TIME TO TAKE ADVANTAGE OF “USE OF TECHNOLOGY”

While it may seem trite to repeat this statement – our society is facing unprecedented times.    In 2014 when I (as the Co-Chairperson of the Illinois Legislative Action Committee of CAI) was negotiating changes to the Illinois Condominium Property Act and the Common Interest Community Association I could not have anticipated the events we are all are facing today.  However, both acts were modified in 2015, in various ways, including a provision titled “Use of Technology.”  I am recommending all board members and management carefully review the provisions of Section 18.8 of the Illinois Condominium Property Act and Section 1-85 of the Common Interest Community Association Act.    Subsection (b) of both 18.8 and 1-85 provides for the following:

(b)        The association, unit owners, and other persons entitled to occupy a unit may perform any obligation or exercise any right under any condominium instrument or any provision of this Act by use of acceptable technological means

Both acts define “acceptable technological means” to:

Include(s), without limitation, electronic transmission over the Internet or other network, whether by direct connection, intranet, telecopier, electronic mail, and any generally available technology that, by rule of the association, is deemed to provide reasonable security, reliability, identification, and verifiability.

If an association has not implemented any increased use of technology since these changes were adopted, it is time to heavily consider doing so.  Please discuss with counsel and management how to continue the business of the association by more effectively employing technology.    Going forward, this crisis should force each of us to review or procedures and protocols to determine whether we are using all the tools available to us.   The language regarding electronic voting has been in place since 2015 – is your association using it?   The statutes provide for electronic notices.  Have proper procedures been adopted to implement this method of communicating with owners and, more importantly, has the association encouraged such efforts?  Out of crisis grows opportunity.   Please use this situation as an opportunity to explore what can be done to allow the business of the association to continue moving forward, while we devote much of our personal time to the immediacy of our current global situation.  

Stay safe and take care of one another.   

COVID-19 VIRUS LEGAL UPDATE

March 15, 2020

As we proceed through this time of uncertainty the best advice (legal or otherwise) we have to offer is to continue to exercise common sense.    There are no health professionals at our office.  It is important to continue reviewing updates from federal, state and local health departments.  

One of the more prevalent health recommendations from the Center for Disease Control and Illinois Department of Public Health is to practice “social distancing.”  “Social distancing” includes the following:

  • Maintain a distance of approximately 6 feet from other individuals
  • Avoid public gatherings and crowds
  • Do not engage in contact with others such as shaking hands
  • Remain at home as much as possible

The greatest impact the social distancing recommendation will have on our community association clients concerns the use of common areas and attendance at meetings.  Again, we encourage a common-sense approach.   

Common Areas

Association clients should consider limiting or eliminating all unnecessary gatherings.  This may, at the discretion of the board of directors, include temporarily closing public gathering spaces.   Certainly, in the event someone within the community is diagnosed with COVID-19, the community should close public gathering areas such as a clubhouse or meeting rooms.    Common entry ways, stairwells, parking garages, and elevators must remain open to provide access to residents, but it is recommended that cleaning protocols be increased during this period of time.    

Further, residents who have either recently travelled abroad or been in contact with someone who has been diagnosed with COVID-19 should self-quarantine and avoid all common areas.    In the event the association or management becomes aware that someone has contracted the virus, we encourage the association to communicate this information to the other residents in a manner to protect the confidentiality of the resident.    DO NOT communicate unconfirmed or unreliable information.   DO NOT participate in gossip.    Misinformation will not help in getting through this crisis.    Before communicating any information to the residents, please consult with counsel.

Meetings

Consider whether the board meeting or owner meeting is absolutely necessary.   If the meeting is not necessary and can be postponed – PLEASE POSTPONE THE MEETING AND RESCHEDULE.  There is no need to strictly adhere to annual meeting dates.   The board will continue to serve until the meeting can be held.

Understanding both the Illinois Condominium Property Act and Common Interest Community Association Act provide “that every meeting of the board of managers shall be open to any unit owner,” we are encouraging our community association clients to temporarily consider redefining the term “open.”  Typically, we would think of the term “open” as requiring a public gathering.   Rather than encouraging public gatherings we are recommending our clients to make use of technology or phone conferencing to conduct meetings.   Understand that notices will need to be revised, however, this should not stand in the way of practicing safety amongst the members.     Under existing law, board members can already use technology to participate in meetings.    Please review the “Use of Technology” sections in both acts at this time to make the best use of the means already provided.     Again, seek counsel for additional guidance.

Finally, we encourage everyone to be patient with one another, use common sense and be cognizant that everyone is trying the best to navigate this unchartered territory.  The information herein is offered as of its date of publication and it may continue to change as we progress through this time of uncertainty.  

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 without confirming the advice.  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. 

