DUE DILIGENCE
10 Questions to Ask
Before You Buy
Your broker won't ask these. Your attorney might not either. But these 10 questions will tell you more about a building than any open house ever could.
Before you sign a contract to buy a condo or co-op in NYC, you need answers to these 10 questions. Not vague reassurances from the listing agent — actual answers backed by documents you can verify independently.
For each question, we explain why it matters, what a good answer sounds like, what a bad answer reveals, and where to verify the response yourself using public records.
What special assessments have been levied in the past 5 years?
Why It Matters
Special assessments are one-time charges for capital expenses the building can't cover from reserves. They can range from $2,000 to $50,000+ per unit. If a building has levied multiple assessments recently, it tells you the reserve fund is inadequate and the board has been deferring maintenance.
A building with no assessments in 5 years either has a well-funded reserve (good) or hasn't done needed capital work (bad). The follow-up question matters as much as the first answer.
Good Answer
"We had one assessment of $4,200 per unit in 2023 for elevator modernization. No other assessments. Our reserve fund currently holds $1.2M against a $2.4M annual budget."
Bad Answer
"I'd have to check." Or: "We've had a few — the board can provide details." Vagueness about assessment history is a red flag. Boards that don't track or won't disclose this information are hiding something or incompetent — both are problems.
How to Verify Independently
Request the last 3-5 years of audited financial statements. Check the notes to financial statements for assessment disclosures. See our Special Assessments Guide for what to look for.
What is the current reserve fund balance, and what percentage of the annual budget does it represent?
Why It Matters
The reserve fund is the building's savings account for major repairs — roof, facade, boiler, elevators. A healthy reserve fund means the building can absorb capital expenses without special assessments. An empty one means every major repair lands on your credit card.
New York has no legal requirement for minimum reserve funding (unlike Florida, which mandated reserves after the Surfside collapse). This means you must evaluate it yourself. The industry benchmark is 25-40% of the annual budget, but many NYC buildings fall far below that.
Good Answer
"Our reserve fund balance is $1.8M. Our annual operating budget is $3.2M, so reserves represent about 56% of the annual budget. We also completed a reserve study in 2024 that projects funding needs through 2035."
Bad Answer
"Our reserves are adequate." Or: "The exact number is in the financials." Any answer that avoids a specific number is a deflection. If the reserve fund percentage is below 10%, expect a special assessment within 2-3 years.
How to Verify Independently
The audited financial statements will show the reserve fund balance on the balance sheet. Compare it to total annual expenses. If the building has never conducted a reserve study, that itself is a data point — they don't know what they'll need.
Who is the managing agent, and how long have they managed this building?
Why It Matters
The managing agent is the single most important operational decision a board makes. They handle finances, vendor contracts, maintenance, compliance, and resident communications. A bad managing agent can cost a building hundreds of thousands of dollars through vendor kickbacks, deferred maintenance, and compliance failures.
Frequent managing agent changes (more than one in 5 years) indicate board dysfunction, management problems, or both. Long tenure with a poorly rated agent can indicate board capture — the agent stays because the board doesn't know any better or because the relationship benefits someone other than the owners.
Good Answer
"Our managing agent is [Name]. They've managed the building since 2018. We conducted an RFP in 2022 and chose to renew. Our property manager is [Name] and our account's direct contact information is posted in the lobby."
Bad Answer
"I'm not sure who the management company is." Or: "We've changed agents a few times recently." If a board member doesn't know who manages their building, governance is not functioning. If agents keep leaving, ask why.
How to Verify Independently
Look up the managing agent on our Managing Agent Ratings. We score firms on DOB violation rates, building portfolio quality, and HPD complaint data. Check if the agent has patterns of problems across their portfolio.
Are there any pending or recent lawsuits involving the building or board?
Why It Matters
Litigation is expensive. Win or lose, legal fees come out of the building's operating budget. If the building loses or settles, the judgment is typically paid through a special assessment. Buildings with active litigation are also harder to sell — lenders scrutinize pending suits during underwriting.
