No Minimum Reserve
Fund Requirement
After Surfside killed 98 people, Florida mandated full reserve funding. New York has no statutory minimum. Boards underfund reserves to keep charges low — then hit owners with $30K-$80K assessments.
THE PROBLEM
Your building is probably underfunded.
Every residential building has major components that wear out on predictable schedules: roofs (20-25 years), boilers (25-30 years), elevators (25-30 years), facades (30-40 years), plumbing risers (40-60 years). The cost to replace these components is knowable. The timeline is foreseeable. The only question is whether the building has been saving for it.
In New York, there is no statutory requirement that condominiums or cooperatives maintain any reserve fund at all. No minimum balance. No percentage of replacement cost. No professional reserve study. No periodic reassessment. The board decides how much to save, and many boards choose to save nothing — because lower common charges make the building easier to sell and keep board members popular.
The result is entirely predictable. When a major system fails — and it always does — the board levies a special assessment. Owners who budgeted for a $1,200 monthly common charge receive a letter demanding $40,000, payable in 90 days. Those who cannot pay face liens, interest charges, and collection lawsuits. The building's finances collapse in a cascade of deferred maintenance, emergency repairs, and owner defaults.
This is not a rare scenario. It is the standard operating pattern for hundreds of NYC condo and co-op buildings every year. The Community Associations Institute estimates that 70% of community associations nationwide are underfunded. In New York, where there is no reserve requirement at all, the number is almost certainly higher.
WHY IT MATTERS TO YOU
The $50,000 surprise no one warned you about.
If you are buying a condo or co-op in New York City, the reserve fund balance is one of the most important numbers you will never see — because there is no requirement that anyone show it to you. The building's financial statements may show a "reserve" line item, but there is no standard for what that number means, no requirement that it be adequate, and no independent assessment of whether it covers upcoming capital needs.
Here is what inadequate reserves look like in practice: You buy a condo in a 20-year-old building. Common charges are $1,100/month — lower than comparable buildings. Six months after closing, the board announces a $3.2M facade repair mandated by Local Law 11. Your share: $47,000, due in two installments over 12 months. You had no warning. The prior owner knew and sold. Your broker did not check. Your attorney did not ask. And no law required anyone to tell you.
Before you buy, ask for the most recent reserve study (if one exists), the current reserve balance, and the capital improvement plan for the next 10 years. If the board cannot produce these documents, that tells you everything you need to know. Use our cost calculator to estimate what adequate reserves should look like for your building.
WHAT OTHER STATES DO
Surfside changed everything. Except in New York.
On June 24, 2021, Champlain Towers South collapsed in Surfside, Florida, killing 98 people. The building had chronically underfunded reserves and deferred critical structural repairs for years. The association had identified $15M in needed repairs in 2018 but delayed action because they could not fund it.
Florida responded with SB 4-D (2022), which eliminated the ability to waive reserve funding for structural components. As of December 31, 2024, all Florida condominiums must maintain fully funded reserves for roof, structure, fireproofing, plumbing, electrical, waterproofing, windows, and any component with deferred maintenance. Reserve studies by licensed engineers are mandatory every 10 years.
California requires reserve studies (Civil Code §5550) and annual reserve funding disclosures. Boards must disclose the percent-funded status and any planned special assessments to all owners annually.
Virginia requires reserve studies and disclosure of reserve adequacy to buyers through the Common Interest Community Board.
New York has done nothing. No reserve study requirement. No minimum funding level. No disclosure to buyers. No response to Surfside. The state with the largest condo and co-op market in the country has the weakest reserve protections.
PROPOSED FIX
Mandatory reserve studies. Minimum funding levels.
New York should enact reserve fund legislation with three components:
- Mandatory reserve studies: Professional assessment of all major building components every 5 years, performed by a licensed engineer not referred by the managing agent
- Minimum funding: Reserves must be funded to at least 50% of estimated replacement cost for all components with remaining useful life under 15 years, rising to 70% by year three
- Buyer disclosure: Reserve study summary, current funding level, and any planned special assessments must be disclosed to all prospective buyers before contract signing
- Annual reporting: Reserve fund balance and percent-funded status must be disclosed to all unit owners in the annual financial statement
The cost of a reserve study is $5,000-$15,000 — a fraction of the cost of a single emergency assessment that results from not having one. This is not a financial burden. It is a financial safeguard.
FAQ
Frequently Asked Questions
How can I find out if my building has adequate reserves?
Ask the board or managing agent for the most recent audited financial statement and any reserve study. If no reserve study exists, that is itself a red flag. Look at the reserve balance as a percentage of the building's annual operating budget — anything below 30% of annual common charges is a warning sign, though this is only a rough heuristic without a professional study.
Can the board levy a special assessment without my approval?
In most cases, yes. Most condo bylaws grant the board unlimited assessment authority without a unit owner vote. Some require a vote for assessments above a certain threshold, but the threshold is set in the bylaws (not by statute) and is often high enough to be meaningless. Check your building's offering plan and bylaws.
What happens if I can't pay a special assessment?
Unpaid assessments accrue interest (typically 18-24% annually), trigger late fees, and become an automatic lien on your unit. The board's law firm will send demand letters (adding $2,000-$5,000 in legal fees to your balance). If you still cannot pay, the board can foreclose on the lien. The legal fees often exceed the original assessment.
Did New York introduce any legislation after Surfside?
Several bills were introduced but none have passed. The managing agent industry and board attorney lobby have not supported mandatory reserve requirements. Meanwhile, Florida, which had the disaster, enacted the strongest reserve law in the country within 18 months. New York, which has more high-rise condos, has done nothing in five years.