What's the Deal with Co-ops That Have Ongoing Assessments?

July 22, 2015 — There are usually two reasons for an ongoing assessment. The first is to raise funds for capital projects or capital reserves. It is not unusual for a building to face more than one capital project in short order, or year after year after year. For instance, funds may be raised or otherwise available for a needed roof replacement but then the board learns that the heating plant will not make it through another winter, and, hey, the elevator controller is problematic, and replacement parts are no longer available.

Then, too, there are those buildings whose construction always means that each Local Law 11 cycle triggers yet another massive project. So the board must either borrow the money or assess over a protracted period of time to cover scheduled, anticipated, and unexpected capital projects. These assessments should be tracked by unit-owners/shareholders as they add to the cost basis of their individual apartments.

Then there are the boards that believe that their common charges/maintenance payments are higher than any similar building in the neighborhood and that this devalues the marketability of their apartments. To keep common charges/maintenance payments in check, some boards will keep running assessments on the books to subsidize operating costs rather than raise common charges/maintenance payments. The accountants call this "smoke and mirrors" and it is a ploy that is clearly evident to anyone reviewing a building's annual financial statements. This type of assessment does not add to the residents' cost basis.

Lori Buchbinder is a principal at Buchbinder & Warren.