The self-managed co-op is an unusual type of apartment building that merits a good deal of research before taking the plunge. While it’s potentially an ideal matchup for some homebuyers, this type of hands-on living situation is most definitely not for everyone.
A quick definition of a self-managed co-op
A self-managed co-op is one whose shareholders manage the building’s day-to-day operations, rather than outsourcing it to a management company.
Self-managed co-ops tend to be small buildings, partly because the cost of hiring an outside management company can be prohibitive.
“Self-managed co-ops must carry out the functions that a managing-agent firm would typically do,” real estate and construction law attorney Marc Supcoff told Brownstoner.
How self-managed co-ops function
Without a management company, the co-op board must handle building maintenance, bookkeeping, the collection of shareholders’ monthly fees, inquiries from shareholders, and other important practical and financial matters.
The board will hire and manage any outside contractors, vendors, accountants or lawyers. Shareholders can take turns shoveling snow, cleaning the hall, and taking the garbage and recycling to the curb, or the board can hire someone to do it.
Advantages and disadvantages to living in a self-managed co-op
The main advantage of a self-managed co-op is not having to pay management fees to an outside firm.
Older self-managed co-ops with low taxes and no underlying mortgage, such as the many Finnish co-ops in Sunset Park and similar small early 20th-century walkup buildings in Jackson Heights, Queens, are known for their low maintenance fees, typically around $600 a month for two-bedroom apartments. (However, it’s important to note that being self-managed does not necessarily guarantee maintenance fees will be low, since taxes and other factors can push up costs.)
The chief disadvantage of a self-managed co-op is that shareholders must often put in long hours to perform the work a management firm would typically handle. Another issue may be a lack of expertise in building management, repair, accounting, and the like.
“It seems like the biggest thing is always who’s responsible for maintenance of the building,” Douglas Elliman broker John Mazurek told Brownstoner, adding, “it can lead to some contentious stuff.”
The smaller the co-op, the more likely it is that all shareholders will be involved in managing the building. While this is attractive to some, others may see it as a disadvantage, as shareholders must be involved and deal very closely with their neighbors, as they are essentially running a business together.
How to inspect a self-managed co-op
When considering buying into a self-managed co-op, it’s important to have your attorney and inspector thoroughly vet the meeting minutes, financial state, and condition of the building. If the board isn’t managing its money well, it can lead to more costs down the line and even affect whether potential buyers can get a mortgage on the property.
Your attorney should ask about the building’s history, what kind of capital improvements have been made recently, what types of maintenance issues do they foresee needing to pay for in the future, how long shareholders have lived in the building, how many units are owner-occupied, what services they hire outside vendors to handle vs. what is done by shareholders, and the size of the building’s reserve fund.
Where to find a self-managed co-op
Self-managed co-ops are not typical, but they can be found throughout New York City. They are usually small buildings, ranging in size from just a few units to a few dozen.
If a unit for sale is in a self-managed building, the sales listing typically mentions it.
HDFC (restricted-income) co-ops are sometimes self-managed, as are the aforementioned Finnish co-ops in Sunset Park, numerous small walkup buildings dating from the teens, and small co-op apartment buildings converted from former townhouses in such areas as Park Slope. Self-managed co-ops are not always older buildings, however. Some small but relatively new buildings are self-managed co-ops.