What Happens When Your Condo is Ready for Repairs - but Not Ready to Pay for Them?

The façade needs work. The roof is aging. The elevators are approaching modernization. A Local Law requirement is creating yet another capital obligation.

And, obviously, none of this happened overnight.

But suddenly, several projects are competing for the same reserve dollars—and the Board is asking a very different question: How are we going to pay for all of this? For NYC condominium Boards, that question is becoming increasingly important. And it may soon affect more than common charges and special assessments. It could affect financing and, ultimately, the marketability of individual units.

The Rules Are Changing

As recently reported by The Wall Street Journal, Fannie Mae and Freddie Mac are tightening condominium lending standards, including increasing the general reserve allocation benchmark from 10% to 15% of annual assessment income.

That headline caught our attention at Ponte—but perhaps for a different reason.

Let's face it: a percentage alone doesn't tell you whether a building is financially prepared.

Consider two buildings.

One contributes 15% to reserves but has a $3 million façade restoration project approaching.

Another contributes less but has recently replaced its roof, modernized its elevators and upgraded major mechanical equipment, leaving relatively limited near-term capital exposure.

The numbers matter—but the building behind the numbers matters more.

And that's especially important in New York City, where buildings don't get to plan capital improvements in a vacuum.

FISP inspections can identify façade repairs that must be completed within prescribed timeframes. Local Law 97 can drive significant building-system and energy-related decisions. Meanwhile, roofs, elevators, mechanical systems, waterproofing and other infrastructure continue to age regardless of what's happening in the annual budget.

As we all know, some projects can wait.

Others can't.

And when several needs converge, there are really only a handful of places to find the money:

Reserves. Increased common charges. Special assessments. Financing.

Usually, it's some combination of them.

Ponte Insight

The mistake is waiting until a project becomes necessary to decide how you're going to pay for it.

The truth is, buildings generally give us clues long before major capital expenditures arrive.

Inspection reports. Recurring repairs. Aging equipment. Regulatory filings. Increasing maintenance costs. Engineer recommendations. Water infiltration. Façade conditions.

Looked at separately, these are building issues.

Looked at together, they're a capital forecast.

That's why we believe a condominium's capital strategy should connect:

Physical Condition → Regulatory Requirements → Capital Priorities → Cost → Timing → Reserves → Financing

Understanding what's coming gives a Board something extremely valuable: time.

Time to prioritize. Time to budget. Time to communicate with owners. And time to determine whether reserves, an assessment, financing—or a combination of all three—makes the most sense.

But How Do Lenders See It?

That's the part of this conversation we wanted to understand better.

Ponte recently worked with Harley Seligman of National Cooperative Bank (NCB) in connection with financing for a condominium capital improvement program.

So rather than speculate about how these changes may affect condominium lending, we decided to ask someone who is seeing these issues firsthand from the other side of the table.

Ponte Question:What are lenders seeing today that concerns them most about a condominium's financial health?

Harley Seligman: It's rarely a single issue. More often, it's the cumulative effect of rising expenses across the board. Insurance premiums, utilities, payroll costs, real estate taxes, and borrowing costs have all increased significantly in recent years. When multiple expense categories are rising at the same time, it puts pressure on operating budgets and reserve funding, making it more challenging for associations to maintain long-term financial stability.

Ponte Question:If a building technically satisfies the reserve requirement but has a major capital project approaching, does the lender look beyond the percentage?

Harley Seligman: Absolutely. Reserve funding is only one part of the analysis. We look at the building's overall financial history, including whether it has consistently operated at a surplus or deficit, whether reserves have been growing or declining, and how previous capital projects were funded. We also evaluate delinquency levels, the likelihood of additional projects in the near future, and whether the upcoming project is an isolated event or part of a broader pattern of deferred maintenance. Ultimately, we're evaluating the full financial picture, not just a single reserve ratio.

Ponte Question: How do existing association debt and special assessments affect the lender's view of a building's financial position?

Harley Seligman: Association debt and special assessments are not necessarily negative, but context matters. A well-planned loan used to fund necessary capital improvements can demonstrate proactive management. However, significant debt or frequent special assessments may indicate that reserves were insufficient or that the association has struggled to keep pace with capital needs. We evaluate how the debt impacts cash flow, whether assessment collections have been successful, and whether the improvements funded by those obligations strengthen the building's long-term financial and physical condition.

Ponte Question:‍ ‍What do you wish condominium Boards understood about financing before they needed it?

The financing process is really about telling the building's story. Lenders look beyond a single year's financial statements and evaluate the property's overall history, management practices, physical condition, and financial health. Boards that plan ahead, maintain strong reserves, address maintenance issues proactively, and communicate a clear long-term strategy tend to have more financing options and a smoother approval process when borrowing needs arise.

Thank you for reading and remember….A good capital plan does more than prepare a building for the next repair, it gives Boards and Owners the clarity to make better decisions before urgency limits their options.

Nancy Lara