Changes to Illinois Homeowners’ Energy Policy Statement Act

The Illinois Homeowners’ Energy Policy Statement Act (765 ILCS 165/1 et. seq.) has been in effect for more than a decade. The general effect of the Act is that it grants certain rights to owners within different types of association communities related to solar energy systems. House Bill 0644, which passed both houses of the Illinois General Assembly as of May 30, 2021 and was signed into law by Governor Pritzker on July 26, 2021 as Public Act 102-0161 makes several significant changes to this Act that may affect how owners within association communities and/or boards of association communities approach solar energy systems. Below is a summary of the major changes to this Act made by Public Act 102-0161. These changes are now in effect.

Applicability to Condominiums and Townhomes

By definition, the Act still applies to condominium associations and townhome associations. However, the effect of the changes in Public Act 102-0161 is that the Act will no longer apply to the vast majority of condominium associations and townhome associations. Section 45 of the Act is changed to state that the Act does not apply to any building that is part of an association community and has a “shared roof”. The changes to the Act define a “shared roof” as “any roof that (i) serves more than one unit, including, but not limited to, a contiguous roof serving adjacent units, or (ii) is part of the common elements or common area”.

Therefore, to the extent that the roof is considered part of the common elements for a condominium (which is the case in most condominium associations), the Act no longer applies to that condominium. Additionally, to the extent that multiple townhome units in the same building share a roof and/or have a contiguous roof (which is the case in most townhome associations), the Act no longer applies to that townhome association. The effect of this is that any rights granted to owners within the Act to install solar energy systems on the roof do not apply to the owners within these townhome or condominium associations. Owners within such townhome and condominium associations would only have the right to install solar energy systems on the roof if, and to the extent, these are permitted by the association’s governing documents.

Location of Solar Energy Systems

For those associations where owners are still granted rights to install solar energy systems under the Act (i.e. most detached single-family homeowner associations), the rights of associations to regulate the placement of solar energy systems on the roofs has been significantly altered. Previously, the Act permitted associations to limit solar energy system installations to “an orientation to the south or within 45 degrees east or west of due south” as long as this did not “impair the effective operation of the solar energy system”. This location limitation has been removed from the Act.

Instead, the Act now permits an association to “determine the specific configuration of the elements of a solar energy system on a given roof face, provided that it may not prohibit elements of the system from being installed on any roof face and that any such determination may not reduce the production of the solar energy system by more than 10%.” As used in the Act, “production” means “the estimated annual electrical production of the solar energy system”.

Thus, associations may still adopt restrictions on where a solar energy system may be placed on a roof. However, in adopting such restrictions the association must take into account the impact these restrictions will have on the production of the solar energy system. A calculation will need to be made, and if the association’s proposed restrictions would reduce the production of the solar energy system by more than 10%, then the proposed restrictions would not be permitted by the Act. What this likely means is that a case-by-case analysis will be necessary with each solar energy system application from an owner to determine what impact, if any, the association’s proposed placement restrictions will have on the production of the solar energy system.

Deadline to Adopt Energy Policy Statement

The Act previously gave associations 120 days to adopt an energy policy statement following the receipt of a request for a copy of the statement or the receipt of an application from an owner to install a solar energy system. The changes to the Act now give associations only 90 days to adopt an energy policy statement following the receipt of either of these requests.

Deadline to Respond to Application for Solar Energy System

The Act previously gave associations 90 days to respond to an owner’s request to install a solar energy system. The changes to the Act now give associations only 75 days to respond to such a request from an owner.

Height Applicability

Previously, the Act stated that it did not apply to any building that was greater than 30 feet in height. The Act now states that it does not apply to any building that is greater than 60 feet in height. The effect of this change is that any homes that are between 30 and 60 feet in height were previously not subject to the Act but now are.

Summary and Conclusion

For most townhome and condominium associations, the changes to the Act mean that owners within these associations no longer have a right under the Act to install solar energy systems on the shared roofs. For associations falling into this category that previously adopted an energy policy statement, the changes to the Act may mean that those statements can now be rescinded.

For most detached single-family homeowner associations, on the other hand, the changes to the Act mean that any previously adopted energy policy statements now likely need to be revised to reflect the different analysis necessary in evaluating a request by an owner to install a solar energy system. Additionally, any such associations that have not previously adopted an energy policy statement now have a shorter window of time to do so upon the initial receipt of a request for such statement or application to install a solar energy system by an owner.

If your association is looking to adopt an energy policy statement or modify a previously adopted energy policy statement, please feel free to contact our office and one of our attorneys would be happy to assist you.

This article is being provided for informational purposes only. This article does not constitute legal advice on the part of Keay & Costello, P.C. or any of its attorneys. No association, board member or any other individual or entity should rely on this article as a basis for any action or actions. If you would like legal advice regarding any of the topics discussed in this article and/or recommended procedures for your association going forward, please contact our office.

