Maintenance fees are monthly charges paid by shareholders in co-op buildings, most commonly in New York City. These fees have a few crucial differences from common charges—the monthly expenses paid by owners in condo buildings—and can vary significantly from building to building. 

What do maintenance fees cover?

In a co-op building, apartment owners are actually owners of shares in a corporation, rather than of an individual piece of real property (like a condominium).

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For this reason, shareholders in co-op buildings don’t pay individual property tax bills on their apartments as they would for a condo unit, but rather, the building’s overall property tax bill is divided up among shareholders, and included as part of the overall maintenance fee. (The portion of a shareholder’s monthly maintenance fees that goes toward property taxes is still tax- deductible, and prospective co-op buyers may want to do the math on this ahead of time to get a sense of a property’s true monthly costs.)

Buildings with especially high maintenance fees will tend to have lower sale prices. Photo: Pixabay

Because taxes are included, maintenance fees in a co-op building will generally be higher than common charges in a condo building, which can make condos appear cheaper at first glance, though that picture gets more complicated once a condo’s monthly tax bill is taken into account.

In addition to property taxes, maintenance fees usually cover a co-op’s operating expenses, the underlying mortgage (if there is one) and utilities such as heat and hot water.

The number of units in a building can affect maintenance fees (fewer units often means a higher financial burden for each shareholder), as can amenities and the size of the staff, how well the building’s finances are managed and whether the building has a commercial tenant to help offset costs.

How do maintenance fees affect sales prices?

Buildings with especially high maintenance fees will tend to have lower sale prices (and often, listings that at first glance seem too good to be true come with a hefty monthly maintenance attached).

In New York City, co-op buildings located in Manhattan usually have much higher maintenance fees than their counterparts in the outer boroughs such as Brooklyn and Queens.

High maintenance fees can also further complicate the financial calculus of a sale, since many co-op boards require prospective buyers to have cash on hand for a certain amount of monthly maintenance payments (often six months’ worth) in addition to their down payment and other closing costs. This helps buildings weed out buyers who might later prove financially unstable and fall behind on their maintenance fees, but it can also make the purchase process onerous.

Do maintenance fees change? And why?

Maintenance fees can, on rare occasions, decrease over time (for instance, if a building has paid off a major debt). But it’s much more likely that they’ll eventually increase, which can happen when a building faces increased property taxes, or a major one-time expense, such as an elevator repair or work on the facade.

Sometimes these extra expenses are levied as permanent maintenance fee increases, and sometimes as an assessment, in which the cost of an expense is added to shareholders’ monthly maintenance temporarily until it has been paid off.