You’re part of something bigger
When you buy into a condo or co-op, you’re not just investing in your individual unit — you’re becoming part of a shared building with collective responsibilities. The health of the building’s finances directly affects your monthly costs, property value, and even your quality of life.
That’s why understanding the basics of building finances — the annual budget, reserve funds, and audited statements — isn’t just for board members. Even as a resident, it helps you see where your money goes and prepares you for changes like fee increases or assessments.
The annual budget: Your building’s financial roadmap
The operating budget is essentially the building’s plan for the year. It shows how much money is coming in (mostly from maintenance fees or common charges) and how much is going out (staff salaries, utilities, insurance, repairs).
- Why it matters to you: This is the document that drives your monthly fees. If the budget predicts higher expenses — say, an increase in fuel costs or new Local Law 97 compliance work — your fees will reflect that.
- What to look for: Compare this year’s numbers to last year’s. If you see big jumps in certain categories, there should be an explanation. Boards usually share a summary with all owners when the new budget is approved.
The reserve fund: Your building’s safety net
The reserve fund is like the building’s savings account. It covers major repairs and upgrades — roof replacements, elevator overhauls, façade work — without relying entirely on special assessments.
- Why it matters to you: A healthy reserve fund protects both your property value and your wallet. Buildings with low reserves are more likely to levy large assessments when big repairs come up.
- What to ask about: Has the building done a recent reserve study (a professional review of future repair needs)? Best practice is every 3–5 years. If it’s been longer, the reserve balance might not reflect upcoming projects.
Sometimes slightly higher monthly fees are a good thing. If those increases are being used to build reserves, it means the building can cover emergencies — or, even better, plan proactive maintenance. Preventative work is almost always cheaper (and less disruptive) than fixing something after it fails. In the long run, strong reserves save owners money and protect the building’s value.
Audited financial statements: An annual check-up
Every year, the building’s finances are audited by an independent CPA. The audit reviews the building’s income, expenses, and reserves, and issues an opinion on whether the financials are fairly stated.
- Why it matters to you: Audits give you confidence that funds are being managed responsibly. They’re especially important if you’re buying into a building — lenders often require them for co-ops.
- Key takeaway: Look at the auditor’s opinion (often on the first page). A “clean” or “unqualified” opinion is what you want to see.
Where your maintenance fees go
Maintenance fees (in co-ops) or common charges (in condos) are what keep the building running day to day. Typical expenses include:
- Staff salaries (doormen, porters, supers)
- Utilities (electricity, heat, water)
- Insurance
- Building repairs and supplies
- Management fees
- Contributions to the reserve fund
If you’ve ever wondered why fees in NYC feel high, staffing, insurance, and energy costs are usually the biggest drivers.
How fee increases and assessments happen
Boards adjust fees annually based on projected expenses. If costs outpace income, they can either raise monthly fees or issue a one-time assessment.
Common reasons for assessments include:
- Major capital projects (elevator or roof replacements)
- Local Law compliance work (façade inspections, emissions upgrades)
- Unexpected emergencies (flooding, structural repairs)
Buildings with strong reserves can handle more of these costs without relying on special assessments — another reason it’s worth knowing your building’s financial health.
How to stay informed (without getting overwhelmed)
You don’t need to memorize every line item. But taking a few simple steps keeps you informed:
- Read the annual budget summary — even a quick scan helps you spot major changes.
- Check reserve fund updates at annual meetings — especially before big projects.
- Review the audited financials once a year — focus on the auditor’s opinion and reserve levels.
- Ask questions respectfully — understanding builds trust between residents and the board.
The bottom line
Building finances can feel abstract, but they affect your everyday life — from your monthly fees to your home’s value. Understanding the basics helps you feel confident about where your money is going and reassures that your building is on solid footing.
