When buying a Co-Op or a condo it is important to remember that not only will you have to make your monthly mortgage payment but you also need to factor in the costs of maintenance fees or common charges. These fees can be high depending on the building you choose. Many times this will deter potential buyers, if they feel the fees are exorbitant. Naturally no one wants to pay more for something than they think its worth. Here are some key questions to help you decide if you’re being overcharged.

How are fees calculated?

Costs are calculated in similar ways for both Co-Ops and condos. Each unit represents a percentage of the building’s value as a whole. Factors such as square footage, desirability of the unit, and location in the building all factor into what percentage the apartment is of the building. For example, a penthouse apartment that also has a view and 100 greater square feet than any other unit will have the greatest monthly fees. The board will give each of these features a percentage value and then calculate how much that unit is worth entirely. The operating costs of the building used as the baseline in this equation. So if the board determines that the penthouse equates to about 15% of the building, and the monthly maintenance costs for the building are $15,000 then the fee would be $2,250.

Co-Ops are even easier because the worth of each unit is already determined. When you buy a Co-Op you are purchasing shares of a corporation. Each unit is worth X number of shares. If your unit is worth 250 shares out of 3,000 then you own 12% of the corporation. Then use this same equation with the cost of running the Co-Op per month to determine your monthly fees.

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What’s included in the cost per month to run the building?

Let’s say that your board reports that it costs them $15,000 per month to run the building. How do you know what this includes? Well it probably includes more than you think. The building is responsible for heating/cooling and lighting the common areas like hallways, lobbies, laundry rooms as well as paying any staff such as doormen, concierges, and maintenance workers. If your building has a pool, gym, or roof top garden we are talking even more money to have those things maintained. Co-Ops also have property taxes included in the fees so you can expect them to be a little higher than those for a condo.

Is anything extra included in my fees?

Yes, a responsible board will take 10% from monthly fees and put them in a fund for emergency situations. For example what if there is a hurricane and the building needs an entirely new roof? If there were no savings put aside for this that would mean each unit needing to contribute their percentage to total cost. This is called a special assessment fee and it does happen. The building could mitigate this cost by using their reserves to partially pay for the repairs.

In conclusion, someone is most likely not getting rich off of your maintenance fees. There is really no such thing as having too much money to maintain a building, especially one that is 100+ years old. However, you should have your broker obtain records from the board’s treasurer before even considering purchasing a Co-Op or condo.