Nationwide, HOA reserves are running out. New York has no reserve requirement.

An association that cannot cover a roof replacement bills a special assessment. Owners who cannot pay fall delinquent. A delinquent owner gets a lien. A lien that goes unpaid goes to foreclosure. That chain ran from one end to the other for 6,376 American properties in the first quarter of 2026, according to ATTOM Data Solutions. The underlying cause, in every studied case, was the same: the reserve fund was not there when the bill arrived.

What the data says.

ATTOM, the real estate analytics firm, counted HOA-related foreclosure filings on 6,376 properties during the first three months of 2026. That figure represents a nearly 40 percent increase from the same period two years earlier, and a roughly 50 percent increase from the same period in 2022. The Wall Street Journal published the figures on August 3, 2026. In the full year 2025, homeowners associations filed 284,933 liens against owners, averaging approximately one every two minutes and up 8.6 percent from 2024.

The Foundation for Community Association Research, in its most recent survey, found that 91 percent of associations saw master insurance costs increase between 2024 and early 2025, with roughly one in ten reporting premium hikes exceeding 100 percent. A spring 2026 report by Association Reserves found that 74 percent of association-governed communities were less than 70 percent funded, meaning they lacked at least 30 cents on every dollar they would need to cover projected capital expenses. When insurance costs double and the reserve fund sits at 60 percent of its recommended level, a major system failure does not produce a manageable bill. It produces a crisis assessment.

The mechanism: from underfunded to foreclosure.

Reserve funds are the financial buffer between a building's ongoing operating costs and its capital replacements: roofs, elevators, boilers, facades, plumbing stacks. A reserve study calculates how much money needs to accumulate each year so the fund can cover those replacements when they arrive on schedule. A fully funded reserve makes special assessments rare. An underfunded one makes them routine, and large.

When an association faces a major capital expense with an inadequate reserve, its board has three choices: defer the repair, borrow, or levy a special assessment. Deferral accelerates the problem and, for structural components, creates safety liability. Borrowing requires lender consent, adding time and interest to the cost. The special assessment lands on owners who may not have liquid cash available, particularly in buildings where common charges have been kept artificially low by underfunding reserves in the first place.

Once an owner falls delinquent on common charges, state law determines what the board can do and how quickly. In New York, the board of managers of a condominium holds a statutory lien for unpaid common charges under Real Property Law §339-aa. That lien is superior to all other liens except property taxes, a recorded first mortgage, and certain government-backed mortgages. The board can foreclose on the lien. Before commencing a foreclosure action, the board must now give the unit owner at least 90 days' written notice, a requirement that took effect October 16, 2025, under an amendment to RPL §339-aa. For co-operative apartments, the mechanism differs: the shareholder's proprietary lease can authorize the corporation to cancel shares for non-payment of maintenance, which the courts have treated as a form of eviction.

New York's reserve gap, by statute.

New York imposes no reserve study requirement on condominiums or co-operatives. A board can set its reserve contribution at any level it chooses, including zero, and no state agency has authority to intervene or require an explanation. Senate Bill S7600 and Assembly Bill A8945, both introduced in the 2025-2026 session, would have required a 30-year reserve study with regular updates. Under A8945, the study would be filed with the State Comptroller; under S7600, with the Attorney General. Both bills were referred to committee in January 2026. Neither received a floor vote before Albany adjourned June 18. The same bills failed to advance under different numbers in the prior session.

The only reserve floor that applies to most New York condominium buildings comes not from the state but from the mortgage market. Fannie Mae Lender Letter LL-2026-03, issued March 18, 2026, requires a minimum reserve allocation of 15 percent of annual assessment income for any loan application dated on or after January 4, 2027. A building that falls below 15 percent without a qualifying independent reserve study is placed on Fannie Mae's project exclusion list. Buyers in that building cannot use conventional financing. At least 66 NYC condo buildings already appear on that list.

The Fannie Mae standard is a lending standard, not a safety standard. It manages risk for the lender on the next transaction. It does not protect current unit owners whose reserve fund is already short and who face a special assessment before any mortgage transaction occurs. And its reach into co-operative buildings depends on whether Fannie Mae financing is used. Co-op purchases are funded through share loans secured by shares and the proprietary lease rather than a unit-level mortgage; LL-2026-03 extends to co-op projects where Fannie Mae share loans are originated, but many NYC co-op buildings do not use Fannie Mae-eligible financing. New York has no substitute state reserve mandate for either sector.

