Date: September 2026

For condo boards already struggling with rising insurance, utility and operating costs, another budget demand is coming. Beginning January 4, 2027, Fannie Mae will require condominiums to budget 15% for reserves, up from 10%. Condos that don’t meet the requirement could make their units harder to finance, and therefore harder to sell. Alternatively, a board can commission a qualifying reserve study instead of budgeting the prescribed 15%.

“Condos have to address this if they want to remain marketable,” says Stuart Halper, an attorney and co-owner of Impact Real Estate Management.

Fannie Mae’s requirements could restrict the financing available to buyers in noncompliant condos. If a lender intends to sell a mortgage to Fannie Mae, the condominium must meet Fannie’s eligibility requirements. If it doesn’t, the buyer may have to find another source of financing — or another building.

“If you don’t comply,” Halper says, “you’re going to lose the ability to keep pace in the marketplace.”

Buyers may still be able to obtain financing for condos that do not meet Fannie Mae’s requirements, but those alternatives can be more expensive. “Typically, that type of mortgage financing for non-warrantable condominium properties comes with higher interest rates and with less attractive terms,” says Orest Tomaselli, president and CEO of Strategic Inspections, a company that specializes in reserve studies. “It costs more to get those loans. At the end of the day, yes, there will be mortgage financing available in some way, shape, or form, but it’s not the best path forward.”

For current condo residents, meanwhile, the increase comes on top of rising costs throughout building budgets. Raising the reserve allocation from 10% to 15% adds another source of pressure on common charges. “Right off the bat, that’s a maintenance increase, not including all of your other operating expenses,” says Howard Mandel, owner at TKR Property Services.

Some of Mandel’s buildings have already refused to budget the current 10% reserve line item, and, he says, “when sales come through, sometimes people can’t get mortgages.”

That’s the conversation likely to play out across the city as buildings begin preparing their 2027 budgets, says Marc Schneider, managing partner and CEO at the law firm Schneider Buchel. “Every item we buy in our lives has gone up over the last number of years, and it just keeps going up,” he says. “I’ve sat in many meetings where they say, ‘Our people can’t afford this,’ and I always say, ‘Show me what line item you’re going to reduce.’ If you can’t, you have a fiduciary duty to raise common charges to pay your bills.”

Boards do have another option: commission a qualifying reserve study instead of automatically budgeting the prescribed 15%. A reserve study assesses major building systems, estimates their remaining useful lives and projects the cost of future repairs and replacements. Tomaselli says that process can help boards and managers identify critical repair needs and plan for future costs. That’s important information for boards to have, he says, because “this is really about preventing much bigger problems in the future.”

But a reserve study does not necessarily save a building money. It could identify near-term repairs and require the condo to fund reserves at the study’s recommended level, which could equal or exceed what it would have contributed under the 15% rule. “You could get a reserve study that says in year one you’re gonna need this, so you have to fund reserves in the amount of a hundred thousand dollars,” says Mary Kate Bertone, controller at Maxwell-Kates. “Now you paid for a reserve study, and you still might have to put in the same amount into reserves.”

For condo boards, then, every route carries a cost. Budget the 15%, and owners may face higher common charges. Don’t meet the requirement, and buyers may have fewer and more expensive financing options. Commission a reserve study, and the building may discover that its actual capital needs require just as much money — or more.

Pushback

With none of those options especially attractive, some in the industry are hoping Fannie Mae will change course.

“I’ve worked with Fannie Mae over the years,” says Geoff Mazel, partner at the law firm Hankin & Mazel, “and it’s always an extremely difficult situation working with underwriters. I think this one might be a target on the backs of condos and create enough of a reaction where something could get done. This is going to need pushback from condos that are affected.”

J. David Eldridge, a partner in the law firm Taylor, Eldridge & Endres, thinks additional pressure may come from lenders as well. “If Fannie Mae starts saying ‘no, not qualified, next,’ a whole bunch of sellers are going to say, ‘Hey, I’ve had three buyers rejected, what’s going on?’ Pushback is going to come from the Fannie Mae-backed banks because they are losing loans.” Eldridge believes changing the requirement from a budget item to an actual reserve-fund amount, in the ballpark of 8%, would be more achievable for more buildings and have a more positive impact on condos’ ability to fund necessary projects and repairs.

“The last few years have been devastating in terms of increases between the cost of insurance, water, sewer, electric, gas — those items have gone up exponentially,” says Halper. “We were all hoping that at a certain point we’d reach a certain equilibrium. This is only putting more pressure on the process. Something’s gotta give.”