Q: I am interested in buying an 800-square-foot, one-bedroom condo in Manhattan. The asking price is $399,000, and it needs significant renovations. The homeowners’ association fee is $1,941 per month. Two other units in the building are for sale, both with higher asking prices — $620,000 and more — but the association fees are lower, around $1,750 per month. They have been renovated, are on higher floors, and are comparable in size. I don’t understand why these units have lower monthly fees. What goes into calculating them?
A: As a buyer, it might seem strange that the homeowners’ association fees don’t match up with the condition of the condominium unit. But each unit’s share of these costs was very likely established when the condominium was formed, so current renovation needs wouldn’t be reflected in them.
New York’s real property law outlines the ways that the percentage of common interest can be calculated for each unit in a building. The percentages, which determine monthly fees, are set forth in a document called Schedule A in the condominium’s offering plan, and they do not change over time unless the affected unit owners consent.
“All future common charge increases and assessments over the entire life of the building use the schedule as a building block for consistency,” said Mark B. Levine, who owns three property management companies in New York City and is principal of EBMG LLC.
While the sponsor or developer needs to set percentages within what the law allows, they do have flexibility, said Laura Mehl Sugarman, a partner in the real estate practice at Benesch.
There are four methods for setting this percentage under the law, and typically the size of the unit and the floor it’s on play a role. But other factors can be considered, like if one unit has advantages over others. The law also allows for assigning an equal percentage to every unit, or an equal percentage to all units within a class. The condominium’s documents will describe which method was used.
If your building set the percentages amid a conversion to condos, renovations in one unit may have justified a higher percentage of common interest at that time.
Before a purchase, it’s a good idea to examine the Schedule A document to see the common interest percentage for the unit you’re interested in, and how it compares to others in the building, so you have an idea of what to expect when it comes to any future increases.
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