The annual budget is the single most important document a condo board produces. It sets every owner's monthly assessment, funds the building's future through reserves, and — if handled carelessly — can be challenged by owners.
Illinois law is specific about how a budget gets adopted. Here's the process, step by step, with the statutory requirements from the Illinois Condominium Property Act, practical advice on building the numbers, and what owners should look for when the proposed budget arrives.
Before you start: gather the right information
A good budget is built from documents, not from last year's numbers plus a percentage. Before drafting, collect:
Year-to-date actuals and a projection of where the current year will end.
Current vendor contracts, including renewal dates and any built-in price escalators.
Insurance renewal estimates from your broker, including expected premium and deductible changes.
Utility usage and rate history for gas, electric, water and sewer.
The reserve study and any updates, including projects scheduled for next year.
The delinquency report, to estimate how much of next year's assessment income may go uncollected.
Any known one-time costs — a legal matter, an audit, an election, an engineering inspection.
Starting with this package in late summer makes the rest of the timeline much easier.
Step 1: Build a detailed proposed budget
Section 9(c)(1) requires the board to prepare a detailed proposed annual budget that sets out, "with particularity," all anticipated common expenses by category, plus all anticipated assessments and other income. It must also show each owner's proposed assessment.
A single line reading "Maintenance — $80,000" doesn't meet that standard. Break it down: janitorial, elevator contract, HVAC service, landscaping, snow removal, repairs.
Each owner's share is set by their percentage of ownership in the common elements under the declaration, unless the declaration allows certain costs — like insurance for particular units or expenses for limited common elements — to be allocated differently.
Typical budget categories
Most Illinois condo budgets include lines like these:
Income: regular assessments, laundry or parking income, late fees, move-in fees, interest on reserves, cell tower or rooftop lease income.
Administrative: management fee, accounting and audit, legal, postage and printing, bank fees, website or owner portal.
Insurance: property, general liability, directors and officers (D&O), fidelity, umbrella, workers' compensation.
Utilities: gas, electric, water and sewer, trash and recycling, telephone lines for elevators and alarms.
Contracts: janitorial, elevator maintenance, fire alarm monitoring and testing, HVAC service, landscaping, snow removal, pest control, security.
Repairs and maintenance: plumbing, electrical, doors and locks, painting, general repairs and supplies.
Payroll: if the building employs staff directly, wages, benefits and payroll taxes.
Reserve contribution: the planned transfer to the reserve fund.
Real estate taxes: if the association pays taxes on any common property.
Forecasting the big drivers
A few lines drive most budget increases, so spend the most time on them:
Insurance. Get a renewal estimate from your broker early, and budget for a realistic increase rather than hoping for a flat renewal.
Utilities. Use at least two years of usage history, and adjust for known rate changes.
Contracts. Read each contract for escalation clauses and renewal terms. A contract that renews automatically at a higher rate is a surprise you can avoid.
Snow removal. Budget for a typical Chicago-area winter, not the mildest one on record.
Bad debt. If some owners are consistently delinquent, a realistic allowance for uncollected assessments keeps the budget honest.
Consider a modest contingency
Many boards include a small contingency or "unanticipated repairs" line. It keeps minor surprises from turning into special assessments. The key is to label it clearly and keep it reasonable, so owners understand it isn't a hidden reserve.
Step 2: Fund reserves
Every budget must include reasonable reserves for capital expenditures and deferred maintenance (Section 9(c)(2)). The board should base the figure on the repair and replacement cost and useful life of the property, investment returns, any reserve study, the impact on owners, and the association's ability to borrow. See our guide to reserves for more detail.
Record in the minutes that the board considered these factors. It takes a few sentences and makes the reserve figure much easier to defend.
Step 3: Send owners the proposed budget at least 25 days before adoption
Section 18(a)(6) requires that every owner receive a copy of the proposed budget at least 25 days before the board adopts it. The copy must show which portions are intended for reserves, capital expenditures or repairs, and real estate taxes.
Work backward from your adoption date. If your fiscal year starts January 1 and you want to adopt in early December, the proposed budget needs to be in owners' hands in early November — which means the board should be finalizing drafts in October.
What to include in the budget packet
The law requires the budget itself, but a packet that explains the numbers heads off confusion. Consider including:
A cover letter from the board summarizing the overall change and the main reasons for it.
A side-by-side comparison of last year's budget, this year's projected actuals and next year's proposed budget.
A short explanation of any line that changes significantly.
A reserve summary showing the planned contribution and upcoming capital projects.
A table of proposed monthly assessments by unit or unit type.
The meeting notice for the adoption meeting.
Step 4: Give membership-meeting notice of the adoption meeting
The board meeting where the budget is adopted isn't an ordinary board meeting. Section 18(a)(8) requires owners to receive notice in the same manner as a membership meeting — written notice at least 10 and no more than 30 days in advance, stating the time, place and purpose.
You can often send the notice with the proposed budget, as long as the timing works for both requirements. For example, a packet sent 28 days before the meeting satisfies the 25-day budget rule and the 10-to-30-day notice window at the same time.