 

OMNIBUS REVISION TO COMMON INTEREST COMMUNITY ASSOCIATION ACT AND ILLINOIS CONDOMINIUM PROPERTY ACT

With the recent votes in the Illinois Legislature, it appears that the current legislative session is coming to a close.   As of August 24, 2017 only one significant piece of community association legislation has passed both houses and was signed by the Governor.  PA-100-0292 (formerly HB0189) consolidated several other bills into a single omnibus act.  This article discusses the changes to both the Common Interest Community Association Act, and the Illinois Condominium Property Act, which are encompassed in this bill.

 COMMON INTEREST COMMUNITY ASSOCIATION ACT CHANGES 

  • Creates a New Section 1-20(e) involving amendments to governing documents. The language provides that approval or consent of a mortgage holder (if required by an association’s governing documents) can be implied if the mortgagee or lienholder receives notice of the proposed amendment and fails to respond after 60 days.    This change will allow associations whose membership has approved of an amendment to pass their agreed upon changes without being limited by lack of response from mortgagees or lienholders.
  • Creates a New Section 1-45 (i) which will require that any association with 100 or more units/homes use “generally accepted accounting principles (GAAP)” in fulfilling any statutory accounting obligations.

ILLINOIS CONDOMINIUM PROPERTY ACT CHANGES 

  • Creates a New Section 9(c)(5). Grants the board the authority (unless there are explicit terms and provisions to the contrary in the declaration and by-laws) at the end of any fiscal year, to dispose of surplus funds of the association by either: (1) contributing the surplus to reserves; (2) crediting the surplus against owners’ assessments; (3) returning the surplus as a direct payment to the owners; or (4) maintaining the funds in the operating account and applying such funds to the following year’s annual budget.  Additionally, the new language provides owners the ability to object to the board’s action regarding the surplus, similar to owners’ right to reject a budget or special assessment found in Section 18(a)(8) of the Act.
  • Amends Section 15 “Sale of property.” In the event the sale of the entire condominium property achieves the requisite percentage of vote, any unit owner who opposed such sale, and filed a written objection, would be entitled to the greater of the fair appraised value of the unit or the balance of any outstanding debt (mortgage/liens) against the unit.  Further, the new language provides that the objecting owner would also be entitled to receive a reimbursement for “reasonable relocation costs” as determined by federal law.  The changes to this section would apply to any pending contracts for sale of the entire property.
  • Amends Section 18(a)(8) of the Act. Currently the Act provides that owners shall have the right to object to any regular or special assessment increase, in excess of 115% of the prior year, by a petition signed by twenty percent (20%) of the votes of an association, and submitted to the board within 14 days of the action.  The change increases the amount of time to file such petition to 21 days.
  • Amends Section 18(a) (16) of the Act. Currently the Act provides that owners shall have the right to object to any contract entered into with a current board member, a board member’s immediate family or a company which the board member has a 25% or greater interest in, by filing a petition within 20 days of such action.  The change increases the amount of time to file such petition to 30 days.
  • Amends Section 18(b)(9)(C) of the Act. Currently the Act provides if the Board passes a rule eliminating proxies at an election and requiring the owners to vote by ballot, the owners shall have the right to object to such rule by filing a petition within 14 days of such action.  The change increases the amount of time to file such petition to 30 days.
  • Amends Section 18.4 (a) of the Act. Currently the Act provides that owners shall have the right to object to a capital improvement approved by the board in excess of 5% of the annual budget (not maintenance, repair or replacement of existing portions of the common elements) by petition signed by owners with twenty percent (20%) of the votes of the Association within 14 days of the action.  The change increases the amount of time to file such petition to 21 days.
  • Creates a new Section 18.10 of the Act which will require that any association with 100 or more units use “generally accepted accounting principles (GAAP)” in fulfilling any statutory accounting obligations.
  • Amends Section 19 “Records of the association; availability for examination” of the Act. The amendment is an attempt to permit owners greater access to records of an association.  Importantly records of an association must be made available within “10 business days” of receipt of the owner’s request to inspect.   Additionally, the amendment removed the portion of the statute which required a “proper purpose” to review certain records.   Further, the amendment includes permitting the inspection of owners’ email addresses and phone numbers, in addition to names and addresses.  However, the legislation provides that an association can require any member examining or copying records related to other owners’ information to certify that such information will not be used for a “commercial purpose.”  Finally, the amendment authorizes the board of directors to fine a member who violates the certification.
  • Amends Section 27 “Amendments.” The language provides that approval or consent of a mortgage holder (if required by the association’s governing documents) can be implied if the mortgagee or lienholder receives notice of the proposed amendment and fails to respond after 60 days.    This change will allow associations whose membership has approved of an amendment to pass their agreed upon changes without being limited by lack of response from mortgagees or lienholders.
  • Amends Section 31. The new language amends Section 31 (subdivision or combination of units) of the Act to define “combination of units.”  Importantly the new language establishes that in the event of a combination of units, use of limited common elements or common elements is not a diminution of other owners’ interest and, despite other language in the Act, shall not require the unanimous consent of all owners.

