NEW YORK CITY

Temperatures have been hitting sweltering highs. Now's a good time to review some guidelines on proper air-conditioner installation — especially if you have new shareholders moving in. Here are some recommendations regarding window-mounted air-conditioning units. Having established rules and guidelines in place will go a long way toward helping prevent accidents — not to mention ensuring a safe Local Law 11 status for the building. And check out this primer on installing ductless air-conditioning units from our Ask the Engineers series. Stephen A. Varone, AIA, & Peter E. Varsalona, PE, both principals in RAND Engineering & Architecture, break down everything from roof installation to proper maintenance. Stay cool this summer, and do it smartly and safely. 

We're in the middle of the purchase process and just learned about an upcoming assessment. We're concerned that the board doesn't know what it's doing.

In co-op and condo circles, "assessment" has long been considered a dirty word. But, in reality, it is the cleanest way to fund a project. For the most part, an assessment has a clear start and end date. The funds are meant for a specific project and based on a specific budget. As a shareholder or unit-owner, you know what you are paying for and how long you have to pay for it. There is comfort in knowing and being able to plan for a finite end date to both the project and the cost.

The alternative methods of raising the funds are through common charge contributions or borrowing. While I'm a big proponent of building a reserve fund through common charge contributions, I feel this is a long-term solution in capital planning. The danger in longer-term solutions is that the people making the decision – the board members – aren't always there for the duration. Boards change and, when that happens, so do strategies and agendas. With any long-term planning, you have to hope that board members and their successors have the same fiduciary discipline and similar financial goals.

Assessments are clear in what they are meant to address, leaving little room for misunderstanding and misinterpretation.

A.J. Rexhepi is director of operations & development at Century Management.

A new shareholder should be concerned about an open lawsuit because the outcome may pose a financial burden on the building. Not all lawsuits are covered by insurance policies and, therefore, the cost of litigation and a possible negative outcome could wipe out reserves or require a special assessment. As a new shareholder, you are now faced with funding these costs in addition to your regular monthly maintenance and mortgage payment. I suggest a shareholder get a legal opinion from his or her attorney as to the likelihood of a negative outcome, or get an opinion from the attorney representing the building.

Buildings face lawsuits all the time for trips and falls, interior damages, etc., but they are often covered by the building's insurance. Lawsuits for claims of discrimination, sexual harassment, human rights violations, mold, asbestos, or fraud are usually not covered under these policies. That's when the effect could be significant.

Pamela DeLorme is president of Delkap Management.

Falling behind on collecting arrears is a big problem with smaller buildings, especially co-ops. Larger buildings have many shareholders and they can survive if a few people don't pay. I see this in the large new condominiums in which the foreign investors often don't pay their common charges.  

In smaller buildings, there are only a few owners. If one or two of them do not pay, the other owners have to pay double. In essence, the owners who pay are punished for the malfeasance of those who don't; they have to pay their own common charges and put in money through assessments or increased monthly charges to make up the budget shortfall.

These buildings have mortgages to pay. If they don't have sufficient funds to cover their mortgages, they could default and the lender could foreclose. We saw this in the early 1990s when the bigger buildings got into trouble because sponsors with unsold apartments and rent-stabilized or rent-controlled apartments could not afford to make the monthly maintenance payments. In sum, boards are advised to aggressively pursue arrears. Although the legal costs may be significant, you have to get owners to pay. Banks will not lend to buildings or unit-purchasers if there are significant arrears in maintenance or common charge payments.

Martin S. Kera is president of Bren Management

Wondering how you can replenish your co-op's reserve fund? Here are five ways.

Say the gas at your co-op is shut off because of a leak. Your building may need to dip into its emergency money stash to make the necessary fixes. But what happens if the fixes you make drain most of your reserve fund?

Keeping the reserve fund replenished is a huge contributing factor to any co-op or condo building's financial health. Another reason co-ops should pay close attention to how much money they have in their reserve funds is to keep banks and lenders happy.

To approve the mortgages of potential buyers, financial institutions want to see a certain amount of money in reserve — professionals recommend keeping three to six months' worth of maintenance charges. (Condos have different requirements.)

Dip below that, and your building may start to see apartment sales figures drop. Here are five ways you can replenish the reserve fund.

