Condo co op building reserve fund

[Benny]

I know you're supposed to allocate 10% of your condo or co op building's annual budget to your building's reserve fund. But that seems overly cautious and everyone wants to keep maintenance and common charges low.

Any way to get around it? It's definitely a big line item.

[ryan_gz]

Yes you can certainly game it, and I believe this happens quite a lot with condo and co op boards in the city. There's no penalty if you miss your 10% reserve fund contribution target every year.

For example, say you set your building expenses to be $90 and set aside another $10 for the building reserve fund in your condo budget. There's no penalty if you miss your target and end up spending $100 every year!

And just for context, I believe the reason this requirement is imposed is because banks want to see it during building project review, when they are reviewing whether to lend against the building. I also heard that Fannie and Freddie have some allowed variances around this, 5% and 10% respectively.

[showtime]

I would add that newer buildings, like new construction condos, are given some lenience generally during their early years.

Also, banks as of 2018 do like to use the tax abated amount when doing their calculations on whether to lend on a building/condo.

[lower_nyc]

It's always a good idea for a building to have some amount of emergency reserves. Just curious, what would happen if the sewer pipe broke and required an immediate $20k repair but the building literally didn't have any money?

Would they have to borrow money from a hard lender while they waited for unit owners to pay any assessment?