According to the New York Department of Taxation and Finance, capital improvements are “any addition or alteration to real property that… substantially adds to the value of the real property, or appreciably prolongs the useful life of the real property,” but these improvements can have different titles for a cooperative versus a condominium.
For a cooperative who owns the building, they are called building improvements. For condominiums, whereby the unit owners own a proportionate share of the property and thus the Association is merely acting as their agent in accomplishing a major repair or replacement of common property, the term is closer to capital project.
When considering capital improvements, it is important that the appropriate distinction be placed upon the work as these improvements are accounted for separately from repair and maintenance expenses and tend to be funded through reserve fund or separate capital assessment or loan proceeds. Common everyday repairs and maintenance are funded by monthly common charges.
Your capital improvement is a major replacement, upgrade or repair that enhances the present condition of the item. The objective would be to overall minimize future costs i.e., repair, in certain cases maintenance costs). Remember that improvements tend to enhance the unit owner’s quality of life but not solely the aesthetics that they have. Think of items meant to last more than a year, that should help you save over the long term and build value into the property.
Be careful to assure the appropriate approval process. When in doubt ask a professional financial advisor to review the entities governing documents.
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