Reserve fund
A reserve fund is the building's segregated savings account for future major capital expenditures — roofs, façades, elevators, boilers, plumbing risers. Funded through a portion of monthly maintenance or common charges, the reserve is the alternative to special assessments when big-ticket work comes due.
Frequently asked questions
How much should a building have in reserves?
There's no universal number, but 10–15% of annual operating budget held in reserve, plus a 30-year reserve study showing trajectory to fully fund identified capital projects, is the working standard. Buildings facing imminent FISP or LL97 work need substantially more.
Can reserves be invested?
Yes, in conservative, liquid instruments — CDs, money market funds, short-duration Treasury ETFs. The investment policy should be a board resolution, not an ad-hoc decision, and it should match the timeline of projected drawdowns. Reserves earmarked for a 2028 façade project shouldn't sit in equities.
What's a reserve study?
A 30-year capital projection prepared by an engineer or specialized firm, listing every major building component, its expected remaining useful life, replacement cost, and recommended annual reserve contribution. NYC buildings should refresh the study every 3–5 years. Cost ranges $5,000–$25,000 depending on building complexity.
Are reserves taxable?
For co-ops and HOAs (filing as housing corporations or under §528), reserves accumulated from member assessments are generally not taxable income, but reserve interest income is. For condos, the rules are similar but condo boards typically operate the budget through the unit owners' personal tax position. CPA guidance matters; this is not legal advice.