Buying a Near North Side condo? The lobby can shine, the views can wow, but the building’s numbers decide whether your investment stays on track. You want walkability and amenities, but you also need confidence that the association funds its future. In this guide, you will learn which documents to request, how to read budgets and reserve studies, how to interpret special assessments, and which local red flags are common in Near North high-rises. Let’s dive in.
Documents to request
- Operating budget (current and prior 2–3 years): Shows income from assessments and fees, plus all recurring expenses, so you can see if the building lives within its means.
- Balance sheet and cash-flow statements: Reveal cash on hand, reserves, liabilities, and whether the association runs surpluses or deficits.
- Reserve study and reserve fund balance: Details major components, remaining useful lives, replacement costs, and a funding plan.
- Board meeting minutes (12–24 months): Surface planned projects, talk of assessments, legal matters, and delinquency trends.
- Special assessment history (5–10 years): Shows frequency, size, purpose, and per‑unit impact of past assessments.
- Delinquency report / AR aging: High delinquency can strain operations and increase the risk of future assessments or borrowing.
- Insurance master policy summary: Clarifies coverage and deductibles, which affect risk sharing after claims.
- Management and service contracts: Explain costs for management, elevators, HVAC, and other vendors.
- Capital plan, reserve funding policy, and engineering reports: Provide justification and timelines for major work.
- Litigation disclosures and municipal orders: Signal potential large, time‑sensitive expenses.
Read the operating budget
Start with the big categories. Typical lines include management fees, utilities, maintenance and repairs, building services payroll, elevator service, insurance, professional fees, reserve contributions, parking, and amenity operations. In Near North high‑rises, labor for front desk and security, elevator contracts, and amenity upkeep can be significant.
Look for a consistent operating surplus. A surplus means the association collects at least what it spends in a normal year. Repeated operating deficits that rely on reserve transfers or short‑term borrowing are a red flag because they often lead to higher assessments.
Scan for one‑time vs ongoing items. Large one‑time charges for capital work should be funded by reserves or a planned assessment, not hidden in operating lines year after year. Review year‑over‑year trends and ask for explanations for sudden spikes in insurance, legal fees, or repairs.
Check footnotes and reconciliations. Budgets should align with audited or reviewed financial statements, and footnotes often explain non‑cash items, transfers, or unusual events.
Reserves and reserve studies
A reserve study inventories major common elements like roofs, façades, elevators, boilers and chillers, windows and balconies, garages, and amenities. It estimates remaining useful life, replacement costs, and recommends annual funding.
Confirm frequency and currency. Best practice is an update every 1–3 years, with a full physical component inventory every few cycles. If the study is older than 3–5 years, cost and life estimates may be outdated.
Focus on funding levels. Many professionals use a “percent funded” metric, which compares the reserve balance to the estimated replacement needs at that point in time. Very low percent‑funded status increases the risk of special assessments or borrowing.
Compare the study to the budgeted reserve contribution. If the study recommends much higher annual funding than the budget provides, the building is underfunding and may need a special assessment later.
Reserve funds should cover capital replacements and major repairs, not routine operating expenses. If reserves are used to plug operating gaps, that signals a governance problem.
Funding methods vary. Associations can build reserves over time, levy special assessments, or borrow through loans or bonds. Borrowing spreads costs but introduces interest expense and may require owner votes based on governing documents. Ask who prepared the study, what assumptions were used, and whether an on‑site inspection informed the findings.
Understand special assessments
In Chicago high‑rises, common drivers include façade and masonry repairs, window and balcony replacements, mechanical or plumbing stack work, elevator modernization, roof and waterproofing projects, garage repairs, and emergency remediation after water or weather events. Code‑ordered work following inspections or municipal notices can also trigger urgent projects.
Assess the frequency and size. Occasional assessments for clear capital projects are normal. Frequent assessments every few years suggest chronic underfunding or deferred maintenance. Large and unexpected assessments that materially exceed typical transaction budgets warrant caution.
Review the purpose and documentation. Engineering reports and clear board minutes that explain the need are more reassuring than vague “emergency” language. Check how costs were collected and whether collections issues lingered.
Near North Side factors to watch
Building style affects costs:
- Prewar masonry high‑rises: Expect periodic façade, tuckpointing, window, and envelope projects, along with older mechanical systems.