General Background. The Just Housing Amendment (“JHA”) took effect in Cook County on January 1, 2020. The Cook County Commission of Human Rights was stayed from enforcement proceedings until after February 1, 2020. The JHA applies to all Cook County landlords, including condominium and homeowner associations. Please note that an association in possession of a dwelling as a result of eviction proceedings, as well as any association policy and/or rule regarding leases, must comply with the JHA.

The JHA was passed in an effort to reduce housing discrimination towards individuals with criminal histories. Prior to its passage, landlords were able to ask applicants a general question on having a criminal background. If an applicant answered in the affirmative, the landlord could deny the application. As of January 1, 2020, landlords, including associations as described above, are prohibited from denying an application based on such criteria. In order to deny an application based on an applicant’s criminal history, a landlord must perform a two-step application process, and even then, a landlord is limited to what criminal history can be used for denying the application. Please note that the JHA does not require landlords conduct criminal background checks. The JHA is triggered only if a landlord wants to conduct a criminal background check as a part of the application process.

Step One: Prequalification. Before a landlord (or association) can conduct a criminal background check, the landlord must evaluate an applicant’s income, rental history, credit score, employment, etc. Any inquiries into an applicant’s criminal background check during this step is prohibited. If an applicant does not satisfy the landlord’s prequalification requirements, then the application can be denied. If the applicant satisfies the prequalification requirements, then the landlord can conduct a criminal background check. Certain disclosures and notices must also be provided to the applicant before a landlord can accept an application fee.

Step Two: Criminal Background Check. After completion and satisfaction of Step One, a landlord can conduct a criminal background check and perform an “individualized assessment” of the results. Landlords are required to provide a copy of the results to the applicant. The applicant can dispute results of the background check if the application is denied. A landlord can only deny an application after conducting the individualized assessment. The denial is limited to criminal history dating back three (3) years and necessary to protect personal safety and/or property. Certain criminal histories are exempt from the JHA restriction.

Looking Ahead. Associations located in Cook County should review their governing documents, rules, and policies related to leasing to ensure compliance with the JHA. It is possible that an association’s current rules and policies do not comply with the JHA two step process. Further, an association’s rules and policies should be amended to include the JHA required disclosures and notices.

Landlords located in Cook County should review their lease applications to ensure compliance with the JHA. Certain questions frequently included on lease applications may not comply. If necessary, the lease application should be revised and include the required disclosures and notices.

Our office can assist your association’s compliance by offering the following:

  • Review and revision of current governing documents, rules, and policies related to leasing;
  • Review and revision of current applications and addenda;
  • Preparation of required disclosures, notices, and forms; and
  • General advice and guidance in navigating the JHA requirements.

 

For condominium association boards looking for ways to enhance property values and market their community to potential new buyers, having the condominium association approved for FHA-backed loans is potentially one of the most effective ways a board can go about this.  In order for a buyer using an FHA-backed loan to purchase a unit within a condominium, the condominium association first needs to be approved by HUD.  HUD’s initial approval is good for a two (2) year period, and must be renewed every two (2) years or else it will expire.  With required down payments as low as 3.5%, some estimates show that more than half of all first-time home purchasers use FHA-backed loans.  Thus, condominium associations that are not FHA approved are potentially losing out on a significant pool of potential home buyers. 

Initially, to clarify some common misconceptions regarding FHA-backed loans, these are not related to Section 8 or any type of low-income government subsidized housing program.  Rather, an FHA-backed loan is a loan given by a private lender that is insured by the federal government.  In some cases, FHA-backed loans can be used to purchase condominium units with a purchase price of over $400,000, and therefore these loans could potentially be used to purchase a high percentage of the condominium units available within the Chicagoland area. 

From a marketing standpoint, there are a number of potential benefits for a condominium association that come with being approved for FHA-backed loans.  FHA approval for condominium associations is only granted for a two (2) year period and must be renewed after that.  In determining whether or not to grant FHA approval to an association, HUD reviews certain association financial documents, delinquency information, owner occupancy rates, reserve contributions, and insurance information (among other items), and determines whether or not the association meets HUD’s minimum requirements for each of these items.  Associations that desire to remain FHA approved must go through this process every two (2) years.  Thus, receiving FHA approval can allow an association to market itself as having gone through HUD’s review process and having met HUD’s requirements.  This can also allow the association to potentially distinguish itself from neighboring associations that either have not gone through this process or have been deemed by HUD to not meet all of HUD’s requirements for FHA approval.

