Facade Repairs Can Bring Unwelcome – and Costly – Surprises

After preparing the annual operating budget, a co-op or condo board's work is far from done. Next comes the capital side of budget planning. Calculating the cost of compliance with mandatory facade repairs under Local Law 11, which applies to buildings taller than six stories, can be especially challenging. The initial inspection that’s required every five years may identify necessary repairs, but the final cost isn’t always predictable. Daniel Wollman, chief executive officer at the management company Gumley Haft is currently managing a building with 1,000 pieces of terra cotta on the facade, a sizable portion of which will have to be replaced. 

“We’ve given the board preliminary estimates, and they’re massive numbers,” Wollman says. “But we won’t really know how many pieces we will have to replace until someone can get up close and examine them. A project like that is going to take 18 to 24 months, so the building has some latitude if they have to go back to shareholders for more money.” 

But kicking the can down the road is never a good idea. Buildings that have put off compliance with Local Law 11 are probably going to pay more now than they would have earlier on, says Paul Brensilber, president of the management company Jordan Cooper & Associates. That’s partly because costs are always rising and partly because there aren’t a lot of new contractors in the market that have the proper insurance to do these projects. “So your construction costs are going up,” he says. “Everybody’s working right now.” 

Boards should also be aware of when their building is next due for an energy audit and retro-commissioning under Local Law 87. Buildings larger than 50,000 square feet must submit an audit report every 10 years. Any energy-saving measures undertaken as a result of those audits should help buildings meet the greenhouse gas emission limits recently adopted by the New York City Council. Part of the so-called Climate Mobilization Act, Local Law 97 requires buildings with more than 25,000 square feet to reduce carbon emissions, beginning in 2024. Emissions must be reduced by 40 percent by 2030, then by 80 percent by 2050. Buildings that exceed the limits face hefty fines, though the law does provide for exceptions. 

“A smart board should be taking this law into consideration and working with a qualified engineering firm to look at which energy-efficiency upgrades they can do now,” says Amalia Cuadra, the director of engineering for the En-Power Group, an energy consulting firm. “Some can take two or three years to implement.” 

Cuadra says she’s already working with a co-op on 69th Street that has figured out it won’t exceed the emissions limit in the first cycle, but faces a potential $66,000 a year in fines in 2030. Board members there are planning now to gradually replace their aging central heating plant in order to cut their emissions and avoid those fines. “We have 10 years to work with them to deal with some of those changes,” Cuadra says.

Gumley Haft is in the process of evaluating its portfolio to determine each of its 65 buildings’ liability for a carbon tax come 2024. “They are looking forward so they can help their boards figure out what kind of tax they need to be prepared to pay – or what they can do to improve their energy performance and lower their emissions,” says Fred Goldner, president of Energy Management & Research Associates, which is working with Gumley Haft. 

Boards should also be aware of another new regulation that has received less publicity but will affect capital budgets. Local Law 94, part of the Climate Mobilization Act, requires that any building owner undertaking a complete roof replacement to include either a green roof or solar photovoltaic system. 

“There is a litany of exceptions, for things like pitch or structure of the roof,” Goldner says, noting that replacement of the roof membrane is one exemption. “But if you don’t fall into one of those, you have to put solar on top, and that could be a huge number you weren’t expecting.”