Emily Myers in Bricks & Bucks
After a year of intense grassroots efforts, the board at New Hampshire House, a 139-unit condo in Rego Park, Queens, finally succeeded in persuading owners to take out a $3 million loan to repair the building's facade. The board’s success means the condo will finally be able to perform the necessary repairs mandated under the Facade Inspection Safety Program (FISP), something it had been unable to do previously.
The building’s last facade inspection in 2018 revealed the need for an estimated $1.5 million in repairs. Without the funds available, the building needed to take out a loan. The condo’s bylaws require the board to secure approval for any loan above $100,000 from a supermajority of the owners, but it could not secure the votes. Unable to make the repairs, the board didn’t file the report required by FISP, and maintenance of the exterior brickwork was neglected. Some apartments are now seeing interior water damage during heavy rains because of the deferred maintenance. “Problems don’t go away because you don’t do repairs,” says David Cohen, an account executive at Kaled Management and the condo’s managing agent. “They just get worse.” The condo’s noncompliance has also resulted in more than $60,000 in penalties for the building over the past six or seven years.
Since the last inspection, five more freeze-thaw cycles have taken their toll on the building’s brickwork. Factoring in a 30% increase in the costs of materials and labor, the estimated repair costs now stand at $3 million. Feeling the urgency, the board called a combined annual and special meeting in 2022, seeking the required 66.7% affirmative vote of a loan to cover the costs. It faced two large challenges that unfortunately it couldn’t overcome: a lot of apartments are sublet and the building has 70% absentee owners. “A lot of these people aren’t at the building and think of the apartments as an asset they can make rental income from,” Cohen says.
Not to be deterred, Helene W. Hartig, owner of Hartig Law and the condo’s attorney, says a decision was made to keep the meeting open for a year to allow people who didn’t participate to send in their votes. That gave the board and condo’s property management team an opportunity to intensify their grassroots efforts to get the votes. “During that year we bombarded the owners with information,” Cohen says. That included knocking on doors, writing letters, organizing meetings, sending memos and emails, and posting notices in the building.
The unit-owners needed education on FISP compliance, the impact of rising interest rates and the link between Fannie Mae’s new lending guidelines and capital repairs. “Not being able to do building repairs can hit people in many ways, including their ability to refinance, and their ability to sell,” Hartig says. Another key to unlocking votes was making sure literature was accessible to people without English as a first language. Multilingual members of the board translated the communications into Mandarin and Russian to reflect the diversity of languages spoken by owners.
In February, two weeks before the 2022 meeting formally closed, the board managed to get 70.95% of the owners to approve a $3 million loan, and it closed a month later. Only 2.5% of unit-owners voted against the loan and 26% did not vote at all.
For buildings with similar challenges, Cohen says it’s important to communicate early and make sure your communications are getting through. Unfortunately, the delay in securing the loan meant the condo lost out on a more favorable interest rate. “When we started this, the rates for loans were in the 3% range,” Cohen says. The $3 million loan, secured from the National Cooperative Bank, has a rate of 6.49%. It will be paid off with a 10-year assessment, which ranges between $200 and $400 per unit per month depending on the ownership interest. The good news is there’s no prepayment penalty, so if the cost of the work is less than $3 million, funds can be repaid with no penalty and the assessment can be reduced.
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