay attention, look around and get in front of trends. Here are a
few trends we can already foresee:
Read More
Controlling for Fraud
A little over four years ago, the Sarbanes-Oxley Act (SOX) was signed into law. The most significant provision was Section 404, which requires corporations to conduct an annual assessment and report on the effectiveness of their internal financial controls. Read More
A Necessary Convenience
Some of the world’s most valuable real estate exists in New York City, and the wealth doesn’t end with residential buildings and office space. In a city with so many people and so little space, a place to park your car can be priceless. Just ask anyone who’s spent half an hour driving around Brooklyn or Queens at night looking for a parking space like it’s the Holy Grail. Because of the subway system and other underground infrastructure, office buildings are rarely allowed to put much parking underneath their property, unlike other big cities where the city insists that buildings accommodate the vehicles of all the people working inside. Read More
Share and Share Alike
They’re the smallest pieces of the co-op puzzle. The one item without which the whole endeavor could not function. Just like in a Fortune 500 corporation, the shares in a co-op reflect value, and can be highly sought-after prizes—depending, of course, on the exclusivity of the address. But for all the talk of shareholders and shares, what do these items really represent, and how do they function? Even co-op owners themselves are sometimes unsure about exactly what it means to own shares, and how those shares are allocated. Read More
Prewar Finances
With all the luxury condos going up in New York City today, many people still maintain a soft spot for the city’s prewar apartment buildings. You’ll see them all around town—on Central Park West and Fort Washington Avenue in Manhattan; on Pelham Parkway and the Grand Concourse in the Bronx; and on Eastern Parkway and Ocean Parkway in Brooklyn. Read More
Maintenance Increase Strategies
The dreaded phrase “maintenance increase” is two words that most co-op owners may not want to hear, but sometimes it is necessary for a building’s board to make the unpopular decision of raising fees. With rising operating costs, fuel and insurance rates climbing, and the need for periodic emergency repairs, raising maintenance fees often is not only a necessity but may even be advisable. Read More
Capital Budgeting and Planning
Like most companies, co-ops and condos have two important, yet distinct budgets which allow boards and owners to manage the day-to-day and long-term financial requirements of their buildings. The operating budget includes recurring expenses such as salaries, taxes, utilities, insurance and maintenance items. The previous year’s expenses are generally a good indicator for the next year’s budget. Read More
Board Hurdles
As a financial professional who has served metropolitan New York's cooperative community for over 25 years, I must say that this is probably the most challenging time in recent history. Everywhere we turn, rapidly escalating costs coupled with increased regulatory requirements result in never-ending work for board members. Read More
Who's in Charge?
Any transfer of ownership of a cooperative unit will require the cooperative corporation to cancel the old stock certificate and issue a new one. Many see this step as a simple clerical task, and often it is the managing agents that keep the stock book and perform this mechanical task for the cooperative corporation. The act of canceling the certificate caries great legal significance and has the potential to cause liability for the cooperative corporation. If the managing agent does this job for the cooperative corporation, then it is acting as transfer agent, and in that role has the same risk of liability as does the cooperative corporation. Read More
A Penny Saved
Everybody complains about money. It doesn't matter if you're a millionaire or just getting by from paycheck to paycheck--everyone is on the lookout for money saving possibilities. Read More
Thinking Outside the Box
While there's certainly no shortage of affluent co-op and condo buildings in New York City, it's a fact that a significant proportion of buildings are home to residents of more modest means--buildings for whom large capital improvement projects, emergency repairs, and major maintenance increases may constitute a significant financial hardship. For those buildings, price is definitely an object, and oftentimes board members and managing agents are hard-pressed to come up with creative ways to increase revenue. For those willing to do their homework and get creative, however, there are many methods by which middle- and lower-income buildings can increase their cash flow, build up their reserve fund, and stay solvent, no matter what the economic climate. Read More
Refinancing in Today's Market
Today's economy is one, which has economists using words such as "perplexing" and "conundrum." Making predictions as to what the economy will do next week is difficult--trying to predict what will happen six months or a year down the road is anyone's guess. But it's a fact that interest rates are at lows not seen since our parents were inking their first mortgages. Read More
Voting "Yes" to Flip Taxes
In New York City, many co-ops and condos use a practice called a "flip tax" in order to boost building revenue. As most co-op and condo owners know, a flip tax is a fee paid to the building, either by the purchaser or seller, each time an apartment is sold, or "flipped." Read More
The Mitchell-Lama Buyout Process
Back in 1955, when the flight to the suburbs was going full blast and many city neighborhoods were deteriorating from lack of money and municipal attention, the Mitchell-Lama bill, named after State Sen. McNeil Mitchell and New York Assemblyman Alfred Lama, was signed into law. Read More
Hand in Hand
Some co-op boards and their attorneys are reluctant to allow their tenant-shareholders to obtain reverse mortgages. They tend to apply a forward mortgage criteria and a forward mortgage mindset to such a request - but this type of thinking I believe simply isn't appropriate. Read More
Real Property Income and Expenses
The New York City Department of Finance (DOF) utilizes income and expense information to estimate a property's market value, which in turn is used to calculate the real estate taxes levied thereon. The DOF culls this information from a variety of sources, most notably the Real Property Income and Expense Form (RPIE). Now is the time of year when your managing agent typically completes your RPIE Form, and there is some good news in that the due date has been postponed from what had generally been an early September deadline to September 20, 2004. The reason for the delay is to afford owners the opportunity to comply with the newly "streamlined"¯ filing requirements. While many filers will appreciate that the multiple forms and addendums previously required have been consolidated into one newly designed RPIE Form, those who were previously exempt from filing may not feel as fortunate as they too are now subject to certain reporting requirements. This latter group includes cooperatives that are either exclusively residential or have less than 1,000 square feet of commercial space and any properties with an assessed value below $40,000. Read More
