A one-time fee with long-term impact
When you buy a unit in a NYC condo or co-op, you may come across a lesser-known fee at closing: the capital contribution. It’s a one-time charge — separate from your monthly maintenance or common charges — that helps strengthen your building’s financial foundation.
These fees can sometimes feel frustrating for buyers, but when structured well and communicated clearly, they’re a smart, fair way to build reserves without raising monthly costs for everyone else.
Here’s what you need to know.
What is a capital contribution fee?
A capital contribution fee is a one-time payment made to the building (not the seller) when a unit changes hands. It’s typically calculated as a multiple of the monthly maintenance or common charges — often 1 to 3 months’ worth — and is paid by the buyer at closing.
Some buildings call it an “initial contribution,” “working capital fund,” or “new owner fee,” but the goal is the same: help keep the building’s reserve fund healthy.
Why do buildings charge this fee?
Simply put: to build or replenish reserves.
Every building needs a reserve fund — it’s the savings that cover big-ticket repairs like roof replacements, boiler upgrades, or elevator modernizations. But if reserves aren’t maintained, boards may have no choice but to issue a special assessment — often on short notice — and that can be a financial strain for many residents.
Capital contribution fees help reduce that risk. Since they’re only charged when a unit sells, they don’t increase monthly costs for existing owners — and they allow incoming residents to contribute to the shared upkeep of the building from day one.
What’s a typical capital contribution amount?
There’s no one-size-fits-all, but common structures include:
- 1–3 months of maintenance/common charges
- A flat fee (e.g. $1,500 or $5,000 per unit)
- A percentage of the sale price (less common, but sometimes seen in luxury condos)
In NYC, that often means anywhere from $1,000 to $7,500+, depending on the building’s monthly charges, amenities, and financial strategy.
Who pays it — the buyer or the seller?
Most commonly, the buyer pays this fee. The logic is that they’re joining a well-maintained community and benefiting from years of capital upkeep, so it’s fair for them to contribute upfront. That said, always review your purchase agreement and building documents — and if you’re unsure, ask your real estate attorney to clarify.
Do capital contribution fees need to be in the bylaws?
Yes — boards can’t just create this fee informally.
The building’s governing documents (like the offering plan, bylaws, or proprietary lease) must specifically authorize the collection of a capital contribution fee. If they don’t, the board would need to amend those documents — which typically requires a formal process and owner vote.
Boards should also disclose the fee clearly during unit sales to avoid surprises for buyers.
What happens if a new owner doesn’t pay?
If the fee is properly authorized in the building’s documents, it’s not optional. Like maintenance charges or assessments, it becomes a financial obligation tied to the unit. Failing to collect it can set a bad precedent and weaken the building’s reserve strategy.
Is this just another way to squeeze buyers?
It might feel that way at first glance — especially during a pricey NYC closing. But a well-structured capital contribution fee can actually save all owners money over time.
Here's how:
- It helps fund long-term projects without needing constant assessments
- It enables proactive maintenance instead of emergency fixes (which are always more expensive)
- It keeps your reserve fund healthy — something lenders look at when buyers apply for mortgages
Slightly higher upfront costs now can prevent much larger financial surprises down the road.
What smart boards should do
If your building doesn’t already collect a capital contribution fee, now might be the right time to consider it — especially if:
- Your reserve fund is underfunded
- You’ve had recent or frequent assessments
- You want to fund future improvements responsibly
Make sure you:
✅ Review your governing documents
✅ Speak with your building attorney
✅ Clearly communicate the purpose and benefits to owners
✅ Stay transparent about how the funds are used
At Daisy, we’ve helped many NYC boards structure capital contribution fees that are fair, legally sound, and aligned with long-term reserve planning.
Final takeaway
Capital contribution fees aren’t just an extra line item at closing — they’re a tool for financial stability. When used correctly, they help protect your investment, reduce surprises, and ensure your building has the funds it needs to stay safe, functional, and well-maintained for years to come.
