Illinois HOA Reserve Fund Laws and Reserve Study Requirements (2026 Guide)

How Illinois regulates HOA and condo reserves

Illinois does not have a single “reserve study law.” Instead, reserve obligations are spread across two main statutes:

• The Illinois Condominium Property Act (765 ILCS 605), which governs condominium associations.
• The Illinois Common Interest Community Association Act (765 ILCS 160), which governs most non-condo communities such as typical HOAs, townhome communities, and other common interest communities.

Both Acts treat reserves as a core part of an association’s financial structure. They require boards to think about long-term capital repairs and replacements and to be transparent with owners about how much is being set aside. However, neither Act currently sets a fixed dollar amount or percentage for reserves, nor do they require an association-wide reserve study to be performed on a set schedule. 

Are reserve studies required by law in Illinois?

As of late 2025, reserve studies are not mandated by Illinois statute for either condos or HOAs. Illinois law requires budgeting and maintaining reserves, but does not require a formal reserve study.

In practice, many boards still commission reserve studies because:

• Lenders and buyers increasingly ask about reserve adequacy and may review whether a study exists.
• Courts and owners expect boards to exercise informed judgment when deciding what constitutes “reasonable reserves.”
• A study gives the board an independent basis for its funding decisions and can reduce arguments about underfunding or surprise special assessments.

From a risk standpoint, operating without any reserve analysis is difficult to defend if a major component fails and owners challenge the board’s planning.

Condo reserve requirements under the Illinois Condominium Property Act

For condominium associations, Section 9 of the Illinois Condominium Property Act is central. It requires that annual budgets adopted by a condo board include “reasonable reserves for capital expenditures and deferred maintenance for repair or replacement of the common elements.” 

When setting what is “reasonable,” condo boards must consider at least the following statutory factors:

• The repair and replacement cost and estimated useful life of property the association must maintain (roofs, elevators, facades, mechanical systems, parking areas, etc.).
• The current and anticipated return on association funds.
• Any independent professional reserve study the association may obtain.
• The financial impact on owners and the market value of the units if assessments are increased to fund reserves.
• The association’s ability to obtain financing or refinancing for major projects.

The Act allows a condo association, in limited circumstances, to waive the “reasonable reserves” requirement if:

• The condominium instruments do not already require a specified reserve amount; and
• At least two-thirds of the unit owners vote to waive the requirement.

If owners waive the reserve requirement, that decision must be clearly disclosed in financial statements and to prospective purchasers, and unit owners generally cannot later sue the board for failing to maintain adequate reserves. 

For most Illinois condominiums, though, the safer path is to maintain robust, well-documented reserves and use a reserve study to justify the board’s decisions.

HOA and common interest community reserve rules under the CICAA

For non-condo communities, the Common Interest Community Association Act focuses on budget transparency and owner rights rather than a fixed “reserve formula.”

Section 1-45 (Finances) requires boards to:

• Deliver a copy of the proposed annual budget to each member at least 30 days, but not more than 60 days, before adoption.
• Clearly indicate which portions of the budget are intended for reserves, capital expenditures or repairs, or real estate taxes.
• Provide a detailed summary of receipts, common expenses, and reserves from the prior year.

The statute also gives owners in common interest communities a powerful check on oversized budgets. 

If the proposed budget (including separate assessments) would cause owners’ total payments to exceed 115 percent of the prior year’s total, 20 percent of the members can petition for a meeting, and a majority of all unit owners can vote to reject the budget. 

Although CICAA does not explicitly use the phrase “reasonable reserves,” Illinois law firms routinely interpret the combination of CICAA and the association’s governing documents as requiring boards to maintain reserves and keep them properly segregated, with the potential for liability if boards fail to itemize and manage reserves correctly. 

What is a reserve study for Illinois associations?

A reserve study is not defined in Illinois statutes, but in practice it is an independent analysis that:

• Lists the major common elements the association must repair or replace (roofs, windows, siding, elevators, mechanical systems, private roads, clubhouses, pools, etc.).
  