The types of litigation matter. A slip-and-fall claim is routine and usually covered by insurance. A construction defect suit against the sponsor can mean major structural issues. A lawsuit by an owner against the board may indicate governance dysfunction. A discrimination claim signals potential Fair Housing Act violations.
Good Answer
"We have one pending matter — a personal injury claim from 2024 that our insurance carrier is defending. No suits filed by or against owners. No construction defect claims. Our legal budget last year was $45,000."
Bad Answer
"You'd have to ask our attorney." Or: "There might be something pending." Boards are required to disclose material litigation in their financial statements. If they won't tell you voluntarily, that's a governance failure.
How to Verify Independently
Search NYSCEF for the building name and address. Also search the condominium/co-op entity name. Check our Building Reports for aggregated litigation data.
What is the building's Local Law 11 status, and when is the next cycle?
Why It Matters
Local Law 11 (FISP) requires facade inspections every 5 years for buildings over 6 stories. If the facade is rated "unsafe," the building must make immediate repairs — often costing $1M-$10M+. This is the most common trigger for large special assessments in NYC.
Knowing where the building is in its inspection cycle tells you whether a major expense is imminent. A building that just completed facade work is unlikely to face another assessment for 4-5 years. A building due for inspection next year could be facing millions in repair costs.
Good Answer
"We completed our Cycle 9 inspection in 2024 — the building was rated SWARMP (Safe With a Repair and Maintenance Program). We have minor pointing work scheduled for this summer, budgeted at $180,000 from reserves. Next full inspection is due in 2029."
Bad Answer
"I think we're up to date." Or: "The engineer handles all that." If the board doesn't know the building's facade status, they aren't tracking one of the largest financial liabilities in their portfolio.
How to Verify Independently
Look up the building on DOB BIS. Check facade filing status. See our Local Law 11 section in the Special Assessments guide for a detailed breakdown of the inspection cycle.
What was the last common charge or maintenance increase, and how much was it?
Why It Matters
Regular, moderate increases (3-5% annually) are healthy — they keep pace with inflation and prevent the reserve fund from being depleted. No increases for several years suggests the board is keeping charges artificially low, likely at the expense of the reserve fund or building maintenance.
A sudden large increase (10%+) may indicate that the board has been deferring increases and is now playing catch-up, that insurance premiums spiked, that a major new expense was added to the operating budget, or that the building's tax assessment increased significantly.
Good Answer
"We increased common charges by 4% in January 2026, consistent with our 3-5% annual increase policy. Our last increase before that was 3.5% in January 2025. We haven't had to levy a special assessment since 2021."
Bad Answer
"We haven't raised charges in 4 years — our board keeps costs down." This sounds good but is actually alarming. Four years of inflation, rising insurance costs, and deferred maintenance mean a sharp increase or special assessment is coming.
How to Verify Independently
The offering plan amendment schedule and annual financial statements show the history of common charge changes. Compare the trajectory to CPI and insurance cost trends. Flat charges during inflationary periods are a warning sign.
Are there any open HPD or DOB violations?
Why It Matters
HPD violations indicate housing code issues — heat failures, water leaks, mold, pest infestations, lead paint. DOB violations indicate building code issues — elevator problems, facade hazards, unpermitted work, fire safety deficiencies. Both affect quality of life, building value, and potential legal liability.
A small number of Class A or B violations is normal in any NYC building. Class C violations (immediately hazardous) are serious. Multiple open Class C violations, or violations that have been open for months without correction, indicate a building that is not being properly maintained — and a managing agent that is not doing their job.
Good Answer
"We currently have two open Class B violations for minor plumbing issues — both have been addressed and we're awaiting HPD sign-off. No Class C violations. No open DOB violations. Here's our violation history for the past 3 years."
Bad Answer
"I'm not sure — you can check online." Or: "Every building has violations." While true that violations are common, a board that doesn't actively track and resolve them is a board that isn't governing.
How to Verify Independently
Check our Building Reports for aggregated violation data. You can also search directly on HPD Online and DOB BIS.
What is the building's insurance coverage, and when does the policy renew?
