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Chargeback

Why not turn a fact of life into a fund-raising opportunity?

The fact of co-op and condo life in question: your super and handymen do odd jobs for your shareholders and unit-owners during regular staff work hours. We’re not talking major, time-consuming alterations, of course, but little things like hanging closet doors or wiring sconces onto light-plates.

 

Sure, you probably forbid it. Since none of your residents is Bob Vila, however, and since your staff not unreasonably wants to earn extra bucks, residents and board members alike often tend to look the other way.

“Largely, my experience has been that it’s an unspoken part of the business,” says Eric Lash, director of management at Alexander Wolf & Company. Anthony Giaimo, a property manager with Buchbinder & Warren, notes simply: “You can’t watch your staff all day.”

This is where the fund-raising opportunity comes in. And it involves something called a chargeback system. A chargeback system utilizes a formal set of work orders and fee schedules in which qualified staffers do minor repairs and similar tasks within shareholders’ and unit-owners’ apartments.

It gives the board more control over scheduling and, in many cases, it is safer for the building as a whole, since it reduces the chance of, say, a self-installed air conditioner falling out a window. For residents, says Lash, the advantage of having staff doing minor out-of-wall repairs (as opposed to in-wall, building-system work for which the co-op or condo is responsible) is “a reduced price as compared to the market, and the convenience of easier scheduling and communication compared with calling outside vendors.”

Fees are split between the worker and the co-op/condo, which generally puts its share into the operating account, says Brooklyn accountant Douglas Condon, who notes: “The board could charge a flat fee billed to [a resident’s] account, or it could take a percentage, or it could even do a hybrid – the building gets a minimum fee, and then a percentage over that.”

“We’re providing a service to the shareholders,” says Giaimo. “And it makes a little money for the co-op.”

The challenge is creating a chargeback system that’s easy to operate. You also need to address liability issues, and to have specific, clearly articulated limits concerning what the staff can and cannot do. “It’s one thing to hang a lamp, another to rewire the apartment,” says attorney James Samson, a partner at Samson Fink & Dubow.

At the simplest level – which might be appropriate for smaller buildings without a full-time staff – a willing property manager can provide an informal chargeback system involving outside plumbers, electricians, and handymen.

“With plumbing or electrical work that is normally the shareholder’s responsibility, I will pay the vendor or contractor and bill the shareholder on their next statement, to reimburse the building,” says Howard Kupferberg of the Long Island-based LCC Realty, which manages several buildings in New York City. “It takes more of my time, but it’s a nice accommodation.”

The most common method, however, utilizes a formal work-order form in conjunction with an a la carte menu of services and prices. “It’s difficult to employ a chargeback system without some form of documentation,” says Lash. A work order “details the services provided, the time and materials involved, and any purchases of material that need to be made. That information can be used by management to charge a shareholder or condo-owner for services rendered.”

Giaimo describes the system at one of his buildings in the East Village: “We have a [one-page] form, and it has a couple of little jobs on there with prices that the co-op assigned and that the super is able to take care of for the shareholders,” such as minor plumbing repairs, air conditioner installation/removal, and window-guard installation, with a space for miscellaneous work.

The staff, he adds, can do such jobs “during work hours, since the co-op charges a nominal fee” – which even with the customary tip a resident should provide still costs less than an outside vendor typically charges.

Scope of Work. What kind of jobs should the staff take on? Something as simple as replacing a light bulb can be a great boon. Says attorney Steven D. Sladkus, a partner at Wolf Haldenstein Adler Freeman & Herz: “Many buildings have very high ceilings and the average person can’t get up there to change the bulb,” either because apartment dwellers seldom keep very high ladders around or because the resident may have physical difficulty climbing. Many seemingly small repairs can loom as major obstacles for older residents in particular, who may be on fixed incomes and may be understandably uneasy about letting a stranger into their apartment.

