J.T. from New York City writes:
Dear Mister Condo,
I live and serve on a board that recently took over sponsor-control of a 3-year old 67- resident condominium. Our bylaws state that we have a live-in super. NYC indicates multi-dwelling residents have a live-in super or one that lives within 200 feet of the building. After recent review of the accounts, our operating expenses parallel our revenue. In the last six months, common charges were raised 25%. We have just hired a management company. The state of our finances is still under review. Now that the board has taken control of the building, we are now taxed with the choice to purchase or rent the Super’s Unit. Needless to say, there are a number of building issues that we have inherited. We are at a cross roads. With no resources available to purchase the unit from the Association should we increase common charges and establish a special assessment to buy the unit? Address the building issues now and continue renting the Super’s Unit? Establish financial stability before extending ourselves financially?
Mister Condo replies:
Big Apple Greetings, J.T.! You and the rest of your Board certainly have a lot on your plate right now. I know there are some considerable expenses facing the association right now but I am going to recommend one more expense for you. Hire a competent attorney to guide you through the process and to also see if the community has any recourse for how things were handled the past three years. Transition from developer to Board control of a condominium can be a complicated process and one where experiences professionals should be used. In the past, I have recommended association hire an attorney, a property manager, and an accountant to assist in this process. The attorney watches over legal matters; the accountant assists with financial concerns; the property manager handles the day to day business of the Board during the process and can be hired on as a permanent solution once the transition phase is complete. Since you have already undergone the transition phase, it sounds to me like you’ll be playing catch up and bringing your association into compliance moving forward.
You mentioned your annual budget basically being a balance between common fees collected and expenses going out. Clearly, that isn’t enough money to sustain the community for the long run. You will need to create a Reserve Fund and fund it through Common Fund contributions – either monthly or via a special assessment. Neither option is going to sit well with unit owners. The 25% increase to common fees in the past six months may have just been the first of many increases that will be needed once a true financial plan is revealed. As for purchasing the Super’s Unit, the Board may wish to speak to a community association lender and secure a loan to make the purchase. Of course, common fees may need to be raised to cover the monthly payments on the loan.
These will be trying times for Board members to be sure. You may face disgruntled owners. But, rest assured, once you get the community past these initial hurdles, your 3-year old condo will be on the right path for years to come. Best wishes!