- Midcentury towers: Watch balcony assemblies, elevators, and original mechanicals that may be due for replacement.
- Newer luxury towers: Modern curtain walls, complex mechanicals, and high‑end amenities raise both operating and capital needs.
Typical expense drivers include façade and waterproofing work, glazing and balcony membranes, elevator modernization, boiler and chiller projects, parking garage repairs, amenity upkeep, and staffing for security and front desk service. Master insurance policies in older or larger buildings may carry high deductibles, shifting more cost to owners for some claims and raising the risk of post‑claim assessments.
Lenders and programs can have project requirements for reserves, owner‑occupancy, and litigation. Buildings with funding shortfalls or large pending assessments may face underwriting hurdles. Ask your lender early whether the building fits the loan program you plan to use.
Chicago enforces building codes and can issue orders tied to façade, roof, or structural safety. Review board minutes and recent permits, and ask directly about any municipal notices or open violations.
Quick checklist and red flags
Documents to request before you get serious:
- Current budget and prior 2–3 years of budgets and financials
- Reserve study and reserve balance history
- Board minutes for the last 12–24 months
- List of special assessments for the last 5–10 years, with amounts and per‑unit impact
- Delinquency report, insurance summary, management contract
- Pending litigation disclosures and recent engineering reports
Red flags to watch:
- Very low reserves with an old or missing reserve study
- Reserve study recommends much higher annual funding than the budget provides
- Repeated special assessments or a recent large assessment with no plan to replenish reserves
- Operating deficits funded by reserve transfers
- High delinquency or weak collections policy
- Frequent board turnover, open litigation, or many unresolved complaints in minutes
- Large, vague “emergency” expenditures without engineering support
- Master policy with unusually high deductibles or limited coverage
- High percentage of rented units that could affect revenue stability and loan eligibility
Make sense of surprises:
- Legal fees spiked: Could be litigation, collections, or contract disputes. Ask for details and likely costs ahead.
- Elevator or mechanical costs doubled: May signal aging equipment near replacement. Check the reserve timeline for these components.
- Reserve contribution decreased: Ask why funding was reduced and how the board will meet upcoming capital needs.
Smart questions to ask management or the board:
- When was the last reserve study, and who prepared it?
- What major projects are planned in 1–5 years, and how will they be funded?
- What is the current owner‑occupied vs rented ratio?
- What is the delinquency rate and collections policy?
- Are there any municipal orders, building violations, or open litigation?
- How often are board meetings held, and may I review the last 24 months of minutes?
Extra due diligence:
- Ask your lender about the building’s fit for your loan program
- Have a condo attorney or experienced local agent review key documents
- Consider a targeted engineering consult if envelope or structure issues appear in the study or minutes
What this means for your offer
Your goal is a building that funds the future, not one that pushes costs to owners through frequent assessments. If reserves are healthy, the budget runs a surplus, and the project list is funded, you can write with confidence. If the study is outdated, funding trails the recommendations, or big projects lack a plan, use that information to negotiate, request credits, or walk away.
If you want a second set of eyes on a building’s financials or help sourcing the right documents before you bid, reach out to Luke Sandler for a focused condo consult tailored to the Near North Side.
FAQs
What is a condo reserve study in Near North high‑rises?
- A reserve study inventories major components, estimates useful life and replacement cost, and recommends annual funding to keep capital projects on track.
How much is “enough” in reserves for a Chicago condo building?
- Many pros look at percent funded, comparing the reserve balance to current replacement needs, and a low percentage signals higher risk of future assessments.
What if an HOA runs operating deficits year after year?
- Repeated deficits that rely on reserve transfers or borrowing are a red flag and often lead to higher assessments or fee increases.
How do special assessments impact buyers in the Near North Side?
- Frequent or large assessments can strain budgets, affect loan approval, and signal underfunding or deferred maintenance in the building.
Which documents should I review before making an offer on a Near North condo?
- Ask for budgets and financials, the reserve study and balance history, board minutes, special‑assessment history, delinquency report, insurance summary, and litigation disclosures.
Are high‑amenity buildings worth higher monthly assessments?
- Amenities add value for many buyers, but they also raise staffing, maintenance, and capital costs, so confirm funding in the budget and reserve plan before you commit.
