New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

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LEGAL/FINANCIAL

HOW LEGAL/FINANCIAL PROBLEMS ARE SOLVED BY NYC CO-OPS AND CONDOS

Spotlight on: Building a Storage Facility in the Basement

New York City

Dec. 2, 2014

Take a tour of the basement with the superintendent and managing agent. Examine all the rooms — noting each room's dimensions and whether there are overhead pipes, support beams, and possible leaks — so you can determine the best space in which to build the storage facility.

Don't Rush In

Ask a professional storage bin company to survey the room or rooms and submit a free proposal, which lays out how many storage bins can fit in each room and their size.

Next, survey the building's residents to see how many would be interested in renting storage space. Depending on the survey's results, as well as the maximum number of bins that can be constructed, you'll be able to determine how much to charge for each bin.

Build, Baby, Build

When you're ready to build, you have two options. You can either hire a contractor to build and rent the bins, or hire a contractor to just build them so that you can lease the bins to residents yourself.

Typically, if you have a contractor handle both construction and leasing, it costs you nothing upfront. But it means they keep as much as 75 percent of the total revenue, with the remaining percent going to the building.

This agreement generally lasts 10 to 15 years, and you should make sure the agreement stipulates whether or not your building gets to keep the storage bins once the agreement expires.

The flip side is for you to pay a contractor to build the storage facility upfront, but then receive 100 percent of the revenue.

Cover Yourself

Before you rent out the storage bins, have the building's counsel prepare a storage bin lease. The lease should include essential provisions that includes, but is not limited to, the following:

  • The lease cannot survive a sale or transfer of ownership of the apartment that is tied to it.
  • There must be insurance coverage for contents and a waiver of subrogation.
  • There needs to be a strict prohibition about storage of prohibited substances.
  • There has to be a cross-default provision to tie proprietary lease defaults to the right to use the storage bin.
  • There must be a right to inspect.

You must also address several practical problems:

  • If there are fewer bins than apartments, will you keep a waiting list? Can one owner lease more than one bin?
  • Can a buyer of the apartment also acquire the right to the bin?
  • How will the storage area be accessed? Who controls the keys? What are the hours of access?
  • Can rent-regulated tenants lease a new storage bin? Can a free-market subtenant use a bin rented by the owner?
  • Who is responsible for maintaining the lighting in the storage area?

Despite all the moving pieces and all the preparation involved in building a storage facility, the potential payoff in the long run is well worth it.  

 

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Adapted from "Is There 'Gold' in Our Basement?" by James Goldstick and James Samson (Habitat, February 2008)

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