The Meter is Running
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Umbrella policies are shrinking while premiums rise, leading to maintenance increases. Communication, education, and early action are crucial for boards facing these financial challenges.
AUTHORStuart Halper, Vice President and Co-Owner, Impact Real Estate Management
We’re seeing a massive reduction
in umbrella policies, where companies
are scaling back coverage
from $100 million to $20 million
while also doubling or tripling
the premiums. Boards neve want
to have to impose maintenance
increases on shareholders, but
with the inflationary track we’re
on, they’re unavoidable.
That’s why we’ve been generally
recommending 5% to 10%
maintenance increases, because
we’d rather not hit shareholders
with expensive assessments. Still,
it creates an unpleasant atmosphere
and puts a lot of stress on
boards. And what’s making things
worse is that the insurance companies
are coming at you at the last
minute and giving you only three
or four days to make a decision
when you have to renew.
We tell boards that the best
thing they can do is keep shareholders
informed. Hold special
meetings to get the information
about costs and maintenance
increases out there early — like
three or six months in advance.
And at the annual shareholder
meeting, put the budget in people’s
hands. Have the most recent
financials and numbers and the
ones from the year before, because
seeing is believing.
As managing agents, we also
have to educate board members
themselves, because they
are sometimes in denial when it
comes to maintenance increases.
To be fair, boards are being pulled
every which way, especially at
affordable HDFC co-ops, because
those that don’t raise maintenance
to appropriate levels will see
arrears start to rise. Buildings with
very little meat on the bones won’t
have sufficient cash to pay for
fuel and other operating expenses
and end up stealing from one
expense fund to pay for another.
It’s a harsh reality, and we don’t
see prices coming down in the
near future. Still, for the most part
boards are making the right decisions,
even though they’re