Why Are HOA Fees so High in NYC?

The New York City housing market can prove expensive and challenging to navigate. Prospective buyers must carefully consider their estimated monthly payments, including their mortgage, property taxes, and additional fees. Unlike homeowners in other parts of the country who may enter a Homeowners Association (HOA), New Yorkers have the task of deciding if they wish to purchase a condominium or a cooperative unit. Both present their own unique qualities, including the ways that owners pay for monthly expenses. However, condo and co-op owners can both agree that those extra costs make up a significant portion of their budgets.

HOA Meaning

Residential properties across the country may reside in an HOA, a predetermined community with a board of directors. The elected board consists of community members who then enforce rules and regulations for the collective. HOAs exist to help preserve the value of all homes in the area, ensuring that some members do not lower property values by destroying property and making the neighborhood unfavorable to future potential residents.

Each month, homeowners must pay HOA fees that help maintain their community. Homeowners do not have the choice to opt out of an HOA; purchasing property in that community immediately adds them to the collective, and they must pay their monthly fees. HOAs do not reserve the right to evict their members, but they can enforce disciplinary measures and place liens on properties.

However, the term HOA is not as common in New York City, and communities consist of units in a building instead of houses in a neighborhood. Additionally, there are no specified statutes that govern HOAs in the state, unlike other areas of the country that control the powers of an HOA board. Instead, most residential buildings are unincorporated, nonprofit associations that follow the New York Nonprofit Corporation Law, or NPCL. They must also obey additional regulations like the Real Property Law (RPL) and the New York Condominium Act.

Boards in Condos and Co-ops

In condominiums and co-ops, there are varying governing bodies that orchestrate building management. In a condo building, owners pay their common charges, instead of HOA fees. In a co-op unit, shareholders answer to a co-op board and pay maintenance fees. The co-op board will enforce rules and regulations for the building to ensure all shareholders can sell their shares for a profit in the future and live in a safe and comfortable environment.

Co-op board also have added responsibilities, as they dictate who joins the cooperative. The board will interview prospective buyers, learning about their personal, professional, and financial background. The board reviews all materials, including personal reference letters, to determine if the interviewee can join the cooperative. Boards also determine the cost of each share, influencing how much shareholders pay for membership.

Covenants, Conditions, and Restrictions

HOAs and community boards develop and enforce their Covenants, Conditions, and Restrictions (CC&Rs). When a prospective buyer considers purchasing property in a community, they should ask their real estate agent to acquire a copy of the CC&Rs to ensure they thoroughly understand every rule. The CC&Rs are long documents that explicitly list every rule that owners and shareholders must follow and also outline disciplinary measures.

HOA Rules

CC&Rs exist to preserve and maintain a community’s aesthetics and amenities, and the building itself. Prospective NYC buyers can expect to see rules that regulate the following for their condo or co-op:

• Paint color for exterior of condo or in a co-op,
• Landscaping and outdoor decorations,
• Guest policies,
• Restrictions on pets,
• Window coverings,
• Holiday decorations,
• How to interact with common spaces,
• Renting and subletting policies.

Co-ops and condos may include more rules than those listed above, varying in extremity. Some buyers may prefer more strict rules as it thoroughly protects their investments. Owners who wish to have more creative freedom, guests, and overall leinenacy may select a property with fewer regulations. Buyers should carefully read through all of the CC&Rs before they make a purchase, as each rule can impact their day-to-day.

Condo Common Charges in NYC

New York City buyers can choose to purchase a condo, which resides in a condominium building with other condo units. Condos are popular among city residents as they offer sole ownership of the unit, meaning the buyer who purchases the condo solely owns that piece of property. However, all condo owners in a building will use common areas, like the entryway and amenities. Therefore, condo owners will pay their monthly mortgage payment, if needed, for their property and also pay monthly common charges to maintain public building areas.

What Do You Get By Paying Common Charges?

Condo owners will pay common charges each month to maintain the common areas of their building. Therefore, those anticipating buying property in an amenity-filled building should keep common charges in mind, as the luxurious indoor pool and roof deck require upkeep. Condos typically charge less for common charges than comparable co-ops do for maintenance fees. However, condo owners will still need to pay their property taxes.

A condo building may also conduct periodic assessments to determine if the building requires more extensive upkeep or repairs. In this case, owners may need to increase their common charges to ensure their building remains safe. Owners will typically distribute this cost over several months of charges to make it more affordable.

Co-op Maintenance Fees in NYC

Co-ops differ from condo units due to their ownership structure, where homeowners purchase a share of the cooperative building as opposed to an individual unit. The share then allows the buyer to occupy a residential unit, and all residents become shareholders in the building. The shareholders will elect a co-op board, which then makes decisions for the cooperative and approves future shareholders. Those who decide to own a co-op unit will go through a more extensive application process that consists of a board interview, supplying their entire financial history, and answering personal questions.

