Tips and Best Practices

Managing CAPEX (Capital Expenditure) projects in NYC co-ops and condos is a complex yet essential responsibility as a board member. Whether you’re overseeing a FISP project, ensuring Local Law 88 compliance, or tackling multiple Local Law 97 initiatives, the board’s decisions play a crucial role in maintaining and enhancing your building’s value, safety and efficiency. But how do you ensure your projects are successful from start to finish?

This guide is designed to provide you with the knowledge and strategies to manage CAPEX projects effectively. From understanding the key differences between co-ops and condos to navigating approvals, budgeting, and stakeholder engagement, this comprehensive approach will help you lead your building’s projects with confidence and success.

 

What Are CAPEX Projects?

CAPEX projects refer to significant investments in a building's infrastructure that improve or extend its lifespan. Examples include facade repairs required by the Facade Inspection Safety Program (FISP, formerly known as Local Law 11) and roof replacements, to energy-efficiency upgrades required by Local Law 88 or extensive retrofits for Local Law 97 compliance. Understanding the scope and objectives of these projects is the first step toward effective management for maintaining your building’s long-term value and ensuring compliance with NYC regulations.

 

Co-op vs. Condo Structures and Their Impact on CAPEX Projects

The ownership structure of co-ops and condos affects how CAPEX projects are managed:

Before diving into project management specifics, it’s essential to understand the fundamental differences between co-ops and condos:

• Co-op Ownership: Residents own shares in a corporation that owns the building. Shareholders elect a board that makes decisions on all Capex projects on their behalf. Some bylaws have limits on scope and amounts that the board can approve without shareholders’ approval.

• Condo Ownership: Condo owners own their own units as well as an allocated percentage of the common areas. This means that in addition to board approval, CAPEX projects often also need owners’ approval. Bylaws may have limits on scope and amounts that need condo owners’ approval.  

Understanding these differences is crucial for tailoring your project management approach.

 

Key Steps to Manage CAPEX Projects Successfully

1. Define Project Scope and Objectives

Clearly define the scope and objectives of the project. In a co-op or condo setting, this means understanding the specific needs of the building, residents’ preferences, and any legal or regulatory requirements. Whether it’s a façade repair or a major mechanical system upgrade, detail the specific work to be done, the expected timeline, and the budget.

2. Engage Stakeholders Early

Early engagement with stakeholders, including board members,  engineers, consultants, and management, is vital. Determine if the project requires co-op or condo owners’ approval or not. Clear and early communication with residents to address their concerns and preferences is crucial no matter if their approval is required or not.

3. Develop a Comprehensive Project Plan

A well-detailed project plan is key to effective CAPEX project management. Include:

• Timeline: Set clear milestones and deadlines.

• Budget: Provide a detailed breakdown of costs, including materials, labor, permits, and contingency funds for unforeseen expenses.

• Resource Allocation: Identify the team members and contractors involved.

• Risk Management: Assess potential risks and create mitigation strategies.

 

Navigating Approvals and Regulations

As a board member, you hold significant authority over CAPEX projects in your co-op or condo. Your decisions share the direction, quality and success of any CAPEX projects. The approval process usually involves:

• Proposal Submission: Presenting a detailed proposal to the board, including plans, timelines, and costs.

• Board Review: The board reviews the proposal, considering factors like aesthetics, noise, and potential disruptions.

• Approval and Permits: Once approved by the board, obtain necessary permits from the NYC Department of Buildings (DOB) and other relevant authorities.

 

Budgeting and Financial Management

 

1. Develop a Realistic Budget, Including:

• Cost Estimation: Obtain detailed estimates from contractors and suppliers. Leverage your consultant’s or architect’s / engineer’s experience in giving their estimates as early notice allows your residents to come up with the required funds.

• Contingency Funds: Set aside a contingency fund for unexpected expenses, typically 10-15% of the total budget.

