The novel coronavirus, COVID-19, has definitely shaken things up in the cooperative and condominium industry. With all non-essential businesses shutting down and the added sense that we have no idea how long this will continue, funds are running low and people are getting worried.
While it is ultimately best to consult a trusted Certified Public Accountant to help you navigate your way forward, The Cash Flow Checklist outlines ways you can prepare for disruptions to your property’s cash flow and significantly help you manage your property’s financial during these uncertain times.
- Start with a monthly escrow for real estate taxes so you can pull that amount out each month.
- Cease any reserve fund contributions.
- Postpone capital improvement projects wherever possible.
- Consider the option to draw down on existing line of credit facilities, but keep in mind that lenders may withdraw all or a portion of the available line in difficult times. Consider the effect on monthly costs of taking drawings.
- Reach out to commercial tenants to best understand rent payments that they will be able to make.
- Review unit owner listings and contact those who you feel might have difficulty keeping up with usual monthly payments. Call on your fellow Board members, the superintendent and neighbors to help identify others.
- It is not clear if cooperatives and condominiums can qualify for SBA Economic Injury Disaster Loans (EIDLS) as well as Paycheck Protection Program (PPP) Loans, however, existing lenders generally need to approve additional financing. Just in case, gathering the required information and being ready to apply once final guidance is received would be prudent.
- Condominiums without existing debt can consider obtaining new debt secured by working capital. Refinancing existing debt may make sense although consider upfront costs and early payment penalties and the anticipated lag of at least 90 days from initiation to closing.
- Reach out the NYC Water Board to see if they have any programs available to defer payment without interest.
- Inform vendors that payments will only be able to be made as funds are available.
- Suspend reimbursement for abatements and Senior Citizens Rent Increase Exemption (SCRIEs).
- Resist covering a deficit by increasing monthly charges or imposing an additional assessment, options that are likely increase the financial stress already placed on residents.
- Avoid the courts at all cost. Neighbors who for years may have dutifully paid their monthly charges deserve better.
Should cash become tight:
Consider borrowing money from reserves to operations with appropriate documentation in the minutes of board meetings and include a clear plan to replenish those reserves.
Contact the mortgage holder and request forbearance for at least 90 days.
Prioritize bill payment as follows:
– Fuel oil
– Office expenses
Seek deferral acknowledgements for:
– Mortgage (focus on interest only)
– Real Estate Taxes
– Water and Sewer
Pay as best as possible:
– Professional fees
– Management Fee
– Corporate Taxes
Consider temporally using security deposits held against monthly charges for buyers who did not meet the board’s requirements at purchase.
The Czarnowski & Beer team is dedicated to providing timely, accurate information on all aspects of the CARES Act and the current economic crisis that affect our clients. If you’re interested in reading our full summary of the provisions outlined for coops and condos in the Act, download our guide here.