After 10 months of unprecedented upheaval, 2020 is ending on a note of high anxiety for cooperative and condominium boards, and with good reason. From the moment COVID-19 first hit New York in March, the pandemic and its accompanying economic shutdown have wreaked havoc on bottom lines, brought capital projects to a dead halt, forced buildings to close amenity spaces, dented property values – in short, disrupting nearly every aspect of co-op and condo life. Now, a comprehensive new survey conducted by Habitat takes a deep dive into New York’s cooperative and condominium community. The 26-question survey – which was emailed in August to 3,474 board directors – provides a telling snapshot of our readers’ anxieties and endeavors in these troubled times.
On Shaky Ground
By far the greatest source of unease is the pandemic’s likely long-term economic impact. Among the 278 board directors who responded to the survey, an overwhelming 87% say that as investors in real estate, they are worried about the economic future of New York City, with 60% admitting that their biggest concern is declining resale and property values.
“Prices do seem to be dipping,” says Andrew P. Brucker, a partner in the law firm Armstrong Teasdale, noting that home prices in the city have dropped by as much as 20% in recent months, while prices in the suburbs have risen the same amount as people flee the city. Given current market conditions, shareholders and unit-owners have little recourse but to wait things out. “I would have told you something different a couple of months ago,” Brucker says. “But at this point, if you can hold on for a year and a half or two years, I think things will probably get back to normal. Probably.”
Buildings that lease commercial spaces are grappling with a much more urgent problem: 59% of those with commercial tenants found that their rental income has been diminished by the COVID-19 crisis, with 31% revealing that they are losing 15% or more of their overall revenue each month. But even as boards are struggling to cover their operating expenses, many are learning that it pays to be flexible when it comes to tenant arrears, either by granting rent deferrals or renegotiating a cheaper lease, to help businesses stay afloat.
Case in point: Soon after the pandemic lockdown began last spring, the board at 77 Bleecker St. in Greenwich Village called an emergency meeting to figure out how to help the businesses in the co-op’s 19 retail and professional spaces survive the outbreak. “We realized we would rather help tenants by doing something reasonable, because when this was all over – if this is ever over – we don’t want a whole bunch of empty units,” explains Michele Berdinis, a board member.
And vacancies, says Theresa Racht, a real estate attorney, would be a grim scenario. “You’re in trouble, because who’s going to rent the space if your commercial tenant goes under?” she says. “A lot of co-ops would have to increase maintenance, which creates another whole problem. There are no easy solutions.”
Indeed, more than half of the Habitat survey respondents said that balancing their budgets will be one of their biggest challenges in the coming year. In order to do that, 72% say they will be raising maintenance or common charges, while 45% anticipate imposing new assessments or continuing those already in place. The high cost of meeting the city’s new energy standards — including the Climate Mobilization Act, which requires buildings of 25,000 square feet or more to reduce their greenhouse gas emissions by certain target percentages by 2024, 2030 and beyond — is also a top concern for 37% of respondents.
“We’re not really sure what some of these standards are going to be, how much time the city will give people to become compliant and what the penalties will be if you’re not,” says Peter Kelvin, the former co-op board president at 535 E. 86th St. on Manhattan’s Upper East Side. “And I’m not sure that anybody knows yet how we’re going to pay for it.”
For buildings that need to retrofit heating systems and other equipment, “it’s going to require an increase in maintenance charges, most likely a substantial one,” says Warren Schreiber, the board president at Bay Terrace Cooperative Section I in northeast Queens. “Everybody is all for reducing our carbon footprint, but the burden is going to fall on shareholders.”
With the city facing fears of a fresh wave of the virus, it’s no surprise more than a third of respondents voiced concern about the ongoing challenges of enforcing safety protocols to protect residents and staffers — and to protect their buildings from legal liability. Hy Diamond, a former board member at 2345 Bell Blvd., says that while he’s relieved that “pretty much everybody” at the Bayside, Queens, co-op has been wearing masks and following the rules, the board has to remain vigilant. “What would happen if the co-op didn’t enforce them, and somebody died of COVID-19?” he says. “It would be a very big legal issue.”
While co-op and condo boards that fail to document and implement government safety guidelines could face litigation, the decision to impose penalties on residents who flout the rules isn’t an easy one. James Glatthaar, a partner at the law firm Bleakley Platt & Schmidt, says that at one building he represents, the board reluctantly imposed a $500 fine for not wearing a mask, even though it recognized the fine could be a hardship. “There are a lot of elderly people in the building,” Glatthaar says, “but the board felt very strongly about it, since they knew it would be the most serious violation.”
Protecting staff members, while also easing their concerns about being exposed to the virus, is another priority. “At one point for several months we cut back to a four-day week for them,” says Kelvin of the Upper East Side co-op. “Speaking with our staff, it sounded like the most stressful part was just coming to work and going home again.”
In addition to protecting themselves from liability, boards are feeling the pressure to get back to routine governance matters that have been put on hold. One-fifth of survey respondents revealed that they had postponed their annual meetings until 2021. For the 18% of buildings that have held virtual meetings, there has often been a steep learning curve, notes Glatthaar, who says one building prepared for possible technical glitches by holding a practice meeting and hiring an independent moderator to run the meetings and help ensure that business gets done.
“Ours went so well that people have been saying, ‘Why don’t we just do that all the time? It’s so much easier and more efficient,’” Kelvin says. The 86th Street co-op, like many others, has also discovered that Zoom gatherings have a value-added benefit — a significantly higher turnout. “We always get a quorum, but never by much,” he says. “This year, I think we had about 65% participation, which is way higher than usual.”
Once unthinkable, remote meetings at co-ops and condos now appear inevitable, with half of respondents saying they will be conducting a virtual annual meeting in the next few months. At less tech-savvy buildings that aren’t ready to make the switch, boards have managed to come up with COVID-19 workarounds. Brian Scally, vice president and director of management at Garthchester Realty, says one of his smaller properties held its annual meeting in the building’s driveway, using a microphone and a speaker. “Everyone was socially distanced,” he says. “It worked very well.”
While the Habitat survey paints a clear picture of the looming challenges co-ops and condos are facing, there is reason for hope. “New York really is the center of the world,” says Brucker, the attorney, who points out the city’s resilience after 9/11 and the crippling recession in 2008. “This will take two or three years to get through,” he adds, “but New York will bounce back.”