Why It Matters
Building insurance premiums have skyrocketed in NYC since 2022 — many buildings have seen 30-80% increases. These increases are passed directly to owners through common charge hikes. If the policy renews soon, expect a potential increase that isn't reflected in the current charges.
Inadequate coverage is a separate risk. If the building is underinsured and suffers a major loss (fire, flood, structural failure), the gap between coverage and actual cost is borne by owners — through a special assessment. Ask specifically about the deductible amounts and whether the building carries umbrella coverage.
Good Answer
"Our policy renews in September. Current annual premium is $280,000. We carry $50M in property coverage with a $25,000 deductible, plus $10M umbrella. Our broker is shopping renewal options now, and we anticipate a 10-15% increase."
Bad Answer
"The managing agent handles insurance." Or: "I think we're covered." Insurance is one of the building's largest expenses and one of its most critical protections. A board that can't discuss it isn't governing — they're delegating governance to the managing agent.
How to Verify Independently
Request a copy of the certificate of insurance. Compare coverage limits to the building's replacement cost. Ask your own insurance broker to review the building's policy and confirm it meets lender requirements.
Has the board denied any subletting or sale applications in the past 2 years?
Why It Matters
In a co-op, the board has broad authority to deny sales and sublets — often without providing a reason. This power directly affects your ability to sell or rent your unit in the future. A board that frequently denies applications makes your investment illiquid.
In a condo, the board typically has a right of first refusal but cannot unreasonably deny a sale. Sublet restrictions vary by building and are governed by the bylaws. Understanding the building's actual practice — not just the bylaw language — is critical to evaluating your exit options.
Good Answer
"We approved all 8 sale applications and 3 sublet applications last year. We have not denied a sale in the past 5 years. Our sublet policy allows subletting for up to 2 years with board approval, and we've approved every application that met the financial criteria."
Bad Answer
"The board reviews each application on a case-by-case basis." This non-answer is especially concerning in a co-op, where it can mean the board exercises arbitrary or discriminatory judgment. Ask for specific numbers.
How to Verify Independently
Ask your real estate attorney to include sublet and sale approval history as part of due diligence. Review the bylaws for specific sublet limitations, fees, and waiting periods. Talk to a current resident if possible.
Can I review the last 2 years of board meeting minutes?
Why It Matters
Board minutes are the closest thing you'll get to a real-time view of building governance. They reveal upcoming capital projects, management disputes, resident complaints, vendor contract decisions, and internal board dynamics. The minutes tell you what the financial statements can't — what the board is worried about, what they're planning, and how they make decisions.
In most NYC condos, owners have a legal right to review minutes under the bylaws. If the board refuses to provide them to a prospective buyer, ask the seller to request them on your behalf. If neither the board nor the seller will produce minutes, walk away.
Good Answer
"Yes, we'll provide the last 2 years of approved minutes. We publish approved minutes to all owners within 30 days of each meeting. Here they are."
Bad Answer
"Minutes are confidential." Or: "We don't really keep detailed minutes." Board meeting minutes are not confidential — they're a governance record. A board that doesn't keep minutes or won't share them is a board operating without accountability. This is a serious red flag.
How to Verify Independently
Read the minutes carefully. Look for: discussions of major capital projects (signal upcoming assessments), managing agent complaints (signal management problems), legal discussions (signal litigation risk), and voting patterns (signal board dysfunction or dominance by a single member).
Printable Checklist
Copy this list. Bring it to your next board interview or send it to your attorney. Every question should have a documented answer before you sign a contract.
- Special assessments levied in the past 5 years — amounts, dates, purposes
- Reserve fund balance and percentage of annual budget
- Managing agent name, tenure, and property manager contact
- Pending or recent litigation — type, status, insurance coverage
- Local Law 11 facade status and next inspection cycle date
- Common charge / maintenance increase history (last 3-5 years)
- Open HPD violations (Class A, B, C) and DOB violations
- Insurance coverage limits, deductible, umbrella policy, renewal date
- Sublet and sale application denial history (past 2 years)
- Board meeting minutes for the past 2 years — reviewed and noted