Think of this as your condo's checking account that shows every source of income flowing into your building. Primarily made up of common charges, these funds are what cover your operating expenses - from keeping the lights on to paying property taxes. Your goal at the end of the year is a balanced budget across income, expenses, and reserve contributions.
Make sure to cover these expenses to keep your building running at peak performance.
Tax & debt service
Ever gone even an hour without water, electricity, or heat (in the dead of winter, of course)? Yeah, it's rough. Your building’s utilities are the monthly expenses you just can't afford to miss. Researching local utility rates will help you prepare for upcoming increases and check out ways you can combat rising energy costs.
What happens if someone falls in the stairwell, if your building gets sued, or if a hurricane floods your lobby? Enter insurance. Your co-op’s policy plans - from master liability plans to directors and officers (D&O) insurance - protect your building and your board from any misfortunes and mishaps that may occur.
This is a good time to review your plans to ensure you're getting the coverage you need.
Insurance policies are projected to increase 15-30%.
D&O liability insurance protects boards from:
Breach of contract
Breach of warranty of habitability
Breach of fiduciary duty
Tax & debt service
Unlike co-op shareholders, condo owners are responsible for paying their own property taxes and mortgages.
Have a live-in resident manager? Your building's on the hook to pay the taxes on that unit.
Labor expenses vary building to building due to a variety of factors.
Are you a full-service co-op? Payroll may be your biggest expense.
Are your building employees non-union or part of 32BJ? The latter could increase your labor expenses dramatically.
Boosting staff morale can improve job performance and retention rates.
32BJ benefits (excluding payroll) are expected to increase 4.5% next year.
Does your boiler need constant attention? Do you only trust one landscaper to keep your rooftop garden alive? By locking in year-long service contracts with the vendors you trust now - from HVAC to elevator and beyond - they'll be able to jump right in when you need them most.
With overtime fees, a third-party security contract could cost way more than hiring a doorman directly.
Putting together a team of advisors you trust is no easy task. Make sure to review all your major professional contracts - accountants, attorneys, management, and more - to ensure you're getting the guidance you deserve.
You can expect contract fees to increase roughly 3-5% annually.
Did the elevator break down during one morning’s rush hour? Is the boiler clanging and hissing so loud it sounds like a cat's stuck in it? Make sure your budget is prepared to handle any repairs that are sure to come up throughout the year, usually at the worst possible times.
A healthy reserve fund is the sign of a healthy building. Your building will run better and you'll substantially cut down on future building assessments. Plus, lenders will be much more willing to lend to potential buyers, increasing the value of your building. Check out our list of reserve funds best practices here.
Fannie May and Freddie Mac suggest contributing 10%.
Gearing up for a Local Law 11 project? Preparing for Local Law 97? Your reserve fund comes in handy for covering these large capital projects. For a refresher on New York City's most important local laws, check out our guides:
Condo assessments are temporary charges to owners on top of maintenance fees. They usually fall under two buckets:
Used to pay for larger projects that increase your building's value. Maybe you have a big Local Law 11 project or everyone's finally ready to turn that dream rooftop deck into a reality.
Used to pay off necessary operating expenses that can no longer be covered by your existing budget. Maybe you hadn’t planned to fix the boiler’s circulator pump or you've finally had enough of that elevator that's as reliable as the 5 train.