Budgets & Reserves

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  • Is the Board required to adopt an annual budget?

    Illinois condominium and common interest community association Boards are subject to statutory budget requirements.


    The annual budget is one of the Board's most important responsibilities because it establishes the association's financial roadmap for the coming year.

  • What should an association budget include?

    A sensible budget should account for anticipated operating expenses, contractual obligations, insurance, utilities, maintenance, professional services, administrative expenses and appropriate reserve funding, among other association-specific expenses.


    Last year's budget can be a useful starting point. It should not be the ending point.

  • What are reserves?

    Reserve funds are money set aside for significant future repair and replacement expenses and deferred maintenance.


    A roof may last many years. A parking lot may last many years. Mechanical equipment may last many years. But eventually those components need significant work or replacement.


    Reserves allow the association to prepare financially before the bill arrives.

  • How much should an association keep in reserves?

    There is no universal dollar amount or percentage appropriate for every association.


    Illinois law identifies factors relevant to reasonable reserves, and associations frequently useprofessional reserve studies to help evaluate anticipated capital needs.


    The appropriate amount depends on the association's physical condition, components, projected repair and replacement costs, available funds and other circumstances.

  • Is a reserve study required?

    Boards should distinguish between the legal requirement to provide for reasonable reserves and whether a particular professional reserve study is mandated.


    Even when a study is not specifically required, a professionally prepared reserve study can be an extremely valuable planning tool.

  • Can owners vote to waive reserves?

    Applicable Illinois law provides mechanisms concerning waiver or reduction of reserve requirements in certain circumstances. Because reserve decisions can have significant long-term financial consequences, Boards should verify the applicable statutory requirements before proceeding.

  • Can reserve funds be used for operating expenses?

    This can create significant financial and legal issues.


    Before using money designated for reserves to address operating shortfalls, Boards should examinegoverning documents, applicable law, existing reserve obligations and the reason for the shortfall.


    Repeatedly raiding reserves to cover operations is often a symptom of an inadequate budget.