Page 8 - New York Cooperator January 2020
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8 THE COOPERATOR —  JANUARY 2020   COOPERATOR.COM  CONT...  Nick Ruccolo, a vice president with   Crowninshield, a real estate management   firm in Massachusetts, also sees financial   mismanagement as the underlying cause   of distress for condominium communi-  ties. “The problem we most typically run   across,” he says, “especially with new ac-  counts, is deferred maintenance. Many   items that should  have  been  done  have   been deferred, or passed along. They   didn’t start as emergency items, but over   time they became emergency items. Typi-  cally then, a  large assessment  will have   to be put in place to take care of it. We   had a situation   like this where   all  the  roofs—  and  the  com-  mon roads—of   a community   were so ne-  glected,  they  had to be done   at the same   time.”  Even with-  out an emer-  gency rearing   its head, build-  ings age, and   m e c h a nic a l   systems  and  equipment be-  come obsolete.   It’s a fact of life   for  property  owners  and  managers and can be predicted to a cer-  tain degree if community administrators  between individuals or groups within the   understand the concept of  depreciation  community, can be just as detrimental to   and earmark funds accordingly. It is the  the health of a co-op or condo. The in-  responsibility of a co-op or condo board  ability for a board to make decisions due   and its management to properly prepare  to conflict or constant infighting among   for the necessary maintenance and ulti-  mate replacement of building systems.  ty can grind the effective operations and   A board that consistently defers regular  management to a halt.   maintenance or opts for a cheap fix rather   than a more long-term solution will ulti-  mately land the property in distress. Like  members, and between groups of resi-  a bridge that hasn’t been properly main-  tained,  the  overall  physical  plant  could  “You have to play the role of conciliator,   come close to collapse, literally and figu-  ratively.  Mortgages  Less common these days, but a very se-  rious problem during the Great Recession   a few years ago, was co-op buildings de-  faulting on payments for their permanent  the board and will try to run the build-  underlying mortgages. As a reminder:  ing or association like their own personal   co-op corporations own their properties  fiefdom. That kind of inappropriate, self-  as fee simple estates, and as such can—  and do—place large mortgages known  breakdown in communication, which in   as underlying permanent mortgages on  turn can make a manager’s job nearly im-  their buildings. The debt service on these  possible.   mortgages is paid monthly and pro-rated   among the shareholders. In certain cas-  es—if there are large numbers of subten-  ants or vacant units, for example, and the   primary shareholders aren’t paying their   monthly maintenance charges on time   (or at all)—the board may not be able to   meet its obligations under the mortgage.    After 90 days, the lender will place the   mortgage in default and begin the pro-  cess of foreclosure. If the property is fore-  closed, the co-op will be wiped out—and   all shareholders will lose their equity.  Halper explains that the key to avoid-  ing such a problem is to limit the num-  ber of subtenants in the property, which   can help keep shareholders committed to   their investment.   He says it’s also   advisable to con-  tact your lender   in the event a se-  rious financial or   cash-flow prob-  lem presents it-  self to head off a   default and fore-  closure  action.  The last thing the   bank wants is the   property.  Interpersonal   Confl ict  While perhaps   less obvious at   first than finan-  cial or  physical   breakdowns,  a  breakdown in in-  terpersonal cohe-  siveness, often characterized by conflict   different factions within their communi-  “Interpersonal  problems  between  residents and the board, between board   dents happens all the time,” says Ruccolo.   to get the opposing sides to reach com-  promise. It’s not unlike the politics of to-  day. You have to find common ground,   and that’s really hard to do.”  Halper mentions situations wherein   an  individual  person  can  get  control of   serving control can lead to a complete   THE CHALLENGES...  continued from page 1  “Completing a regularly   scheduled reserve study,   and maintaining both the   reserves required therein   and completing the work   required as scheduled,   will avoid the possibility   of the property becoming   distressed.”              — Nick Ruccolo


































































































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