  
• Estimates the remaining useful life and replacement cost of each component.
  
  
• Builds a long-term funding plan that shows how much the association should set aside each year so that funds are available when components wear out.

Section 9 of the Condominium Property Act explicitly tells boards to consider “any independent professional reserve study which the association may obtain” when deciding on reserve levels. This makes reserve studies a recognized tool in Illinois law, even if they are not yet mandatory.

How much should Illinois associations keep in reserves?

Unfortunately, Illinois law does not set a specific percentage or dollar threshold for reserves. There is no statutory rule that, for example, “an HOA must keep 30 percent of its budget in reserves.”

Instead, the purpose of the legal reserve requirement is to ensure associations can pay for capital repairs and replacements of common elements over time, so owners who enjoy the use of the assets contribute fairly to their eventual replacement and the community avoids sudden, unmanageable special assessments. 

Practically, Illinois boards should:

• Use a reserve study (or at least a structured analysis) to estimate long-term capital needs.
• Ensure reserves are on a trajectory that will cover those needs without repeated emergency assessments.
• Document how the board applied the statutory factors (for condos) or considered the long-term financial health of the community (for HOAs) when approving the budget.

Many communities target funding levels that keep them broadly in line with reserve specialist recommendations and lender expectations, rather than chasing a rigid percentage.

How often should Illinois HOAs and condos update reserve planning?

Even without a statute, best practice in Illinois is to commission a full reserve study every three to five years and to update the funding plan annually as part of the budget process.

Recent proposed legislation, such as HB2563, would require associations over certain thresholds to obtain reserve studies at least every five years, but these bills have not been enacted as of November 2025 and remain in committee. 

That makes it even more important for boards to voluntarily adopt a schedule that demonstrates diligence:

• Full reserve study every 3-5 years.
• Annual review of actual reserve balances, upcoming projects, and any changes in costs.
• Interim adjustments when major projects, disasters, or unexpected inflation hits.

If your community is older, has complex infrastructure (e.g., elevators, parking garages, private roads), or has historically underfunded reserves, shorter refresh cycles are prudent.

Practical compliance checklist for Illinois boards

For boards searching for “Illinois HOA reserve fund laws” or “Illinois HOA budget,” the core steps look like this:

• Identify which statute governs your community. Condominiums are under the Condominium Property Act; most other planned communities fall under CICAA.
• Review your declaration and bylaws for any specific reserve requirements or minimums that go beyond the statute.
• For condos, document how the board considered the five statutory factors in Section 9 when setting reserve levels, and attach any independent reserve study to the meeting minutes.
• For HOAs and other CICs, ensure your proposed budget clearly identifies the reserve line item and that owners receive it 30-60 days before adoption, together with the required prior-year summary.
• Maintain reserves in a separate account with clear tracking of contributions, withdrawals, and balances.
• Communicate candidly with owners about whether reserves are adequate and what the plan is to close any shortfall (phased assessment increases, special assessments, or loans where permitted).
• Revisit your reserve plan annually and consider commissioning or updating a professional reserve study at least every 3-5 years.
  
  

How PropFusion and Illinois reserve professionals can help

Even though Illinois does not yet mandate reserve studies, boards that treat reserves as a living plan - not a line item - are much better positioned when costs rise or components fail.

PropFusion maintains a network of registered reserve study professionals who understand Illinois statutes, lender expectations, and the practical realities of budgeting for older Midwest buildings and communities. 

Through PropFusion, your board can:

• Request and compare multiple reserve study proposals for Illinois associations.
• Centralize your reserve study, funding plans, and scenarios in one platform.
• Model different funding strategies before you commit to assessment increases or special assessments.
• Keep historical studies and updates organized so future boards can see how decisions were made.

Combined with advice from your association’s attorney and accountant, a professional reserve study and PropFusion’s planning tools can help you meet Illinois reserve obligations, defend your decisions, and protect both property values and owner trust.

This guide is provided for informational purposes only and does not constitute legal advice. Associations should consult qualified Illinois legal counsel for advice on their specific situation.