Condo and co-op reserves in New York

Condominiums: the declaration, the bylaws and section 339-v

New York condominiums are created under the Condominium Act, Article 9-B of the Real Property Law. Section 339-v lists what the bylaws must contain, such as how the board of managers is elected, how common charges are set and collected, and how the bylaws can be amended, and lets them cover other matters. It does not require a reserve study or a minimum reserve balance. Source: Real Property Law 339-v, New York State Senate.

So where does a condo's reserve obligation come from? From its own declaration and bylaws, which usually let the board include a reserve for replacements in the annual budget and charge it to owners by common interest. Read yours: some require a reserve line, some only allow one, and a few set a percentage. If the wording is unclear, check with the association's attorney.

Co-operatives: a corporation with a proprietary lease

A co-op is a corporation, usually formed under the Business Corporation Law or as a housing company, that owns the building. Shareholders hold proprietary leases. The bylaws and the lease set how the board fixes maintenance, and many standard-form leases let directors set aside reserves for contingencies and repairs. No statute tells a co-op to fund reserves to any level or to commission a study; the CAI state summary describes New York in the same way.

The big difference from a condo is borrowing. A co-op can refinance its underlying mortgage or take a line of credit to pay for a facade or boiler job, so its reserve study should compare funding from reserves, from an assessment and from debt. A condo usually cannot mortgage the common elements in the same way, so its plan leans harder on reserves and assessments.

What lenders look at

For a buyer's loan, the lender reviews the project. Fannie Mae's Selling Guide project standards for condos and co-ops look at whether the budget allocates enough to replacement reserves, and at deferred maintenance and critical repairs. A current reserve study gives the managing agent an answer to those questionnaire items that does not depend on a rule of thumb. FHA loans apply to condos only.

New York City: four laws that set the repair calendar

Inside the five boroughs the Department of Buildings and the Mayor's Office run inspection and emissions programs that create capital work on a schedule. None of them requires a reserve study, but a study is the natural place to carry their findings.

Local Law 97 in reserve terms

Buildings over 25,000 square feet file an annual emissions report, and emissions over the building's limit draw a penalty, set at $268 per metric ton of carbon dioxide equivalent in the law. The limits for 2030 to 2034 are much tighter than the first period's. For a co-op or condo board, that turns heating plant, controls, windows and roof insulation from "replace when worn out" into "replace by a date", which is exactly the kind of item a reserve study schedules. Source: NYC Sustainable Buildings, Local Law 97.

Outside the city

Westchester, Nassau, Suffolk and upstate buildings follow the state's Uniform Fire Prevention and Building Code, enforced by the local building department; the NYC local laws above do not apply. Homeowners associations sold under an offering plan were filed with the Attorney General's Real Estate Finance Bureau, and their documents set any reserve duty. See the Department of State, Building Standards and Codes.

What we would put in front of the board

1. The reserve clauses from your declaration and bylaws, or proprietary lease and bylaws.
2. The last FISP report and any open DOB violations.
3. The latest Local Law 152 certification and, if you have a garage, the Local Law 126 report.
4. The Local Law 97 report for the last calendar year.
5. Three years of audited statements and the current budget.

With those in hand, a provider can price the study accurately. See what moves the price.