What is a Co-Op or Condo Assessment?
Capital expenses like elevator, roof, or façade maintenance are frequently necessary for co-op and condo buildings. Boards frequently employ assessments to fund these renovations. These are short-term hikes to your maintenance or common costs to support a specific upgrade or to replenish a co-op's reserve fund.
Depending on the expense of the renovations, assessments might last anywhere from a few months to a few years. The amount of money in the building's reserve fund—that is, how much cash is on hand for emergencies—can influence whether or not a board levies an assessment.
Imposing an assessment permits a board to prevent a permanent rise in the condo's common charges—or the maintenance of a co-op—also known as dues or fees. Higher-than-average carrying expenses and significant assessments can both have an influence on an apartment's sale price.
How Are Assessments Determined?
Assessments are based on the common interest given to each flat in a condo complex or the ownership in a co-op.
Even though the square footage is the same, evaluations might differ between flats. Because a higher-level apartment uses the elevator more frequently than a ground-floor unit, it typically has a larger common interest in ownership of the condo.
If the project is being financed with the aid of a bank, the evaluation may additionally include loan interest. This will also be split out by co-op shareholding or percentage of common interest in a condo.
Are Assessments Flawed?
Assessments are an indication that the board is reinvesting in the facility, which benefits the owners. Throughout the life of a structure, there will be some form of assessment.
Your building should ideally have both a capital plan and solid reserve money. The capital plan is an asset appraisal created with the assistance of an architect or engineer and input from the management firm and super. It will determine the age of the elevator, boiler, sprinkler system, façade, and roof, as well as when and how much it will need to be repaired or replaced.
Once the capital plan is set, the building will require reserves to be paid for. This can be accomplished by raising common charges, instituting a flip tax, selling a building's air rights, or refinancing a co-op's underlying debt.
If a building relies too much on assessments to pay for upgrades, it may indicate that there are limited reserves, which might be an issue if an emergency occurs. (This is why it's usually a good idea to collect this information from a building's financial statement before buying.
Do Assessments Have An Impact on the sale price?
The assessments will differ depending on the number of flats in the building. The more there are, the lower the impact on each unit.
The cost of a project for owners in a 30-unit building, for example, is higher since it is shared among a smaller number of individuals. In a larger building of 300 units, even if the total cost is higher, the actual cost for each unit will most likely be lower.
If there is a future assessment, we make an effort to negotiate that it be factored in when pricing the unit.
Can Assessments Be Used to Support Energy Efficiency Upgrades?
Energy upgrades are becoming more important to building boards as they are urged to transition away from fossil fuels and meet pollution restrictions under Local Law 97. Using assessments to pay large capital projects is a possibility, but it may be problematic—assessments put pressure on co-op and condo owners, and the influence on sales price must also be considered.