Self-Managed Co-ops: Pros and Cons

Once you have decided that 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 know the pros and cons before making an offer. If you enjoy a more hands-on approach, a self-managed co-op may be a good fit.

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 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 significant issues, filing any necessary paperwork with the New York City Department of Buildings, and enforcing the building’s rules.

Due to the cost of hiring a management company, you will typically find self-managed co-op buildings 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. Decisions may also get done faster since there are fewer shareholders. You may also enjoy living in a smaller building, such as a homey, cozy feeling. 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 disadvantages

The co-op’s shareholders are responsible for the building’s operations, aside from those above mundane tasks such as dealing with the garbage and shoveling the snow. Either the unit owners have to do it themselves or take on hiring companies for the tasks. Professional management companies list qualified accountants, lawyers, contractors, and other workers they have conducted business with.

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. They should also ensure regular maintenance issues are addressed and not glossed over. A proper home inspection can also help you uncover plumbing, wiring, and electrical problems.

Is this right for you?

You are likely to have more say in this type of arrangement, given that 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.