Once you have decided a New York City co-op is your cup of tea, you may come across a self-managed building. While self-managed cooperatives are atypical in the city, you should certainly know the pros and cons before making an offer. If you enjoy a more hands-on approach, you may find this type of co-op a good fit.
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What is a self-managed co-op?
A self-managed co-op does not hire an outside management company to run the building. Instead, the shareholders handle this function, which involves the day-to-day issues and longer-term management concerns, such as the building’s financial stability.
Typically, co-op boards outsource functions related to running the building. This includes collecting shareholders’ monthly fees, hiring an accounting firm to prepare and audit the financials, bringing on a lawyer, handling maintenance issues, hiring contractors for major issues, filing any necessary paperwork with the New York City Department of Buildings, and enforcing the building’s rules.
Due to the cost involved with hiring a management company, typically, you will find self-managed co-op buildings are smaller than usual.
What is the appeal?
Your maintenance fees are likely much lower than other city co-ops since a self-managed building does not incur the expense of hiring a management company. You may also enjoy the benefits of living in a smaller building, such as a homey, cozy, feeling. Decisions may also get done faster since there are fewer shareholders. The smaller building could also prove beneficial when you are ready to sell since these typically have less competition, and many buyers are attracted to boutique-type buildings.
The co-op’s shareholders are responsible for the building’s operations. Aside from those above, there are mundane tasks such as dealing with the garbage and shoveling the snow. Either the unit owners have to do it themselves, or take on the responsibility of hiring companies for the tasks. Professional management companies have a list of qualified accountants, lawyers, contractors, and other workers that they have conducted business with in the past.
A small building may also have fewer amenities, and, if it is not a desirable building, the previously mentioned advantages no longer exist.
Conduct due diligence
Since the building’s owners are taking on maintenance and financial duties, it is even more critical that your lawyer conducts due diligence, and the unit undergoes a thorough inspection. Your lawyer will look at the financial statements and the board minutes. He/she should also make sure regular maintenance issues are being addressed and not glossed over. A proper inspection can also help you uncover problems, including plumbing, wiring, and electrical.
Is this right for you?
You are likely to have more say in this type of arrangement, given you likely will find fewer shareholders and the lack of a management company. If this appeals to you, a self-managed co-op might work for you. But, if you would rather have other people worry about the building’s management because these tasks are too time-consuming, then a more traditional approach is the way to go.