• Payment Terms: Clearly outline payment terms with contractors to avoid disputes.

2. Monitor and Control Costs

Regularly monitor project expenses against the budget. Use project management software to track spending and financial reports. Address any deviations from the budget promptly to avoid overruns.

3. Transparency with Residents

In co-ops and condos, transparency is key to maintaining trust. Regularly update residents on the project's financial status and any changes to the budget or scope.

 

Managing Contractors and Vendors

1. Selecting the Right Contractors

   Choose contractors with experience in working on co-op and condo CAPEX projects. Check their references, review their past work, and confirm that they are licensed and insured. Although we often see that boards choose the contractor that comes in at the middle price point, we find that this is the lazy way of making decisions. With proper due diligence, it is your responsibility as a board member to choose the best contractors for the job, no matter if that bid is the lowest, highest, or even in the middle.

2. Clear Communication

   Establish clear communication channels with all stakeholders, including contractors, consultants, property managers and owners. Set expectations regarding project timelines, quality standards, and any potential disruptions. Regularly meet with contractors to review progress and address any issues.

3. Contractual Agreements

   Draft detailed contracts outlining the scope of work, payment terms, and timelines. Ensure that the contract includes clauses for handling delays, changes, and disputes. Don’t forget that New York State’s Prompt Payment Act nowadays caps the retainage (the portion of the contract sum withheld to ensure proper completion of work) for all private construction projects valued at $150,000 or more, at 5%.

    

Communication and Resident Relations

1. Keep Residents Informed

Effective communication with residents is crucial for maintaining harmony. Provide regular updates on project progress, timelines, and any potential disruptions. Consider holding meetings or distributing newsletters to keep everyone informed.

2. Address Concerns Promptly

Be proactive in addressing any concerns or complaints from residents. Establish a system for residents to voice their concerns and ensure that they are addressed in a timely and respectful manner.

3. Manage Disruptions

Anticipate and manage disruptions such as noise, dust, or restricted access. Inform residents in advance and take steps to minimize inconvenience.

 

Quality Control and Inspection

1. Regular Inspections

Conduct regular inspections to ensure that work is being completed to the required standards. This includes checking the quality of materials, workmanship, and adherence to the project plan.

2. Addressing Issues

Address any issues or defects promptly. Work with contractors to resolve problems and ensure that any necessary corrections are made.

3. Final Walkthrough

Conduct a final walkthrough with contractors and key stakeholders to review the completed work. Depending on the kind of CAPEX project, the proper regulatory instance like The Department of Buildings (DOB), ConEd, NYSERDA, also need to do their own inspections. To obtain warranties, the manufacturer also needs to verify proper installation before issuing warranties. Ensure that all aspects of the project are finished to satisfaction before final payment is made.

 

Project Completion and Handover

1. Final Documentation: Ensure that all final documentation is completed and handed over. We always recommend saving all documentation in a shared and well-organized cloud folder such as the board’s shared Google Drive or One Drive. This should include warranties, permits, and as-built drawings. For all FISP documents, don’t forget to name the folder by the year since FISP projects are required every five years.

2. Resident Feedback: Gather feedback from residents regarding the completed project. This can provide valuable insights for future projects and help address any remaining concerns.

3. Project Review: Conduct a post-project review to evaluate the project's success. Assess what went well, what could be improved, and any lessons learned.

Managing CAPEX projects in NYC co-ops and condos requires a nuanced approach that considers the unique characteristics of these residential environments. By understanding the differences between co-ops and condos, engaging stakeholders early, navigating approvals and regulations, managing budgets and contractors, and maintaining clear communication with residents, you can ensure a successful project outcome.

Effective project management in this setting involves meticulous planning, transparent communication, and a proactive approach to problem-solving. With these tips and best practices, you’ll be well-equipped to handle the complexities of project management in NYC’s coop and condo buildings, ultimately achieving results that satisfy both the building’s needs and its residents.