Page 11 - NY Cooperator July 2019

COOPERATOR.COM THE COOPERATOR —JULY 2019 11 charges to build its reserve fund. “Most often to not raise owners’ hackles.” you don’t want to allocate less money to your reserve fund than the previous year, if operat- ing expenses increase,” says Michelle Stark, a rying that increasing maintenance charges property manager with Realty Performance might stoke the ire of the residents, the al- Group in Rochester, New York. “When work- ing with boards on their budgets, it’s impor- tant to put together the operating expense portion first, then see what’s left to be allocat- ed into the reserve. Although each association dry when it is time for a major maintenance has distinct needs, most often I see a $5-$10 project,” says Stark. “Boards don’t always want increase in maintenance charges every other to increase because of the pushback from the year.” Selling the Plan Maintenance increases cannot be affected show the community at annual meetings how unilaterally. A board/management team must the budget works, and why increases are nec- explain to the rest of an association why pay- ing more money is necessary. This is best done with honesty and transparency. “I remind everyone that the people driv- ing these decisions are also homeowners and are subject to the same increases; so these choices are not made lightly,” says Jordan. “If we’ve decided to increase maintenance charges, you can guar- antee that we’d taken a look at the reserve schedule, at actual re- serve balances, at what the necessities for the community are, etc., before we’d decide that this needs to happen. burning free cash, but I don’t recommend do- The reasons these increases come in is either ing that for a particularly long period of time. operation costs or the community’s costs are I’ve seen communities go for years without higher than what we’d have on hand in free a fee increase, and then you come in and hit cash flow.” Ideally, this won’t be management’s first it would have been before, say 5 percent. But time at the rodeo, and it will be able to con- vey why fees need to be raised in clear and five years—less than inflation—at 5 percent concise terms. “The property manager brings is a lot more jarring. It’s easier to wrap heads an expertise in the operation of a community around a minor routine increase than a larger that a board and residents should be able to sudden one. There’s a psychological factor. ascertain,” says Liberman. “The manager should be able to explain what something will its equipment, then the useful life of that cost, why it’s a worthy expenditure, and how equipment is reduced, which in turn increases things will only be more expensive in the long its maintenance schedule and throws off the term should you not act now. Newsletters, reserve study,” Jordan continues. “The reserve monthly open meetings with a clear agenda, study takes for granted that the association is and proper notice will all help get owners on doing preventative maintenance on a regular board with these decisions.” “Nobody can punch holes in something than later. If they’re letting those things atro- that’s properly prepared and unassailable,” phy, then by the time they get around to fixing adds Eberhardt. “Accurate financials are key, their equipment, they won’t necessarily have because you cannot argue with numbers— although people will argue about everything long-term planning.” else. It’s a delicate balancing act. Raising main- tenance charges and communicating that a time’ remains true here: the association that portion will go to the reserves generally helps Consequences of Inaction If it comes as any comfort to boards wor- ternative may be much worse—and in some cases, could actually sink the association. “Refusing to raise fees when an increase is needed will leave an association high and community, but dodging this inevitability is sure to backfire. It’s important to thoroughly essary.” A board with some excess cash in its op- erating account can potentially defer raising maintenance charg- es, or increase them at a lesser rate, but this too can come back to bite them. “If a board with some extra money needs a 10 per- cent increase, they might only adapt a 5 percent uptick, instead opting to use that operating money that they’d not allocated to their reserves,” says Jordan. “They’ll be them with what is basically the same increase what would have been 1 percent per year over “Also, if the association doesn’t maintain basis and fixing anything wrong sooner rather the money to do so, and that messes with the In the end, the old adage about a ‘stitch in “When working with boards on their budgets, it’s important to put together the operating expense portion first, then see what’s left to be allocated into the reserve.” —Michelle Stark continued on page 14 250 Park Avenue South New York, New York 10003 212-557-3600 www.TudorRealty.com To learn more about our property management services, please contact Andrew S. Lazarus, Senior Vice President 212-813-3054 or ALazarus@TudorRealty.com Since 1990, Tudor Realty Services Corp. has been providing hands- on, proactive property management services to cooperative and condominium buildings throughout New York City. Life was simpler in 1990. New rules and regulations as well as changing technology have certainly made managing your building more challenging. 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