Why are some maintenance charges so crazily high?
I write a real estate column for the New York Resident — imaginatively called Front Porch — and this was the best question I’ve seen in a while. Here’s the answer:
Sometimes a high maintenance signals that you’re looking at a combination of smaller individual units, and you’re paying the charges on all of them.
In general, maintenance has three components: 1) payments on the underlying mortgage in the building; 2) the real estate/property tax payments the building makes to the city; and 3) operating expenses for the building, which are mainly staff costs and secondarily building upkeep costs.
You can get an idea of which component is most heavily weighted by seeing how tax-deductible a maintenance is. If the maintenance is 50% deductible or more, you’re seeing the influence of the tax-deductible components, which are mortgage interest and taxes; if it’s less than 50%, staff costs and expenses like replacing the roof, items that aren’t tax deductible, are eating the building.
As an individual buyer, you’ll pay off your mortage in thirty years. But be aware, that buildings older than that – sometimes buildings 100 years old – often still carry mortgages and make mortgage payments because it can create a tax advantage for them to carry the debt.
If you feel comfortable that a unit’s maintenance charge is within your budget but still want to understand more about the building’s financials, your attorney should be able to decipher them for you. Be aware that many building financial statements for 2005 are just coming out now.