Planning a renovation in a New York City co-op or condo is an ordeal, regardless of the amount of work being done. Coordinating with your contractor and your building management is a hassle, and then you have to figure out how you and your family will live during the ongoing project.
So it may come as a surprise, as the person doing all of this logistical work, that you might owe an additional fee to your building. Renovation fees, which are not uncommon, are in place to compensate buildings for the inconvenience experienced as result of your project, or for the extra coordination involved, or for the wear and tear on the building your project creates.
Because these fees vary and your budget is probably not unlimited, you should find up upfront how much you'll be paying and for what.
Not a large amount
Occasionally, a renovation fee will amount to little more than a minor payment to management as a cost for doing business.
Boards do not collect any fees, they are typically paid to the managing agent, says Michael Rothschild, vice president of A.J. Clarke Real Estate Corp., a real estate management firm.
He described the typical fees paid to the managing agent—roughly $400-500—“to administer the work, as well as reimbursement of fees to the architect who reviews the plans. These fees can be larger for bigger jobs, but it's not a huge expense, in any event. The only time that I've seen co-op boards themselves charge is when the project goes beyond the allotted time to complete the work.”
Some fees attempt to offset any potential drain on building resources.
“Typically, any fees charged are a deposit, a possible weekly fee to the building for the disruption, and a fee to the managing agent for the review of the alteration with the board,” says Mark B. Levine, a principal with EBMG, a property management firm.
“Lately, because of wear-and-tear at a property, we've seen buildings instituting fees that are categorized as 'elevator usage' charges, and/or weekly fees that continue throughout the life of the project. Renovations are disruptive to the buildings, but smart boards also acknowledge that the investment by the owner in the unit will increase the market value of the building, so boards do try and make it fair for both parties.”
More time = more money
Owners and shareholders should be especially concerned with a renovation that goes over its projected timeframe.
“The biggest problem we see comes from shareholders who sign alteration agreements that say a job is going to take three months, with a fine or penalty or liquidated damages of some dollar amount thereafter,” warns Stuart Saft, a partner at the law firm of Holland & Knight.
“When we get complaints, it's rarely about the upfront fee; shareholders and unit-owners know about those from the outset. It's the daily fee that accrues when work goes on much longer than it should have. You have to make sure that the contractor is very careful when estimating the length of the project, because I've had it happen to me: They say it will take six weeks to renovate a kitchen, but it winds up taking four months. Because they hadn't said six consecutive weeks. So they show up, demolish everything, then disappear for a costly length of time, and it's the customer that suffers.”
Saft recommends taking the following precautions.
“If the building—or the alteration agreement—requires a fee of $500 should the work last longer than the allotted time, then the renovator should try and pass that along to the contractor,” Saft continues. “If the contractor estimates three months, then they should provide that, were a fine levied if it goes over, the contractor will be held responsible, as they had made the three-month claim while trying to sell the job.”
In his experience, Saft sees upfront fees as less of an issue. “Some buildings have them, others don't, and it's rarely exorbitant,” he says. “It might be 1 percent cost of the work, or a flat fee of say $25,000 for a major renovation ... whatever the building's standard policy is. Residents should ask to see construction requirements before starting any work so they know what they're getting into beforehand, rather than making arrangements with the contractor and then consulting the building's rules.”
Ask before you buy
Specific dollar amounts of renovation fees are determined by the board and management and should be incorporated into an association's documents. They're rarely—if ever—in flux due to market variations. So if you plan to renovate, be sure to ask about these fees before buying into a condo or co-op.
“The fees are usually whatever the board decides,” says T. Austin Brown, an attorney at the law office of Frank J. Rio in Brooklyn. “If you have a board filled with old hoarders who detest the idea of construction, they'll try to wring as much from you as possible. But, ideally, a business-minded board would simply charge fees that cover expenses and risks, like architect and legal review.”
“A renovator should be firm that a board not attempt to profit from their project,” Brown suggests. “And I'd recommend having a lawyer going over the vendor contract, because there can be some real pitfalls when a contractor and owner aren't on the same page. A good contract can be used to keep the contractor on schedule.”
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