Step 5: Adopt the budget in an open meeting
Budget adoption must happen at a board meeting open to owners. Owners can attend, and they can record the proceedings (the board may set reasonable rules about how). Give owners an opportunity to ask questions — it's far better to hear objections at the meeting than in a petition three weeks later.
If the board makes changes to the proposed budget at the meeting, record them clearly in the minutes. Significant changes after the budget was distributed can raise questions, so discuss them with the association's attorney if they're substantial.
Step 6: Know the owners' petition right
If the adopted budget, combined with any special assessments, would raise total assessments for the year above 115% of last year's total, owners holding 20% of the votes can petition within 21 days for a meeting to reconsider it. The board must hold that meeting within 30 days of receiving the petition, and the budget stands unless a majority of the total votes of the association are cast to reject it.
A budget increase of 15% or less isn't subject to this petition at all.
Step 7: Notify owners of their new assessment
Once the budget is adopted, send each owner their new monthly (or quarterly) assessment amount, the effective date, and payment instructions. Update automatic payment amounts in the association's payment system, and remind owners who pay through their own bank's bill-pay to change the amount themselves.
Step 8: Deliver the year-end accounting
The budget cycle doesn't end with adoption. Under Section 18(a)(7), the board must give every owner an itemized accounting of the prior year's actual common expenses each year, showing reserves, capital expenditures, repairs and taxes, the amounts collected, and the net surplus or deficit.
Coming January 1, 2027: Public Act 104-797 updates this requirement to specify that the accounting includes receipts and expenses, and must be delivered electronically to owners who have given the association their contact information and authorized electronic delivery.
What to do with a surplus — or a deficit
Section 9(c)(5) gives the board clear options at year-end, unless the declaration and bylaws say otherwise. After any year-end audit is approved, a surplus may be:
1. Added to the reserve fund;
2. Returned to owners as a credit against remaining assessments for the current year;
3. Returned to owners as a direct payment; or
4. Kept in the operating account and credited when calculating next year's budget.
A deficit may be folded into the following year's budget.
Owners have a check here too. If 20% of owners deliver a petition objecting within 30 days of notice of the board's choice, the board must call a meeting within 30 days, and owners can select a different option — but only if a majority of the total votes are cast to do so. Otherwise the board's decision stands.
A sample timeline (calendar-year association)
August–September: Gather actuals, contracts, insurance estimates and the reserve study; collect bids; draft the budget.
October: Board reviews drafts; finalize the proposed budget and packet.
Early November: Mail or email the proposed budget and the adoption-meeting notice.
Early December (25+ days later): Adopt the budget at an open meeting.
By December 31: Notify owners of their new assessment amounts.
Late December / January: Watch for any petition within 21 days of adoption.
After year-end close: Deliver the itemized annual accounting and decide on any surplus.
Common mistakes
Sending the proposed budget fewer than 25 days before adoption.
Using 48-hour board-meeting notice instead of membership-meeting notice.
Lumping expenses into vague categories.
Budgeting zero or a token amount for reserves without a waiver vote.
Budgeting insurance or utilities flat when increases are known.
Ignoring contract escalation clauses.
Using reserves to balance the operating budget.
Forgetting the year-end accounting entirely.
For owners: how to read the proposed budget
When the proposed budget arrives, a few questions help you understand it:
What's the total change, and why? Look for the two or three lines driving most of the increase.
How much is going to reserves? Compare it to the reserve study's recommendation.
Are any capital projects planned? Ask whether they'll be paid from reserves or a special assessment.
Is the budget realistic? Compare the proposed figures to this year's projected actuals. A line budgeted far below what's actually being spent will create a deficit.
What's my new assessment? Confirm the amount and effective date.
Bring your questions to the adoption meeting, or send them to the manager in advance so the board can prepare answers.
Frequently asked questions
Does the board need owner approval to adopt the budget?
No. The board adopts the budget, but owners have a petition right if total assessments rise above 115% of the prior year.
Can the board adopt the budget at a regular board meeting?
Yes, as long as that meeting is noticed in the same manner as a membership meeting and the proposed budget went out at least 25 days earlier.
What if the budget isn't adopted before the new fiscal year?
Check your declaration and bylaws. Many provide that the prior year's assessment continues until a new budget is adopted. Talk with the association's attorney before billing owners at a new rate without a properly adopted budget.
Can owners see the documents behind the budget?
Owners have broad rights to association records under Section 19, including contracts and financial records.
The bottom line
The Illinois budget process is detailed but predictable. Boards that start early, build a genuinely itemized budget from real data, explain the numbers and hit each notice deadline will adopt a budget that holds up — and owners who understand what they're paying for.
Related reading:
How Much Should an Illinois Condo Association Keep in Reserves?
How to Tell Owners Their Condo Assessments Are Going Up
How to Read Your Condo Association's Financial Statements (Without a Finance Background)
Special Assessments in Illinois Condos: What the Board Can Do on Its Own, and When Owners Get a Vote
Pimmit Run Management builds budgets for Illinois condo associations from real vendor contracts and reserve data, and tracks every statutory deadline automatically. Contact us to see how budget season can be less stressful.
This article is general information, not legal advice. Your declaration and bylaws may add requirements; consult your association's attorney about your situation.
This article is general information, not legal advice. Consult your association's attorney about your specific situation.