Q: What is the purpose of maintenance fees and when are they applicable? Co-ops, condos? Are there taxes over and above the maintenance fees? I am particularly looking at 1-bedroom apartments for sale in Manhattan so I am only interested in issues applicable to Manhattan apartment purchases. Thank you.
A: Referred to as “common charges” in condos or as “maintenance” in co-ops, these fees are used to fund the day-to-day operations that are integral to a building’s functionality, such as fuel, labor, upkeep of machinery and equipment, insurance, underlying mortgage payments, and so on.
In a condominium, real estate taxes are paid in addition to common charges. This form of ownership is deeded, and is therefore subject to real estate taxes.
In a co-op, your maintenance fee includes interest on the building’s underlying mortgage payment. Depending on your tax bracket, a percentage of this may be tax deductible on your annual income tax return.
During the purchase process, it’s important to review a building’s financial history so that you can gain a better understanding of how the building operates, its maintenance history, and any contemplated capital improvements that may be implemented going forward. Your real estate professional can acquire the building’s past and current financial statements, which you and/or your attorney may wish to review as part of the due diligence process.
Additionally, if you would like us to pair you with a real estate agent who best suits your needs and criteria, we would be happy to do so.