Page 1 - New York Cooperator July 2020
P. 1

July 2020                                             COOPERATOR.COM  continued on page 9   When it comes to commercial tenants, says Piekarsky, “They all   need to be pursued—but restaurants and retail are in many cases also   struggling. This pandemic is affecting everyone.” In making their deci-  sions as to how to proceed with legal remedies, boards must take the   long view. “Boards need to keep up with their regular delinquency poli-  cies,” advises Piekarsky. “However, reaching out by phone and offering   payment plans versus getting nothing is a very sensible approach. At   continued on page 2   Each year, boards are tasked with fig-  uring out the costs associated with all   aspects of their community’s operations,   including any capital repairs or improve-  ments they plan to undertake in the com-  ing fiscal year, and then making sure the   revenue is there to cover said costs. Even   in the best of times it’s a balancing act,   involving predictions, assumptions, and   fungible pools of income alongside hard   historical data, face values, and built-in   escalations. And at the end of the pro-  cess often comes the unenviable task of   informing residents how much more   they will need to pay the association or   corporation each month to cover all of it.   In times of transition and upheaval   (like now) the process takes on added   complexity. Assumptions and predic-  tions are thrown out the window. Reliable   sources of revenue—like commercial   rents or amenity fees, for example—are   up in the air. Line items need to be add-  ed for expenses that didn’t exist even six   months ago: personal protective equip-  ment, digital body temperature gauges,   and social distancing compliance moni-  tors, for example. And those are just the   ones that can be reasonably predicted   four  months  into  the  COVID-19  crisis.   If there is one word that seems to run   parallel with coronavirus and its effects,   it’s uncertainty.   Educated Guesses  Upheaval aside, however, the basics of   budgeting remain the same. Communi-  ties must still meet all of their financial   obligations to operate and insure their   facilities; pay vendors, contractors, and   lenders; and provide a safe and secure   Among the many realities made visible (or more visible) by the COVID-19 crisis is the   domino theory: when one falls, the others follow. Conceived (and largely disproven) as a politi-  cal metaphor, the notion has proven more useful when applied to issues of the economy and   public health. The co-op and condo community, unfortunately, is one of those dominos. As the   pandemic spread and the threat of mass infection and death rose, the reality of an economic   slowdown, or even a full shutdown, came into clearer focus for boards and community admin-  istrators. While cash flow is essential to the day-to-day operations of buildings and associa-  tions, the welfare of owners and shareholders and the long-term economic success of tenants   are arguably more intimately linked to the decision-making process of residential boards than   in some other segments of the economy.  Extraordinary Circumstances, Considered Responses  Scott Piekarsky is an attorney specializing in community law with New Jersey-based firm   Phillips Nizer. “The biggest problem,” he says, “is that people are out of work and cannot afford   all of their overhead, including community association maintenance fees. Owners are falling   behind, and associations may begin to struggle to meet their monthly obligation in paying   their vendors.”  The question is how elected boards of directors should react to this challenge as community   leaders. Should they pursue legal remedies (like collection actions or late fees, for example) im-  mediately, or show some restraint considering the current extraordinary circumstances? “We   are taking all action that the courts permit us to take,” explains Piekarsky. “No one is getting   evicted, and no sheriff sales are occurring regarding foreclosures. Some judges are entering   money judgments, and others are not. It makes sense to start proceedings so you can get in line   \\\\\\\[for relief\\\\\\\]. If you wait, there may be a much longer wait list and a time delay to get that relief.   \\\\\\\[Legal action\\\\\\\] also may be used as a deterrent or tool to get people to try to get current.”  Even  before  the  COVID-19 crisis hit,   the  question  of  where  real  estate  values   were going was the elephant lurking in the   corner of the room. Some submarkets (like   Florida, for example) were strong—and get-  ting stronger. Others (like New York City)   were suffering declines—primarily thanks   to tax law changes passed back in 2017. The   limitations on deductibility of state and lo-  cal taxes had already had a  deleterious ef-  fect on co-op and condominium prices in   New York City, its suburbs, and nearby New   Jersey, which are all high-tax areas. Other   factors, like the change to the so-called   ‘mansion tax,’ also contributed to a decline   in  prices  and values  in  New  York,  as did   substantial  overbuilding  in the high-end   luxury market.  Then along came COVID, and its ac-  companying economic  shutdown—which   has changed the realities of work and life-  style, perhaps permanently to some extent.    Are brick-and-mortar office spaces as es-  sential as they once seemed? Can business-  es such as law firms, advertising agencies,   even financial institutions conduct their   daily operations without a physical space   in which personnel can congregate? If not,   will an urban lifestyle be as appealing as it   once was, particularly if the attractions of   that lifestyle—dining out, theatre, nightlife,   and the rest—are sharply limited, or fraught   with anxiety?  What Does the Future Look Like?  David Eisenbach is a historian, author,   and lecturer at Columbia University, and   is an expert on urban history, particularly   that of New York City. He sees huge po-  tential  changes  coming.  “Density  is  what   makes New York—and maybe breaks New   York under COVID-19,” Eisenbach says.   “Just look at the subway. If you think fly-  ing exposes you to COVID, think about a   40-minute subway ride with a transfer in   Times Square  during rush hour.  Or what   about the packed elevator to the 30th floor   of your office building, every day, twice a   day, five times a week? Density is what fills   New York’s universe of restaurants, clubs,   Coping With Cash    Flow Problems  Fallout from COVID-19 Hits    Communities’ Bottom Line  BY A.J. SIDRANSKY  The Price is…  Right?  Adjusting Valuations for   Pandemic’s Impact  BY  A. J. SIDRANSKY  Budgeting in   a Changed   Landscape  Making Predictions for the    Unpredictable  BY DARCEY GERSTEIN  205 Lexington Avenue, NY, NY 10016 • CHANGE SERVICE REQUESTED  continued on page 8 


































































































   1   2   3   4   5