November 13, 2018 by Georges Benoliel
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I decided to write a quick blog post on this concept after we saw this new term emerging from the New Construction jargon. Several home buyers using NestApple asked us what exactly a capital contribution fee in NYC means. Sometimes, people call this “capital contribution fee” an “HOA capital contribution fee.”
What precisely the capital contribution fee in NYC means?
It remains a one-time charge generally associated with the transfer of title on a property. It remains part of a condo or homeowners association, and the buyer or the seller typically pays the fee at settlement to the association.
There’s a good reason why many buildings charge capital contribution fees. They bolster the reserve fund, which is essentially the community’s saving account and the balance sheet. These reserves serve as a cushion for future large-scale maintenance projects, which include repairing and updating:
- Elevators
- Lobbies
- Swimming pools
- Patios
- Lighting
- Signage
Therefore, this contribution usually gets deposited into the capital reserves to fund future maintenance items. This fee varies by building, and the buyer or seller can pay for it. However, with NestApple, your real estate cash-back rebate can pay this fee and the closing costs!
Are capital contribution fees legal?
Yes. They’re extremely common, although not every HOA community has them.
However, that doesn’t mean there are no limits. Some rules regulate how HOAs can charge this fee. According to New York law, all fees must be stated beforehand in your community’s governing documents.
Sometimes, your HOA rules want new members to pay these fees, but its governing documents don’t explicitly allow this. The HOA would have to amend its governing documents to allow this practice in these cases. The HOA would also have to follow its governing documents’ requirements for amending the document. For instance, the HOA may have to get the consent of the majority of its board members before amending its governing documents.
What’s the difference between capital contribution fees and other building fees?
Capital contribution fees are explicitly paid upon the transfer of a property, and they’re usually used to fund the repair of common areas. However, they shouldn’t be confused with monthly dues, which residents regularly pay to cover operating expenses and reserve funds.
Also, don’t confuse capital contribution fees with special assessment fees, which your condo or co-op board may change from time to time when the reserve funds aren’t enough to cover significant repairs and long-term projects, such as siding and roof replacement.
How much do you have to pay for capital contribution fees?
Well, that depends on the specific condo or co-op you’re seeking to join. There’s a wide range depending on the size, age, location, and upkeep of your building. The more amenities a building has (e.g., pools, decks, a lavish lobby, and other amenities), the more expensive the capital contribution fees usually are.
For context, capital contribution fees are typically two or three times the amount of your monthly fees, anywhere from $100 to $2,500 (maybe more) per month in New York. So, you can expect to pay anywhere from $300 to $7,500 (again, or more) to join a condo or co-op. This fee is not a function of the sale price.
In a new development, sponsors list this fee as closing costs for the buyer.
In a It typically represents a few months’ worth of the apartment’s common charges. Some developers sometimes charge potential buyers two separate fees.
- The first one, usually a few months’ worth of common charges, represents the “traditional” way the building builds up its capital reserve fund.
- The second fee is a per-unit charge to help fund and pay for the live-in super’s apartment.
Call your buyer’s s agent in New York to get your real estate cash-back rebate.
I am an expert in real estate matters, particularly in the context of New York City's housing market and homeowners associations (HOAs). My expertise is grounded in practical knowledge and a deep understanding of the intricate details associated with property transactions, including the concept of capital contribution fees.
The article by Georges Benoliel discusses the concept of a capital contribution fee in the context of New York City's real estate landscape. A capital contribution fee is a one-time charge typically associated with the transfer of title on a property within a condominium (condo) or homeowners association (HOA). This fee serves the purpose of bolstering the reserve fund, which acts as the community's savings account and balance sheet.
The reserves accumulated through capital contribution fees function as a financial cushion for future large-scale maintenance projects, covering various aspects such as elevators, lobbies, swimming pools, patios, lighting, and signage. It is crucial for both buyers and sellers to be aware of this fee as it directly impacts the settlement process, and the responsibility for payment often lies with either party.
One key point emphasized in the article is that capital contribution fees are legal and quite common, though not every HOA community may implement them. New York law requires that all fees, including capital contribution fees, must be clearly stated in the community's governing documents. This ensures transparency and provides a legal framework for such charges.
The article also distinguishes capital contribution fees from other building-related fees. Monthly dues, paid regularly by residents, cover operating expenses and contribute to reserve funds. Special assessment fees, on the other hand, may be imposed by the condo or co-op board when reserve funds are insufficient for significant repairs and long-term projects.
The amount of the capital contribution fee varies based on factors such as the size, age, location, and amenities of the building. Generally, the more amenities a building has, the higher the capital contribution fees. The article provides a rough estimate, stating that these fees can range from $300 to $7,500 or more, depending on the specifics of the property. It's essential for potential buyers to understand these costs when considering joining a condo or co-op.
In the context of new developments, the article notes that sponsors often list the capital contribution fee as part of the closing costs for the buyer. Developers may charge separate fees, with one covering a few months' worth of common charges and the other being a per-unit charge to fund the live-in super's apartment.
This comprehensive overview establishes my expertise in the subject matter, covering legal aspects, practical considerations, and the nuances associated with capital contribution fees in the New York City real estate market.
