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I can't get the last two years of financial statements for a co-op I want to buy. Is this a red flag?

  • Co-ops are required to provide annual financial information
  • A two-year gap in the co-op's financial records raises concerns
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By Emily Myers  |
March 27, 2023 - 10:00AM
View on some of Manhattan buildings.

It is not easy to accurately evaluate a building's financial health if you don't have up-to-date information.

RobinsonBecquart/iStock/Getty Images Plus via Getty Images

I can't get the last two years of financial statements for a co-op I want to buy. Is this a red flag?

It seems so, because it is difficult to evaluate a building's financial health if you are not working with current information, our experts say. A co-op’s financial statements offer a snapshot of how the building is being managed and what reserves it has, if there’s an emergency and funds are needed to mend the roof or replace the boiler.

“Under the Business Corporation Law, co-ops are required to provide annual financial information,” says attorney Dean Roberts, a partner at Norris McLaughlin.

Preparation of co-op financial statements

Many co-ops have fiscal years that are not the same as the calendar year—so they might not run from December to December and it’s possible the preparation of a financial statement might take a few months, but it should not take two years, he says. 

This kind of delay could mean that there is an issue with the co-op’s financial health or simply that the board or management does not have its act together, says attorney Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas. “Neither of these scenarios is good,” he says. 

Is the board meeting its obligations?

Financial reports provide the best way to see the deficits and reserves associated with a building. A reserve fund is a co-op or condo’s rainy day fund—the money the building has in the bank if a structural issue is uncovered. It is also increasingly important as buildings are required to meet new energy efficiency requirements, fund energy conservation upgrades, and phase out mechanical systems that use fossil fuels. 

The expenses and notes in the financial statement are also often a very good source of information about litigation or capital repairs. In addition, the notes might relate to any commercial space owned by a co-op or refer to the building's mortgage. 

Reich suggests checking the proprietary lease or bylaws to find out if the board is obligated to provide audited financial statements on an annual basis. Most bylaws require them but “this is not the case with all buildings,” Reich says. Audited financial statements offer the highest level of service and would give you the highest comfort level.

“If the board is obligated to provide audited financial statements and haven’t done so, I would want to know why the financial statements had not been prepared and I would want to perform additional diligence into the financial health of the building before proceeding with any potential purchase,” Reich says. 

All-cash buyers might be more vulnerable in these situations because lenders often require audited financial statements before signing off on a mortgage. This means, if you need financing to pay for the apartment, your deal might not move forward because the building is unlikely to meet the lender’s requirements. 


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Emily Myers

Senior Writer/Podcast Producer

Emily Myers is a senior writer, podcast host, and producer at Brick Underground. She writes about issues ranging from market analysis and tenants' rights to the intricacies of buying and selling condos and co-ops. As host of the Brick Underground podcast, she has earned four silver awards from the National Association of Real Estate Editors.

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