Another potential marketing benefit of being FHA approved is that this could allow an association to attract more buyers desiring to live within the community as opposed to investor owners.  FHA-backed loans are designed for home buyers who are looking to purchase the home as their primary residence.  In most cases, FHA-backed loans are not available for buyers desiring to purchase the home as an investment property.  Thus, being FHA approved may open an association up to a potential pool of buyers that are for the most part looking to buy a home to live in instead of rent out.

Furthermore, having an association approved for FHA-backed loans is a requirement for an owner within the association to obtain a FHA reverse mortgage (HECM).  Reverse mortgages have become a popular financial tool for some retirement-age home owners.  Therefore, whether or not an association is FHA approved could be a major factor for prospective buyers considering this reverse mortgage option in the future.

There are potentially other benefits to a condominium association being FHA approved as well, which is why many condominium association boards explore this option for their associations.  If your condominium association is considering applying for FHA approval or renewal of a current FHA approval and would like assistance with this process, please feel free to contact our office and one of our attorneys would be happy to assist you.

This article is being provided for informational purposes only.  This article does not constitute legal advice on the part of Keay & Costello, P.C. or any of its attorneys.  No association, board member or any other individual or entity should rely on this article as a basis for any action or actions.  If you would like legal advice regarding any of the topics discussed in this article and/or recommended procedures for your association going forward, please contact our office. 

HUD ANNOUNCES NEW FHA OWNER OCCUPANCY REQUIREMENTS

The U.S. Department of Housing and Urban Development (“HUD”), recently published Mortgagee Letter 2016-15, which modified the owner occupancy requirements for condominium associations seeking Federal Housing Administration (“FHA”) approval.  Prior to the adoption of Mortgagee Letter 2016-15, a condominium association with an owner occupancy rate of under fifty percent (50%) could not be granted FHA approval.  With the adoption of Mortgagee Letter 2016-15, however, condominium associations with owner occupancy rates as low as thirty-five percent (35%) may be eligible for FHA approval, provided they meet certain additional requirements.

Specifically, a condominium association with an owner occupancy rate between thirty-five percent (35%) and fifty percent (50%) may be eligible for FHA approval if it meets the following additional requirements:

 1.  The association’s financial documents (i.e. budget, balance sheet, and income and expense statement) provide for the funding of replacement reserves for capital expenditures and deferred maintenance at a level of at least twenty percent (20%) of the total annual budget for the association.

     For condominium associations with an owner occupancy rate of at least fifty percent (50%), the reserve contribution requirement is ten percent (10%) of the annual budget.  So, HUD’s minimum reserve contribution requirement for associations with under fifty percent (50%) owner occupancy rates is double the minimum reserve contribution requirement for associations with at least fifty percent (50%) owner occupancy rates.

2.  No more than ten percent (10%) of the total units in the association may be delinquent by more than sixty (60) days on assessment payments to the association.

     For condominium associations with an owner occupancy rate of at least fifty percent (50%), the delinquency requirement is that no more than fifteen percent (15%) of the total units in the association may be delinquent by more than sixty (60) days on assessment payments to the association.  So, HUD is requiring associations with under fifty percent (50%) owner occupancy rates to have significantly fewer units delinquent by more than sixty (60) days on assessment payments to the association then it requires for associations with at least fifty percent (50%) owner occupancy rates.

3.   The association must provide financial documents (i.e. budget, balance sheet, and income and expense statement) for the previous three (3) years.

      For condominium associations with an owner occupancy rate of at least fifty percent (50%), HUD requires only the current year budget, a balance sheet that is no more than ninety (90) days old, and an income and expense statement from the prior fiscal year end as well as one that is no more than ninety (90) days old.  Thus, HUD is requiring associations with under fifty percent (50%) owner occupancy rates to provide financial documents for two (2) additional prior fiscal years as compared to what it requires for associations with at least fifty percent (50%) owner occupancy rates.

4.   The association must apply for FHA approval through the HRAP process.

The HRAP process means the association submits its application directly to a HUD office for review.  Associations with at least fifty percent (50%) owner occupancy rates also have the ability to apply for FHA approval through the DELRAP process, whereby an authorized lender has the ability to grant the association FHA approval.  It would appear that the DELRAP process is not available for associations with under fifty percent (50%) owner occupancy rates.

 

These new owner occupancy requirements announced by HUD should permit additional condominium associations to obtain FHA approval, provided that an association with an owner occupancy rate between thirty-five percent (35%) and fifty percent (50%) can also meet the new financial requirements set forth by HUD.  If your condominium association is considering applying for FHA approval and would like assistance with this process, please feel free to contact our office and one of our attorneys would be happy to assist you.

This article is being provided for informational purposes only.  This article does not constitute legal advice on the part of Keay & Costello, P.C. or any of its attorneys.  No association, board member or any other individual or entity should rely on this article as a basis for any action or actions.  If you would like legal advice regarding any of the topics discussed in this article and/or recommended procedures for your association going forward, please contact our office.