Compared to condos, co-ops have lower asking prices and higher monthly costs called maintenance fees. Shareholders do not pay individual utility bills or property taxes but divide the total cost of those expenses among themselves through their maintenance fees.

What Do You Get By Paying Maintenance Fees?

Shareholders pay for plenty of services in one convenient maintenance fee. While maintenance fees may vary from building to building, co-op buyers can expect to pay the following in their monthly bill:

• Electricity,
• Gas,
• Water,
• Property taxes,
• Mortgage payments (if applicable),
• Insurance,
• Building maintenance costs, including minor repairs,
• Salaries for building staff,
• Other fees.

When shareholders receive their monthly bill, they see each cost as an individual line item. Shareholders pay the respective cost for the number of shares they own in the building. For example, someone who owns 3% of the building pays 3% of the electric bill.

Co-op Rules and Regulations

Similar to how some HOAs have reputations for strict rules that regulate paint color, quiet hours, etc., co-op boards may also enforce their own strict rules that may not appeal to all owners. Many co-op boards do not allow their shareholders to sublet their units, or they put strict measures in place to qualify prospective subletters. When looking to purchase in a co-op, prospective buyers should work with their real estate agent to ensure they understand the board’s limitations.

Are My Monthly Fees Too High?

Condo and co-op monthly fees can make up a significant portion of a homeowner’s budget. While homeowners in other parts of the country may pay $200 to $300 monthly for their HOA fees, NYC owners can expect to pay upwards of $1,000. However, owners should remember that homeowners in other parts of the country individually pay for utilities, and may not have as many common amenities like a fitness center, pool, or landscaped rooftop deck in their community. New York City also has a higher cost of living and a more expensive housing market than most areas of the country, further driving up monthly costs.

Budgeting for Common Charges and Maintenance Fees

When looking at a property on RealtyHop, buyers can easily view their estimated monthly payment in the listing’s details. To determine how that monthly cost fits into their total budget, buyers can then use a monthly payment calculator to input their mortgage details and their monthlies. The calculator displays the total amount a buyer will expect to pay between their mortgage, monthlies, property taxes, and any additional costs like private mortgage insurance (PMI).

Monthly Expenses Comparison Between Condos and Co-ops

Co-ops typically charge more for their maintenance fees than condos do for their common charges, and maintenance fees consist of more line items. The following example highlights the price breakdown between a comparable condo and co-op unit in Manhattan

In the above example, the co-op unit has a higher HOA payment than the condo. When factoring in property taxes, the condo owner will pay a similar amount as the co-op owner each month. Therefore, owning a co-op may appear more expensive when immediately comparing the monthly costs, but condo owners will end up paying a similar amount after property taxes. The individual monthly cost will also further depend on the building and its amenities. Buyers should, therefore, consider the individual differences between condos and co-ops when determining which type of property to purchase.

Additional Differences Between Condos and Co-ops

Besides the ownership and monthly payment differences, there are other distinguishing factors between condos and co-ops in New York City. Condo owners typically have more freedom to customize their property as there are fewer rules and regulations. Prospective buyers can also consider the following differences between property types:

Financing

Condo buyers can use a conventional mortgage loan to finance the cost of their purchase. However, co-op buyers will need to acquire a co-op or a share loan. The co-op loan helps prospective shareholders finance the cost of their share in the building, as they will not specifically buy a unit.

Buyers should take time to shop between lenders and find a loan that offers the most attractive terms for their situation.

Selling

If buyers plan to eventually sell their property, they should consider how condos and co-ops process sales. Condo owners can typically list their property and proceed with a selling process that resembles that of a single-family home. However, co-op shareholders may spend more time and effort selling their shares to new members, as their co-op board must approve the sales price and the new buyers. Prospective buyers who anticipate moving in the near future may decide to purchase a condo instead of shares in a co-op to ensure they can easily sell their property.

Tax Differences

Condo owners explicitly own their property and will pay individual property taxes for their unit. However, co-op shareholders pay a percentage of property taxes for the entire building. The maintenance fees include their property tax payments, making it simpler to keep track of their monthly bills.

Learn more: What are the Benefits of Buying a Co-op vs a Condo?

Conclusion

Condo and co-op owners will join an HOA by moving into their new home but will likely refer to that governing body as their co-op board or community association. Each month, owners will pay monthly maintenance fees or common charges that maintain their building, and in the case of co-ops, also pay their property taxes and utilities. While co-op maintenance fees are more expensive than condo common charges, both owners will end up paying a similar amount each month after factoring in property taxes. Therefore, prospective buyers should also consider the other differences between each property type to determine which purchase best aligns with their real estate goals.