The co-op squeeze: Soaring maintenance fees pushing some owners out
Spiraling maintenance fees at co-ops are becoming a major headache for some owners - driving some of them to cheaper pastures.
Annual maintenance fees per room on the East Side rose from an average of $3,457 to $5,606 from 2001 to 2011, according to the Council of New York Cooperatives and Condominiums. On the West Side, fees jumped from an average of $2,784 to $4,671 per room over the same time frame.
For West Siders, real estate assessments doubled and their property taxes rose from $739 per room per year to $1,912. All together, taxes in West Side co-ops went from gobbling up 23% of a monthly maintenance bill to 37.5%, leaving co-op owners with a smaller pie slice to pay for utilities, repairs, infrastructure upgrades, debt service, insurance and labor.
Assessments and higher maintenance bills are in part driven by steadily rising fixed expenses such as water, sewer and utilities. Insurance rates also increased after 9/11. But property taxes are a major driver of escalating maintenance bills in all buildings, experts say.
The City Finance Department did not respond to inquiries about the rise in assessments for New York City co-ops.
Most cash-cramped shareholders sell, said Stuart Halper, a real estate attorney and co-owner of Impact Real Estate Management.
"I see a lot of people around Fort Greene and Prospect Heights - neighborhoods that have skyrocketed in value - who have been there 25 years. They're cashing out. They leave the city because they can't afford to live there any more," Halper said.
Having to pay one's fair share of infrastructure upgrades in prewar buildings comes at a bad time for people who have seen their incomes drop, he noted.
In some co-ops, costs are also being driven up by affluent newcomers demanding costly upgrades.
"Every building I work with seems like Fort Knox in terms of security. That's a new thing," said Michelle Maratto, a managing partner in Itkowitz LLC.
"They want a concierge. They want a gym. They want to redo the lobby," said real estate attorney Phyllis Weisberg.
"The constant, constant argument is 'how do you keep maintenance down?'" observed Richard M. Kielar, who served on his building's co-op board for seven years. The maintenance bill, "is not a fixed expense any more: It's an escalating burden.
"There is always tension between the families in the building who want the lowest costs possible," and shareholders who don't appear to believe that high monthly maintenance fees can negatively impact resale value, added Neil Schaier, a lawyer who lives in a Chelsea co-op.
A co-op can move to repossess a unit in which a shareholder has paid off a mortgage, but fallen behind on his maintenance fees.
Maratto said she sees many nonpayment cases against people who could no longer afford their buildings.
One morning this January, a 42-year-old man was in housing court, trying to get back the two-bedroom co-op he bought 15 years ago, and which had been padlocked hours before.
The defendant, who did not want his name used because he felt it would adversely affect his job search, said he fell behind on his maintenance payments after he lost his office manager job and was not eligible for unemployment benefits.
"If I lose it, everything I've worked for all my life is gone," he said of his apartment. Unexpected assessments, he said, "are what killed me."
The managing agent for his building described him as a shareholder who had a long history of delinquent maintenance payments. "Have there been assessments? Yes. But they've been extremely reasonable."
"Nine out of 10 times, the co-op does not want to lose these shareholders," but only wants the maintenance payments brought up to date, said Judge John Henry Stanley, who heard 10 to 20 co-op cases a day in Manhattan Housing Court.
The majority of people who lose co-ops they've already paid for do so because of a death, medical catastrophe or job loss, Stanley said. But there are also people who bought their homes "thinking they were a lifetime investment, but improvements in the building are making it impossible to remain."