First-time Apartment Buyer's Guide to Maintenance Fees

Originally seen in June 27th's Daily News.

When making the decision to purchase an apartment in New York City, the asking price is not the only factor to determine what you can afford.

Many first-time buyers overlook an expense that can have a big impact on the overall cost of the home — namely, maintenance charges.

These fees can be pricey. In New York, the average maintenance charge hovers around $1,500 a month — and remember, they need to be paid in addition to any mortgage payment you may have.

Known as “common charges” in condominiums, these fees are billed monthly to all owners in a co-op or condo building and cover necessary operating costs — as determined by the building's board.

Expenses such as maintenance of shared amenities like a pool or gym, salaries for doormen or superintendents and utility costs for common areas (ie. lobbies, hallways) are covered by maintenance fees.

Keep in mind that more luxurious amenities usually correspond with heftier charges.

It's also important to note that whether you chose to purchase a co-op or a condo has an impact on what is covered by your fees.

A co-op is a unique form of ownership where the buyer is in fact purchasing a stake in a corporation. Each owner is allocated a percentage of shares based upon the size of the home they occupy as well as its relative desirability (views, position in the building etc.).

The shareholder is responsible for paying a monthly fee based upon the number of shares he or she holds — so the resident of a penthouse with sweeping skyline views would pay more per month than someone whose studio unit on the first floor faces an alley.

Since the co-op corporation owns the physical building, they are responsible for the payment of real estate taxes. They pass along the taxes to the shareholders by wrapping this expense into the monthly maintenance charges. If real estate taxes rise, there will be a corresponding jump in a co-op resident's fees.

The good news for co-op owners is that the portion of their maintenance fee that covers real estate taxes can be deducted from their annual income tax liability.

In the case of condos, the amount each owner pays in “common charges” is also dependent upon their home's square footage and location in the building.

However, condo buyers are purchasing real estate — specifically the literal space within the four walls of their unit — rather than shares in a corporation. Therefore, by law, they are responsible for paying taxes on their home and are billed individually.

As real estate taxes are not included in their common charges, usually condo fees trend lower than those for a co-op.

Rather than being a static cost, maintenance charges tend to rise by a few percentage points each year. However, there are variables. If a co-op building has oil heat and the price of fuel oil spikes — or real estate taxes rise — residents could see a larger jump in their monthly fees.

In addition, remember the old adage that “nothing lasts forever.” Eventually the building's boiler is going to need replacing, or the carpet in the common hallways starts to look a little ratty.

Co-op and condo owners are not off the hook in these special situations. Instead the building's board will call for what is called an “assessment” — a temporary charge to cover the extra expense that is billed to owners, often over the span of several months.

Maintenance fees are non-negotiable and a necessary evil for those looking to purchase in a multi-family building.

When shopping for your new home, it pays to choose your building wisely. Ask your agent plenty of questions about a property's associated fees.

Don't think you will ever use that condo tower's indoor pool, golf simulator or sauna? You'll still be paying for it, so maybe a no-frills building is a better fit for you — and your wallet.

There's a great variety of buildings in our city — and always remember that in real estate, as in life, there's a right match for everyone.