Common Charges in NYC: What You Need To Know
If you are looking at buying a condo in New York City, you are probably keenly aware that it’s not just the purchase price that is higher than the rest of the country — it’s also the monthly expenses. In this article we are going to be focusing on Common Charges (CCs), which are the monthly fees paid by condo owners to cover the cost of maintaining and operating the building.
Common Charges in New York City typically cover the following building expenses:
Building Maintenance and Upkeep. This includes facade work, roof maintenance, elevator inspections and maintenance, and cleaning of lobbies and common hallways.
Building Staff Salaries. If the building has doormen, porters, a resident manager or maintenance staff, they need to be paid. These can either be full-time staff or part-time staff, but the staff/shareholder ratio can greatly effect the CCs in a building.
Building Amenities. The more amenities a building has, the more upkeep they require. A gym will need to service the treadmills and exercise bikes, and to replace equipment as it breaks down over its useful life. A pool may need a lifeguard, and will certainly need regular maintenance.
Building Insurance. The building’s insurance typically covers the exterior and common areas of the building, as well as some liability for slips and falls and that sort of thing.
Landscaping and Snow Removal. If a building has common outdoor space, they may hire a company to handle gardening, grass cutting and general landscaping. In the winter, a building ought to handle snow removal as well.
Trash Removal and Pest Control. Some smaller buildings have the residents bring the trash to the basement and organize it themselves, but most larger buildings have central trash chutes in refuse rooms in the hallways and the building staff handles it. Regular pest control is also a wise investment for buildings to prevent pest problems in the first place.
Utilities for Common Areas. Heating and cooling for individual units is typically paid for by the respective owners, but the common areas are paid by the building via CCs.
Legal Expenses. If a shareholder goes into arrears on their CCs, the building will often need an attorney to deal with the situation. In addition, sales, transfers and renovations may need an attorney’s attention as well as a building architect. These fees are usually offset by transfer fees and renovation fees, but ultimately the building will be responsible for legal fees and will pay for them out of CCs.
Reserve Fund Contribution. It is wise for a building’s board to save a rainy-day fun for unexpected expense, which often come up. A reserve fund helps prevent special assessments. See more on Reserve Funds* below.
*If the reserve fund didn’t exist, then anytime there was an unexpected expense, the shareholders would have to come together and decide how to pay for it. For example, if an elevator needed repair, and it was going to cost $100,000, then each owner in the building would have to pay their proportional share of that expense. In a 50-unit condo building, this would result in an assessment of $2,000 per shareholder (assuming equal size and value apartments). In most cases, condo buildings in NYC don’t divide ownership equally, since some apartments are larger than others, some have valuable outdoor space, and some have better views than others. The ownership structure of a condo building is laid out in what is called the Schedule A in a building’s Offering Plan. I’ll go over details of the Offering Plan in another article, but the important part here is to know the percent of the building’s common elements that you are buying. Your attorney can locate this in the Offering Plan during the due diligence period (before you sign the contract).
When educating buyers about monthly expenses, I like to benchmark the monthly expenses to a Monthlies-Per-Square-Foot. For example, a 1,000 SF apartment that has $1,500 monthly CCs and $1,500 monthly taxes would have combined monthlies of $3,000. Taking the total monthlies and dividing by the square footage we have:
$3,000 / 1,000 = $3 per Square Foot per Month.
This way of comparing monthlies allows you to determine if a building’s monthlies are relatively high or relatively low compared to other listings. Let me know if you’d like me to go into a deeper dive of monthlies per square foot, and to give some examples of the monthly expenses of newer condo buildings. Leave a comment if you have any questions, and don’t be afraid to reach out to me.