Even for more able-bodied residents, one thing in particular screams for professionally competent work: air conditioner installation. “Besides minor plumbing, etc., the most important item regarding this whole thing is the installation of the air conditioning units,” says Giaimo. “Having the super install all air conditioning units benefits the co-op in the area of safety by insuring that they are installed correctly and as per code” with approved support brackets and the like to keep them from crashing to the sidewalk.

Other jobs a staff member might typically perform in an apartment: hang drapes, fix door hinges, install faucet assemblies, fix light switches, move heavy objects, and deal with sticky window frames and sashes.

Generally not allowed: painting, plastering, oven or refrigerator repairs, and anything that could be construed as an alteration, which requires board approval.

How Much? Typical fees range in the neighborhood of $15 to $20 for minor repairs that take a half-hour or less, double that for work taking a half-hour to an hour, with set fees for such items as air conditioner installation ($35 to $40) or removal ($15 to $20). The building keeps a portion, and the worker gets a portion. “I would say that in the absence of any compelling reason otherwise, probably a 50-50 split is appropriate,” suggests Lash. Typically, a resident will give a tip.

Materials. The resident can provide materials, or the staff member can buy them, provide a receipt, and be reimbursed by the resident (which can run into questions of cost for the time spent going to and from the store); or the building can provide common materials such as toilet parts under a set fee schedule.

For some repairs, though, it’s prudent for the building to offer preventive maintenance for free. “Fix toilets,” suggests Sladkus. “If a very simple fix isn’t done, it could lead to a much bigger problem.” When it comes to fixing leaks and the like, “It makes sense to offer those kinds of services free of charge.”

Work Hours. When should a staff member do this work – during his or her shift hours, or on their own time? While it might appear logical for workers to do in-apartment work before or after their shift or on their lunch hours, it’s arguably better for them to do it during their regular shifts.

For example, says Sladkus, there’s the question of on-the-job injuries: “If it’s done as a sanctioned, during-hours job, then I can’t see why it wouldn’t be covered under workers’ compensation,” the state insurance program that covers people for injuries sustained at work. “If it’s done as an after-hours job and the worker slips and falls, the insurance company could argue he wasn’t doing that in the course of normal employment activities, and might disclaim coverage.”

In fact, a cooperative or condominium might even be safer having its employees make whatever apartment repairs fall within their scope of licensing and expertise, as opposed to outside contractors. Samson notes that New York State Labor Law Section 240(1), commonly known as the New York Scaffold Law, states, in effect, that, “if you are a worker and you’re standing on an elevation [such as a ladder] and you fall and are hurt, then you’re not restricted to claiming [only] workers’ compensation. You can sue the owner of the building for the full amount of your damages.”

The co-op or condo unit-owner wouldn’t be liable in any case, notes Jason Paris, a personal-injury trial attorney who is a partner at Paris & Chaikin. “Owners of single- or double-family homes are exempt from the labor law unless they are actively dictating the manner and method of the work being done. For the purpose of this question, a co-op or condo owner is considered a single family, so they would be free from liability under the labor law.”

Nonetheless, a clause indemnifying the cooperative or condominium can’t hurt. “A co-op can have the shareholders sign an indemnification form and a waiver form, and the work order should have fine print saying that the shareholder is liable” for any damages. Of course, as Samson notes: “Nothing ever stops you from being sued.”

Division of Labor. This leaves the issue of how to divide up among the staff what could be lucrative work – or, conversely, how to fairly assign staff to apartments known for less-than-generous tips.

“You need to set up a division of who gets what,” advises Lash. “Clearly, it would [be the responsibility of] the super or resident manager, and if they’re acting fairly, the jobs would be divided evenly among the super and/or handymen. I can see where staff might be at odds over how many jobs go to this person or that person.”

“If it’s done correctly, it benefits everybody,” says Samson. The resident gets convenience and cost-savings, and as for the staff and the building itself, chargebacks can mean greenbacks.

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