Can Owners Reject a Budget That Raises Reserves? Illinois's 115 Percent Rule

Every fall, some Illinois boards face the same arithmetic. The reserve fund is thin, the roof or the elevator is close to the end of its life, and the honest reserve contribution would push assessments up sharply. Owners have a statutory tool to push back, and boards should know exactly how it works before the proposed budget goes out.

The rule in the Condominium Property Act

Section 18(a)(8) of the Condominium Property Act (765 ILCS 605/18) covers the case where an adopted budget, or a separate or special assessment, would make the total of all assessments payable in the current fiscal year exceed 115 percent of the total payable in the previous fiscal year.

When that happens:

• owners holding 20 percent of the votes may deliver a written petition to the board within 14 days of the board’s action;
• the board must then call a meeting of owners within 30 days of receiving the petition;
• the budget or assessment is ratified unless a majority of the total votes is cast at that meeting to reject it.

Note the last point. Rejection needs a majority of all the votes in the association, not just of those who attend. A petition is easier to start than to win.

Homeowner associations: the same idea in the CICAA

Townhome and single-family HOAs covered by the Common Interest Community Association Act have a matching provision in Section 1-45 (765 ILCS 160/1-45), with the same 115 percent threshold, the 20 percent petition and the 14 and 30 day deadlines. The proposed budget there has to reach members 30 to 60 days before adoption, against 25 to 30 days for condos.

What does not count

Section 18 sets out exceptions, for example separate assessments for emergencies or for work the association is required by law to do. Whether a particular assessment falls inside an exception is a legal question about your facts. Ask the association’s attorney before relying on one, because a board that guesses wrong invites exactly the meeting it hoped to avoid.

Why this matters for reserves

Section 9(c) of the same Act requires condo budgets to provide reasonable reserves, and one of the factors the board must weigh is the financial impact on owners of any increase in assessments. The 115 percent rule is that factor with teeth. A board that has under-reserved for years cannot always fix it in a single budget without inviting a petition.

The practical answer is to plan the catch-up. A good Illinois reserve study shows the contribution needed to keep the fund healthy, and can be run with a phased schedule: say, a larger step this year, then smaller steps over the next few, staying under the threshold each time while major replacements are still some years off. If a large project is close, the study helps the board explain why a bigger increase, or a special assessment, cannot wait.

A checklist for the budget meeting

1. Run the numbers early. Before the proposed budget goes out, work out whether the year’s total assessments, including any special assessment, will pass 115 percent of last year’s.
2. If they will, decide whether to phase the increase, and write down why the board chose the path it did.
3. Send the proposed budget with a short explanation of the reserve line and the study behind it. Owners who understand a roof schedule rarely petition against it.
4. Keep the study’s component list to hand at the meeting. Specific questions get specific answers.
5. If a petition arrives, put the 30 day deadline in the calendar straight away and call the meeting properly.

None of this replaces your attorney’s advice on the declaration and the Act. It does mean the reserve line arrives at the budget meeting with its reasons attached, which is what Illinois law asks for in the first place.