The Refund Roller Coaster
With New York City rebounding from a sluggish economy and resulting budget deficit, Mayor Michael R. Bloomberg reached a budget agreement with the City Council that includes a $400 dollar property tax refund to city homeowners, who bore the brunt of last year's 18.5 percent property tax increase-the largest single property tax increase in the city's history. The $47 billion budget was sealed with a handshake between Mayor Bloomberg and City Council Speaker Gifford Miller at City Hall late in the evening of June 21st, and was promptly whisked off to Albany for approval. Legislators, however, adjourned for the summer without approving a state budget or the homeowner's rebate plan. It is expected though that the lawmakers will reconvene a summer session to approve the budget and rebate plan. Read More
Reserve Funds
The primary function of a board of a co-op or condo is to operate, maintain, repair and preserve the common property. The board also has a responsibility to maintain the value of the property. Read More
80/20 Vision
Say the words "80/20 rule"¯ to a New York City co-op board, and you may be met with groans and furrowed brows. A provision in Section 216 of the Internal Revenue Service (IRS) tax code, the 80/20 rule limits the amount of commercial revenue a co-op building can take in during a year to 20 percent of the building's total cash inflow. The other 80 percent has to come from the shareholders' fees, maintenance charges, or special assessments. If a building's outside income slides one percent past 20, shareholders forfeit valuable tax write-offs and abatements. Read More
Breaking the News
With today's uncertain economy and the prices of everything from gas to insurance on the rise, maintenance increases may be on the horizon for thousands more co-op and condo owners this year. Shelling out money is never a pleasure, but those increases do not always have to be painful. With a board that plans ahead and shareholders who are keyed in to the issues, those rising rates can be a simple, necessary adjustment, not a financial headache. The key, the experts say, is communication. Read More
Using Your Equity
New York City has been in the midst of a real estate boom for the last several years. Even with the economy in recession and the lingering effects of 9/11, homeowners have seen their apartments double, even triple in value in as little as five to ten years. To tap in to the ballooning equity, New Yorkers often take out home equity loans or do a cash-out refinancing. But for homeowners over the age of 62, on a fixed income, incurring an additional monthly expense may not be an attractive option. For this group of homeowners, provided that their co-op board allows it, a reverse mortgage can utilize the home's equity and provide needed cash without ever requiring a monthly repayment. Read More
Co-ops on the Rebound
Cooperative buildings should be run like businesses, with prudent investing and organized budgeting practices in place. As many buildings that have been on the brink of financial disaster can tell you, if you ignore these aspects of running your co-op, the results can be disastrous. Here we take a look back at several buildings, all of which had experienced serious financial problems, to see how they are faring today. Read More
Fraud Prevention
With all of the negative headlines involving multi-national corporations over the past few years, fraud has been elevated to the forefront of financial topics. This is the theme of a new accounting pronouncement that becomes effective this year. As a result, you can expect to see some fairly substantial changes in the way your accountant performs your building's audit. Read More
Going Green to Save Green
Solar powered panels dotting rooftops. Recycled waste water replenishing toilets. Geothermal heat pumps for heating and cooling. Filtered fresh air into apartments. What's next? Sheep grazing in the Sheep Meadow? Read More
The Big Payback
It's hard enough balancing our own personal budgets without having to worry about an entire city's bottom line. But that's exactly what New York City Mayor Michael Bloomberg asked property owners to do last year when he sought a tax hike of nearly 25 percent to cover budget shortfalls. Read More
Trimming the Bottom Line
With increasing costs for heating fuel, insurance, real estate taxes and the like taking a bite out of the operating budget of most every co-op and condo in the city, some cost saving measures can help stem the tide of rising costs. Payroll can be trimmed, taxes protested, and expenses monitored and with some effort, significant results can be achieved. Don't assume that there is nothing you can do about your board's expenses. The key to good management is to look at every single expense. Read More
On the Straight and Narrow
In the unfortunate and troubling event that you suspect incompetent - or even criminal - behavior regarding your building finances, an accountant or a certified fraud examiner can forensically investigate the issue to determine whether or not mismanagement or possibly criminal wrongdoing is present. The question of whether or not a fully certified fraud examiner should be brought in depends upon the amount of damage, what kind of legal action will be taken, and whether or not losses can be recouped; after that, there remains the task of shoring up your building's defenses against fraud to see that it doesn't happen again. Read More
Challenging Your Real Estate Taxes
Tax certiorari. Even the name remains obscure in Latin, perhaps in an effort to make the entire process seem difficult and hard to manage for the average real estate owner. For co-op and condo boards, however, the tax certiorari proceeding is a real opportunity to reduce real estate taxes for their buildings and for their shareholders. The real estate tax rate in New York has gone up 18.5 percent since last year, making it more important than ever to exercise your building's right to lodge a protest. Read More
Helping Your Co-op or Condo
Navigating the finances and ensuring the fiscal stability of your cooperative corporation or condominium association has never been an easy task. Certainly, New York's residential community has been through some challenging times, and looking immediately ahead, the coming 12 to 18 months are likely to be among the most challenging for the city as a whole - and for residential co-ops and condos in particular. Read More
Refinancing Your Cooperative
In today's low interest rate environment, refinancing is the top agenda item for many cooperatives. However, while the current interest rates would seem to guarantee a "win-win"¯ situation, a savvy board must take into account more than just low rates when making the decision to refinance. As board members, you need to consider the existing terms of the property's underlying mortgage and closely analyze your co-op's financial security, current monthly costs, and projected capital improvements as you seek the optimal refinancing option. Read More
