Q&A: Are Voluntary Contributions OK?

Q I am the secretary of a recently formed condo association board in a mid-sized building (93 units) on the South Side. Due to circumstances I'm sure are common, what money we have is barely sufficient to manage the status quo, including contributions to the reserve fund.

Nevertheless, we are fortunate to have owners who are enthusiastic about improving certain aspects of the building. So, the question is: Can the board accept voluntary contributions of money and/or labor from willing owners to accomplish projects for which there is no money in the budget, such as repainting the fitness room and replacing a shabby piece of lawn around the front entrance to the building, without creating a second class of owners and/or liability issues?

—A Helping Hand

A “The response is 'Yes', but with a number of cautionary comments,” says Chicago-based attorney Michael C. Kim of the law firm of Michael C. Kim & Associates. First, if the association has “barely sufficient” funds to manage its operations and maintain the physical condition of a condominium property, the board of directors must seriously review the financial needs of the property and revise the annual budget to provide adequate funds for ongoing maintenance requirements as well as a reserve fund for long term capital needs (in that regard, I suggest obtaining a reserve study to evaluate the condition of the property and its likely repair needs in the next 5, 10 and 15/20 year time frames). Alternatively, if the association (in particular, its members) simply cannot afford to maintain the property despite the recommended financial review, then the association must seriously consider modifying its functions so as to curtail or even eliminate certain financial demands (for example, eliminating certain amenities).

“Second, the board can accept voluntary contributions of money and/or labor from unit owners to accomplish projects which are not being funded by the association. You should check with your association accountant as to whether any cash contributions may be subject to income taxation. The making of such voluntary contributions does not create a “second class of owners.”

“Finally, if unit owners are volunteering their own labor to perform projects on the association property, you should check with the association’s insurance agent as to whether any injury suffered by a volunteer or caused by a volunteer to another would be covered under the association’s liability insurance coverage; and even if covered, the board may wish to consider requiring such volunteers to sign a waiver of liability and indemnity to the association with respect to their work on the property.

“While volunteerism is a positive aspect of community living, the board must be mindful of the fundamental need to organize its finances without having to depend significantly on the “kindness” of its members and should take reasonable steps to address possible liability concerns even with volunteer workers.”

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