The business judgment rule protects the decisions that create this.

Once a board adopts a reserve contribution level, New York law makes it extremely difficult for unit owners to challenge that choice. The business judgment rule, established in Levandusky v. One Fifth Avenue Apartment Corp., 75 N.Y.2d 530 (1990), protects board decisions from judicial review as long as the board acted within its authority, in good faith, and in the interests of the building. A reserve contribution that turns out to be insufficient is not, by itself, a breach of fiduciary duty under that standard.

The protection holds whether or not the building's bylaws require a reserve study. New York does not mandate that a board commission a study before setting its contribution level. A board can set contributions without reference to any engineering analysis of actual replacement costs, and unit owners have no statutory right to demand one. The first actor to price the building's hidden financial fragility is typically the mortgage market, and its correction arrives not as a warning letter but as a financing restriction that ends the next buyer's options entirely.

What an NYC condo or co-op unit owner can check now.

There is no public database of NYC condo or co-op reserve fund balances. No state agency collects or publishes the figures. What an owner can do:

• Request the audited financial statements. Real Property Law §339-w (condos) and Business Corporation Law §624 (co-ops) entitle owners to inspect financial records. The reserve fund balance appears on the balance sheet as a separate restricted account. If the board cannot produce a set of audited financials, that absence is itself a signal.
• Calculate the reserve ratio. Divide the reserve fund balance by the current annual common charge budget. A ratio below 10 percent warrants a follow-up question about the reserve study. A ratio below 5 percent is a structural problem. Fannie Mae's new floor for financing eligibility is 15 percent of annual assessments.
• Ask for the reserve study. Request the most recent study in writing and ask when it was last updated. A study more than five years old does not reflect replacement costs since 2020, which have risen substantially for labor, materials, and insurance. A board that has never commissioned one cannot accurately tell you when the money runs out.
• Check the Fannie Mae exclusion list. If the building is on Fannie Mae's project exclusion list, its reserves or deferred maintenance have already triggered a lender restriction. Most mortgage brokers can run this check. A building on the list is not necessarily insolvent, but it faces a smaller pool of buyers and lenders on every future transaction.
• Know the enforcement limit. If the board declines to provide financials, the remedy is a written demand citing the applicable statute, followed if necessary by a proceeding under CPLR Article 78. No state agency can compel compliance on your behalf. The Attorney General's Real Estate Finance Bureau does not have authority over reserve levels or board financial decisions after the offering plan closes.

Bottom line.

Homeowners associations foreclosed on 6,376 properties in the first quarter of 2026, nearly 40 percent more than two years earlier, because the reserve fund was not there when the capital bills arrived. New York condominiums and co-operatives face the same structural dynamic. The state imposes no reserve study requirement. The business judgment rule insulates boards that set reserve contributions below the level any prudent study would recommend. The only external floor is Fannie Mae's LL-2026-03 reserve rule, effective January 4, 2027, which reaches both condos and co-op projects where Fannie Mae financing is used but addresses lender risk rather than owner protection. The national data is a preview, not a warning: the failure mode is already running, and New York's regulatory design gives it nothing to slow it down.

Primary sources: ATTOM Data Solutions, Q1 2026 HOA foreclosure filings, as reported by The Wall Street Journal, August 3, 2026; Foundation for Community Association Research, HOA financial health survey, 2025-2026; Association Reserves, HOA Reserves: Industry Insights Report, April 2026; NY Real Property Law §339-aa (common-charge lien and foreclosure; 90-day notice requirement effective October 16, 2025); NY Senate Bill S7600 and Assembly Bill A8945, 2025-2026 session, referred to committee January 2026; Fannie Mae Lender Letter LL-2026-03 (issued March 18, 2026; 15 percent reserve floor effective January 4, 2027); Levandusky v. One Fifth Avenue Apartment Corp., 75 N.Y.2d 530 (1990).

Companion resources: The condo industry's own trade organization backs mandatory reserve studies. New York's bill didn't advance. · An untouchable board and no standard to hold it to: how NY law steers condos and co-ops toward default. · Fannie Mae's 15% reserve floor arrives in January. NYC condo boards need to act. · Florida made structural condo reserves non-waivable in 2024. New York's equivalent bill never moved. · A lawyer's warning about defunct owners associations has 1.07 million views. New York gives you no way to check. · A developer stopped paying common charges. Here is what the condo board can legally do. · What NYC condo and co-op owners can legally demand from the board · Issues · Methodology