HB 2563: New Illinois Legislation May Require Condo and HOA Reserve Studies Every 5 Years

HB 2563: New Illinois Legislation May Require Condo and HOA Reserve Studies Every 5 Years

Illinois’ 2025 legislative session began January 8 and adjourned May 31. Nearly 7,900 bills were introduced during the 2025 session. HB 2563/SB 1703 is legislation that would require condominium associations governed under the Illinois Condominium Property Act (765 ILCS 605/1 et. seq) and homeowners associations governed under the Illinois Common Interest Community Association Act (765 ILCS 160/1 et. seq) with major shared components to conduct and update a reserve study every 5 years. This potential legislation was re-referred to the Rules Committee at the end of the session, indicating that the bill needs further review. This blog article will discuss HB 2563 and its potential impact on community associations if passed.

Potential Changes to Illinois Condominium Property Act and Common Interest Community Association Act

HB 2563 would (i) add a new Section 1-32 to the Common Interest Community Association Act, (ii) amend 765 ILCS 160/1-35 of the Common Interest Community Association Act, (iii) add subsection (k) to 765 ILCS 605/18.5, and (iv) amend 765 ILCS 605/22.1 of the Illinois Condominium Property Act.

HB 2563 would provide that a community association with “major shared components or significant infrastructure” must have a reserve study conducted. Under HB 2563, “major shared components or significant infrastructure” is defined as:

[S]tructural, mechanical, electrical, and plumbing components of the common areas and any other components that are the responsibility of the association to maintain, restore, repair, and replace, or infrastructure, including, but not limited to, roads, street lighting, hardscape, landscape, ponds and lakes, water features, pools, and accessory buildings, if applicable, with a restoration or replacement cost exceeding $10,000, which are capital expenses as identified in the federal tax code and generally accepted accounting principles.

HB 2563 defines “reserve study” as an analysis of the reserves required for future major maintenance, repairs, and replacements of common elements and common areas.

HB 2563 provides the following qualifications for professionals who may conduct reserve studies:

The reserve study and any update thereof shall be conducted by a qualified person, association, organization, or business entity who is knowledgeable about the major shared components or significant infrastructure that will be the subject of the reserve study. A qualified person, association, organization, or business entity is one who has experience and knowledge about the normal useful life, function, performance, condition, maintenance, repair, and replacement, and related expenses, of any one or more of the major shared components or significant infrastructure that will be the subject of the reserve study. The reserve study is not required to be conducted by a single person, association, organization, or business entity. An association may internally prepare a reserve study provided that such a reserve study compiles information from a qualified person, association, organization, or business entity.

Under HB 2563, a community association with major shared components or significant infrastructure that has had a reserve study conducted after January 1, 2024, must have an updated reserve study performed within 5 years after the reserve study was conducted. Meanwhile, a community association with major shared components or significant infrastructure that hasn’t had a reserve study performed since January 1, 2024, must have a reserve study performed on or before January 1, 2028.

Under HB 2563, a copy of the reserve study must be made available to a prospective purchaser in the event of a resale of a unit under the Common Interest Community Association Act and the Illinois Condominium Property Act. Lastly, HB 2563 exempts the reserve study requirements for community associations with 15 or fewer units.

Key Takeaways for Illinois Condominium Associations and Homeowners Associations

1. Community associations with major shared components or significant infrastructure must conduct a reserve study.
2. Community associations should be aware of the timing requirements:
   • If a study has been done on or after January 1, 2024, a new or updated study must occur within five years of that study, and every five years thereafter.
   • If no reserve study exists since January 1, 2024, one must be completed by January 1, 2028, then updated every five years.
3. Use qualified professionals: Reserve studies must be prepared or compiled by someone experienced in evaluating the useful life and replacement costs of relevant components.
4. Provide transparency during resales: On resale, the most recent reserve study must be made available to potential buyers upon request.
5. Exempt small communities: Associations with 15 or fewer units are exempt from the study requirement, but must still comply with budgeting and financial obligations elsewhere in the Common Interest Community Association Act and the Illinois Condominium Property Act.

How Illinois Condominium Associations and Homeowners Associations can Prepare for HB 2563

1. Develop a Five-Year Cycle

Boards must start planning now. If an association had a reserve study done in 2024 or later, it must be renewed before its fifth anniversary. If no study exists, the association has until January 1, 2028, to perform one. After that, the cycle will be updated every five years.

2. Board accountability

If passed, HB 2563 will require the community association board of directors to conduct a reserve study. Association boards should begin budgeting to ensure they can afford this. Failing to conduct a reserve study could expose boards to legal liability.

3. Integrate resale disclosures

If passed, community associations must provide a copy of the reserve study to the prospective purchaser upon request. Community associations should begin preparing for this scenario.

4. Update governing documents

Though HB 2563 automatically amends the Common Interest Community Association Act and the Illinois Condominium Property Act, boards should ensure their governing documents reflect these new legal obligations.

Conclusion

HB 2563 has not been signed into law and has been re-referred to the Rules Committee at the end of the session, indicating that the bill needs further review. However, if HB 2563 is passed, community associations will be mandated to conduct a reserve study. Community associations should begin preparing for this by properly budgeting to ensure they have adequate financial resources to hire a qualified reserve study company. Even if HB 2563 is not passed, community associations should still conduct a reserve study to determine the financial and physical health of the association’s major components.

The attorneys at Hirzel Law, PLC, are experienced community association attorneys who can assist in finding reputable professionals to conduct a reserve study for your association.

 

Jeremy Fernando is an Associate Attorney at Hirzel Law, PLC., Mr. Fernando is licensed to practice law in the State of Illinois. He concentrates his practice on community association law, condominium law, homeowners association law, and real estate law. Mr. Fernando’s legal career includes serving in corporate practice where he represented insurance companies and institutional investors in U.S. and cross-border private placements of securities, including transactions in the Netherlands, England, Ireland, Australia, and Germany. Mr. Fernando earned his Juris Doctor from Marquette University Law School, where he graduated with honors and ranked in the top 15% of his class. He also served as an Associate Editor of the Marquette Law Review. Mr. Fernando is committed to providing effective legal representation to his clients and is passionate about helping communities navigate complex legal challenges. He may be reached at 312-552-7669 or jfernando@hirzellaw.com.