A Guide for Creating and Preserving Affordable Artist Spaces
This section offers some management tips for a typical project, and includes pages on the following:
Management: Who is Responsible for What?
No matter how the building is legally organized, someone needs to collect funds, pay bills and see to it that the building is insured and maintained. Most lenders will insist on a management plan as a condition of approval.
Smaller projects are often self-managed, but larger ones usually hire a professional management company. If you are faced with hiring a management company, interview a few different companies and be sure to check references, also make sure that your contract has a cancellation clause.
Ultimate management responsibility is spelled out in the legal documents of any artists' building.
- In a condominium, the "trustees" are in charge.
- in a co-op, it is the "directors".
- In a rental building it is usually the "general partner".
Management Responsibilities: They are usually organized to follow a routine. When things require deliberation they come back to the owners for final decisions. The general tasks of management companies are:
- Rent/dues/mortgage collection
- Tenant/occupant relations
- Personnel management (cleaners, repairmen, etc.)
- Common area cleaning
- Move-in coordination
- Property insurance – a management company can frequently get better rates
- Long range replacement schedules
- Bill payment
- Record-keeping (taxes, annual financial statements, monthly reports)
Owner Responsibilities: Deliberated decisions are abundant and include the following:
- How much to set aside for replacement reserves
- Whether or not to re-roof, re-paint, replace the boilers, etc. in a given year
- What level of insurance to carry
- Gallery or special facility management
- Whether to contest tax increases
- Disciplining occupants for infractions
- Etc, etc, etc.
It is good for every organization to have a building committee to make decisions about these items, which the formal structure can then approve (or discuss). Full-forum meetings of all tenants can be counter-productive; decisions are sometimes made more efficiently in small groups.
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Who Pays What?
It is always recommended to immediately begin capitalizing replacement reserves. New residential properties often start out with a low monthly replacement reserve contribution - maybe $50/mo/unit. This typically proves to be too low, eventually resulting in the dreaded special assessment which always incenses (or impoverishes) at least a few residents. Reserves should be at least $100 per month per unit, or more if your property needs frequent painting or is only partially renovated.
PAYING THE RENT
The key aspect of a shared space is the process of paying and collecting rent. Rent computations and payments can result in confusion which can create lease- threatening problems. Here are a few ideas to set up a simple rent paying system:
- Establish a cooperative bank account separate from any one individual's bank account. Each co-op member should pay one month's security deposit, and thereafter deposit monthly rent payments well in advance of the due date to allow checks to clear. Do not accept checks from out of state as they take too long to clear.
- Rotate bookkeeping responsibilities to help all members understand the importance of finances and paying rent on time. This may also deter unfair practices among floormates. The books should be accessible to inform members about the status of the finances and to avoid surprises.
- Devise a clear and equitable rent formula. In many cases, rent is pro-rated based upon the actual square footage of studio space. For example, if the total useable amount of studio space on a floor is 10,000 s.f. and you occupy a 1,000 s.f. studio, then you should pay 1/10th the rent.
- Also some thought should be given to a different formula for common improvements or repairs. If, for example, the group decided to build a new, common bathroom, should a single artist who has a 2,000 s.f. studio pay twice as much as two artists who share a 1,000 s.f.? Probably not.
PAYING FOR UTILITIES
Most artists are required to pay business rates for electricity and telephone service because they are located in industrial or commercial buildings. These rates are higher than residential rates.
Utility payments may be handled through floor cooperative accounts or, if in one tenant's name, paid directly to the tenant. Some groups divide costs equally. Others prefer to get exact prices per appliance from the utility company.
In either case, the use of power tools, kilns, or other equipment that uses a great deal of power might warrant a separate meter. The landlord may agree to pay for this.
PAYING FOR TRASH REMOVAL
Most municipalities do not pick up trash from commercial buildings. In some cases, landlords are not responsible for trash removal. It would be to your advantage to coordinate trash removal with floormates and, ideally, other businesses in the building. Compare prices from several trash disposal companies and look into the cost of renting a dumpster. Be sure that the dumpster is lockable.
SETTING A FIXTURE FEE FORMULA
Establish a clear policy for determining fixture fees to be obtained by floormates when studios change hands. The value of fixtures varies greatly from studio to studio, depending upon the work done, appliances, and whether sweat equity or contract labor was involved. These figures should serve as the basis for setting the fixture fees.
It may be complicated to figure this out. Consider the following:
- Number of months left on the lease and the likelihood of renewal
- Cost of materials and labor
- An inflation factor for materials since work was done
- A depreciation factor (meaning that the initial owner of the improvement and subsequent users of that improvement have been benefiting from the value of the improvement over time and therefore the value of the improvement should be less than the original cost)
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Subletting existing studio space involves renting or subletting an existing studio from the individual artist(s) whose name(s) appear on the lease. Floor co-operative agreements can give sub-tenants broader rights than those subtenants without such agreements. Such arrangements are also easier to maintain in the event of tenant turnover during the lease term, as replacement tenants can know more precisely the mutual responsibilities and expectations among co-op members. Because of the greater stability of co-ops, tenant turnover is less frequent than those without written agreements.
KEY FEES OR FIXTURE FEES
When taking over an existing studio, you may be asked by the current tenant to pay a fixture fee or a key fee, ranging anywhere from a couple hundred to a thousand dollars. These fees are for costs incurred in the development of the space. Be sure you ask to see what improvements you are being asked to pay for and ask to see receipts and hours of work put in. Don't hesitate to ask how the fee was determined. These fees are often negotiable.
REVIEWING SUBLETTING LEASES
Be sure to see how much time remains on the lease you are taking over. Find out when it might be renewed and assess the likelihood of renewal. If there isn't a lot of time left on the lease, you should consider the risk of losing your fee, or you might negotiate a fixture fee refund if the lease is terminated or not renegotiated on terms as agreed. Be sure you understand the process for paying rent and security deposits. Subtenants should have a written agreement – whether a floor co-op agreement or not – and should review it carefully with potential floor mates.
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Real Estate Taxes
Real estate taxes can be as much as three times higher for commercial properties than residential properties. Since artist live/work space is difficult to categorize as either distinctly residential or commercial, it occupies an important middle ground. For developers and artists alike, the classification of such space holds important consequences. To encourage the presence of artist space, in 1988 the City of Boston changed assessing requirements to allow building owners who own commercial buildings and who establish this property as legal visual artist live/work space to change their assessing classification from commercial to residential. This process saves the building owner significantly on property taxes.
In other municipalities the residential use usually prevails in choosing the tax assessment category for a live/work project. But the question is known to arise in public forums, particularly zoning or planning board meetings. It is best to have your answer prepared and your logic laid out ahead of time.
Property management brings the group together, but in meetings that are often tedious. Figure out ways to build cohesiveness among group members outside of these meetings. High-functioning groups have pot-lucks or holiday parties to which all occupants are invited, where the main topic of conversation is, "Who cooked that amazing pasta?" and not the insurance bill or the water heaters. It is impressive how much goodwill can come from a simple, informal party.
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