Many co-ops and condos take a narrow approach to long-term planning in an effort to keep a lid on maintenance or common charges, says Ira Meister, president and CEO Matthew Adam Properties, a leading New York property management firm.
“Boards fail to maintain adequate reserve funds and delay or give short shrift to preventive maintenance and neglect making repairs when necessary, or doing just the minimum,” Meister says.
Boards often smaller ignore repairs resulting in much bigger repairs in the future
He believes this approach can cause the slow deterioration of a property and create more expensive major repairs down the road. When that occurs, the reserve fund is usually too small and a major assessment or significant double-digit increase in monthly charges is necessary.
“This situation can be avoided if the property is forward thinking and develops a long-term capital improvement plan,” Meister says. “In most cases, this is a five-year program that identifies projects that will be required, prioritizes them and identifies funding sources. In fact, the American Institute of Certified Public Accountants has recommended that co-ops and condos include information on the useful life and replacement costs of the building’s infrastructure in financial statements.”
The property manager and team must coordinate to create a long-term plan of repairs and projects.
Preparing a long-term plan requires the coordinated efforts of the property manager, an accountant, the superintendent or resident manager and an engineer. The first step is gathering as much information about the physical plant and systems as possible. Effective superintendents know their building and can pinpoint areas that would require work; in many instances, small matters that could lead to larger projects unless attended to. The engineer would perform a complete inspection of the building including the exterior, the roof, public areas, and systems such as the boiler, HVAC if the building has central heating and cooling, etc. Once this information is gathered, the team needs to prioritize the work based on need and spreading out the cost over a period to lessen the impact in any given year.
Once projects are identified and a cost estimate is determined, the accountant working with the property manager and the board can determine a financing plan. .
“Sound planning with an eye to the future and making the most of the opportunity find improved ways of providing services not only keeps costs down for shareholders and unit-owners, but makes the building more desirable and increases the value of apartments.” Meister says.