Anne Marie Barker
Senior Property Manager, Awaye Realty
We had been recommending small annual maintenance increases at one of our co-ops to keep the building financially sound. The board members kept refusing the increases, thinking that they were protecting the shareholders by keeping the maintenance down. A series of unforeseen major expenditures depleted the reserve fund. It is now time to refinance and the board will be forced to impose a special assessment and a significant maintenance increase — a situation that could easily have been avoided.
Steven W. Birbach
Chairman, Carlton Management
One of our co-ops was left with a mess by the sponsor. The sponsor had defaulted on maintenance payments to the co-op, and the underlying mortgage was coming due within the year. Because a third of the building was not paying maintenance, cash was dwindling. The previous management firm had no experience in dealing with unsold shares or knowledge of the rental market. When we were hired we immediately put a plan into place to take over the unsold sponsor units and rent them out at market rents, thus covering the maintenance fees. Within two months, all of the apartments had been rented. The building refinanced, reducing its mortgage payments. Adding to the building's cash reserves, the co-op sold several of the unsold units. The board members never thought there would be a positive outcome when they were left with the defaulted units and a large monthly shortfall to overcome.
President, Sandberg Management
We took on management of a small co-op last year that had been managed by the sponsor. The co-op was running an operational deficit, had no reserve fund, and owed real estate taxes of over $60,000 (almost one year in arrears). We were asked to come up with a plan to get the shareholders back on their feet. Working with the board, we implemented a maintenance increase and two concurrent assessments: one to pay off the tax liability and one to start building a reserve fund. The maintenance increase also covered a line item in the budget to operate a 10 percent surplus that lenders like to see in refinances. We also worked out a payment plan with the Department of Finance to avoid late fees on the arrears. These steps were accomplished in 45 days.
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