association would have commingled their operating and reserve funds. This commingling could lead to many issues.
association w rese
Reasonable Reserves and Reserve Study Requirements
We already discussed how important the reserve study is since this is the association’s plan for the future. The study lists the common area component inventory, useful life estimates and the repair and replacement costs over a 25- to 30-year period, typically. There is no Illinois law requirement to have a reserve study. The Illinois Condominium Property Act only states that you should have reasonable reserves and discusses how to determine if you have reasonable reserves, which basically is the definition of a reserve study. Check your bylaws and declaration to make sure if your association has a reserve study requirement and to determine what common elements the association is responsible for, in order to include them in your reserve study. Reserve studies should be done by a professional engineering firm to make sure that all the major common area components are included in the study and have reasonable estimations of useful lives and replacement costs.
Many times boards do not review the study when it is prepared by the engineering firm. Discuss the components in the study with the engineering firm to make sure all
necessary components are featured in the study, and ask questions of the firm who prepares the study. If boards perform their own reserve study, many times they will not include certain common area components for which the association is responsible. The reserve study is only a guide, but it is a guide that the board should be reviewing annually, especially at budget time and when planning future projects. It is also a good idea to have the study updated every 3-5 years, and particularly after a major repair or replacement project has been completed. Many associations have not done a reserve study in several years, and others not at all. This hints that the association may not have a plan in place to fund the repair or replacement of common area elements. If you are looking to buy a unit in an association, first visit the association so you can see the condition of the property. Then, review the financials and the reserve study to see how much is in reserves, if there are any large projects coming up, and if the association has sufficient funds to complete those projects or will they have to pass a special assessment to its owners in the near future.
the financials and in reserves, if there
d if the association projects or will they owners in the near
Funding Your Reservesves
The questions regarding how much an association should fund reserves each year and what is the right amount of reserves are difficult questions to answer. Even though the Federal Housing Association (FHA) has required approved
ciation should ht amoun
LOW COST CONDOMINIUM ASSOCIATION LOANS
No Prepayment Penalties • Fast Loan Approvals • Expertise • Flexible Terms and Conditions
If your association is in need of improvements, please contact Tim Haviland at 630.908.6708 or
thaviland@inlandbank.com
inlandbank.com
Subject to credit approval. 36 | COMMON INTEREST® • Fall 2020 • A Publication of CAI-Illinois Chapter
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56