A pair of siblings got a tough lesson in caveat emptor and the dog-eat-dog world of New York City real estate. Ten months ago, they bought a co-op and — despite having hired an attorney from a firm recommended by their broker — things haven't turned out quite how they imagined. "We’ve discovered several issues that we think he should have caught," they tell Brickunderground in this week's Ask An Expert. "Not long before we bought the apartment, the board had such serious disputes over elections that it did not meet or function for a while; the building’s roof needs substantial repairs (and did for at least a year before we purchased); and about six months before we purchased, a board member was removed for violating her fiduciary duty." Yikes. The siblings feel their lawyer should have discovered these types of issues and want to know whether they can get some of their money back. And it looks like it's going to be tough. Brickunderground says, "It's possible that your attorney did overlook key information and that you have grounds for a claim — and some reimbursement — here, but it'll be tough to turn up concrete proof, say our experts." The problem is figuring out whether the attorney ignored the information or whether it was simply not available in the paperwork he or she would have reviewed. "In representing a purchaser of a cooperative apartment, an attorney should review the cooperative offering plan, amendments thereto, at least two years of financial statements, as well as the board minutes going back at least three years," Brickunderground quotes Jeffrey S. Reich, a real estate attorney with Schwartz, Sladkus, Reich, Greenberg, Atlas LLP. "However, even performing proper due diligence may not have turned the writer’s attorney on to the stated issues unless they were disclosed in the board minutes, a footnote to the financial statements or an amendment to the cooperative offering plan." Even then, however, it "might be tough to quantify the difference between what you paid for the apartment, and what you would have paid had the building's problems been disclosed." There may be no recourse in this case, which may seem unfair, but that's how New York City rolls.

I want to put in a dishwasher, but the broker said I would have to ask the board. The apartment I want to buy already has a washer/dryer, so why would this be a problem?

Your board has probably consulted with its engineer or architect or other professional involved with the building's systems. Many properties, especially the beautiful older ones, do not have sufficient infrastructure for all the equipment we like to use now.

In your case, the building's drain system may have limited capacity. The board may have restricted the quantity and type of equipment it will allow to accommodate the current drain capacity; it may have chosen to cap certain equipment to what was present as of a particular date; or it may have limited the number or type of equipment based on some other guidelines. The board may also be concerned about additional costs for water/sewer charges that the additional dishwasher would incur.

I encourage you to discuss any concerns with your property manager. Also, arrange an appointment to read your building's minutes. Both resources will provide meaningful guidance to you. Your offering plan may also provide a report of your building's plumbing capacities and an explanation of the equipment originally provided to each apartment.

Finally, you should confirm that the washer/dryer currently installed received the board's approval, especially if they were not part of the original installation by the sponsor. If your seller, or any former owner of the apartment, installed the washer/dryer without approval from the board, you may need to remove it (using a licensed and insured plumber and electrician).

Divya Rashad is executive vice president and managing director of The Andrews Organization.

Not always. The importance of having a reserve fund has been coming up with greater frequency in the last few years. This past spring, we began managing a building and it was immediately apparent that the property was a wreck. In the field, our property managers were met with severe problems such as deteriorating elevators that were damaged from years of neglect, cracked sidewalks in need of repair, a leaky roof, asbestos situations in the boiler room and garage, and a temperamental boiler. And, of course, let's not forget about all the local law work that had not been done!

If Murphy's Law was to apply to any building, this was it! The challenge continued away from the building. Over time, we found ourselves receiving legal notices from irate vendors demanding payments. The largest ones came from oil companies because of the high heating costs of recent winters. We had numerous meetings with the board to come to grips with the enormous financial challenge. A more financially sound building would have turned to its reserves to address these issues. But this was not an option here. This building did not have any reserves.

A special meeting had been called to give all shareholders an opportunity to speak. The truth was painfully clear. There was no money for a rainy day. Ultimately, the board decided to impose a special assessment. Because of the magnitude of the financial challenge, the assessment will be a part of their lives for the next four years.

Anastasios Magoulas is CEO of All Area Realty Services.

I spent an afternoon with RAND rappellers John Monroe, senior architect/construction phase director, and Sara Tsiropinas, project associate, watching them hang from ropes to inspect a building at the corner of Tenth Avenue and West 23rd Street. Here's what happened. 

Most well-run co-ops and condos have a reserve fund, which you can think of as a building savings account. As an owner/shareholder, you want peace of mind that, should an unexpected capital project arise or large-scale repair be needed, the building has the funds to cover the expense. Imagine a rather large and unexpected leak in the roof causes damage to many of the building's common areas. If a building does not have a reserve fund, the owners/shareholders are responsible for coming up with the immediate funds needed to pay for that unexpected roof repair. The reserve fund makes it easier for the building's management team to expedite needed repairs.

It should be a red flag to you if a building you are looking to buy into does not have a reserve fund. When reviewing a building's financials for a prospective owner/shareholder, auditors and attorneys like to see a reserve fund that contains enough money to cover an unexpected expense or repair that could arise. They want to assure their client that the building has money to fall back on without the need to assess the building's owners/shareholders. You want to buy into a financially healthy building, one with three to six months' worth of common charges or maintenance charges in its reserve account. It is also recommended that a building set additional funds aside to finance anticipated future major repairs and replacement projects.

The reserve is a positive building asset, one that is shared by all unit-owners/shareholders on the balance sheet. A reserve fund demonstrates board discipline and healthy financial solvency.

Michael Berenson is president of Akam Associates