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. 

 

OMNIBUS HOUSE BILL 0189

With the recent votes in the Illinois Legislature, it appears that the current legislative session has come to a close.   As of July 10, 2017, only one significant piece of community association legislation has passed both houses.  HB0189 consolidated several other bills into a single omnibus bill.  This article discusses the changes to both the Common Interest Community Association Act, and the Illinois Condominium Property Act, which are encompassed in this bill.  It was sent to the Governor for signature on June 27, 2017.

COMMON INTEREST COMMUNITY ASSOCIATION ACT CHANGES 

  • Creates a New Section 1-20(e) involving amendments to governing documents. The language provides that approval or consent of a mortgage holder (if required by an association’s governing documents) can be implied if the mortgagee or lienholder receives notice of the proposed amendment and fails to respond after 60 days.    This change will allow associations whose membership has approved of an amendment to pass their agreed upon changes without being limited by lack of response from mortgagees or lienholders.
  • Creates a New Section 1-45 (i) which will require that any association with 100 or more units/homes use “generally accepted accounting principles (GAAP)” in fulfilling any statutory accounting obligations.

ILLINOIS CONDOMINIUM PROPERTY ACT CHANGES 

  • Creates a New Section 9(c)(5). Grants the board the authority (unless there are explicit terms and provisions to the contrary in the declaration and by-laws) at the end of any fiscal year, to dispose of surplus funds of the association by either: (1) contributing the surplus to reserves; (2) crediting the surplus against owners’ assessments; (3) returning the surplus as a direct payment to the owners; or (4) maintaining the funds in the operating account and applying such funds to the following year’s annual budget.  Additionally, the new language provides owners the ability to object to the board’s action regarding the surplus, similar to owners’ right to reject a budget or special assessment found in Section 18(a)(8) of the Act.
  • Amends Section 15 “Sale of property.” In the event the sale of the entire condominium property achieves the requisite percentage of vote, any unit owner who opposed such sale, and filed a written objection, would be entitled to the greater of the fair appraised value of the unit or the balance of any outstanding debt (mortgage/liens) against the unit.  Further, the new language provides that the objecting owner would also be entitled to receive a reimbursement for “reasonable relocation costs” as determined by federal law.  The changes to this section would apply to any pending contracts for sale of the entire property.
  • Amends Section 18(a)(8) of the Act. Currently the Act provides that owners shall have the right to object to any regular or special assessment increase, in excess of 115% of the prior year, by a petition signed by twenty percent (20%) of the votes of an association, and submitted to the board within 14 days of the action.  The change increases the amount of time to file such petition to 21 days.
  • Amends Section 18(a) (16) of the Act. Currently the Act provides that owners shall have the right to object to any contract entered into with a current board member, a board member’s immediate family or a company which the board member has a 25% or greater interest in, by filing a petition within 20 days of such action.  The change increases the amount of time to file such petition to 30 days.
  • Amends Section 18(b)(9)(C) of the Act. Currently the Act provides if the Board passes a rule eliminating proxies at an election and requiring the owners to vote by ballot, the owners shall have the right to object to such rule by filing a petition within 14 days of such action.  The change increases the amount of time to file such petition to 30 days.
  • Amends Section 18.4 (a) of the Act. Currently the Act provides that owners shall have the right to object to a capital improvement approved by the board in excess of 5% of the annual budget (not maintenance, repair or replacement of existing portions of the common elements) by petition signed by owners with twenty percent (20%) of the votes of the Association within 14 days of the action.  The change increases the amount of time to file such petition to 21 days.
  • Creates a new Section 18.10 of the Act which will require that any association with 100 or more units use “generally accepted accounting principles (GAAP)” in fulfilling any statutory accounting obligations.
  • Amends Section 19 “Records of the association; availability for examination” of the Act. The amendment is an attempt to permit owners greater access to records of an association.  Importantly records of an association must be made available within “10 business days” of receipt of the owner’s request to inspect.   Additionally, the amendment removed the portion of the statute which required a “proper purpose” to review certain records.   Further, the amendment includes permitting the inspection of owners’ email addresses and phone numbers, in addition to names and addresses.  However, the legislation provides that an association can require any member examining or copying records related to other owners’ information to certify that such information will not be used for a “commercial purpose.”  Finally, the amendment authorizes the board of directors to fine a member who violates the certification.
  • Amends Section 27 “Amendments.” The language provides that approval or consent of a mortgage holder (if required by the association’s governing documents) can be implied if the mortgagee or lienholder receives notice of the proposed amendment and fails to respond after 60 days.    This change will allow associations whose membership has approved of an amendment to pass their agreed upon changes without being limited by lack of response from mortgagees or lienholders.
  • Amends Section 31. The new language amends Section 31 (subdivision or combination of units) of the Act to define “combination of units.”  Importantly the new language establishes that in the event of a combination of units, use of limited common elements or common elements is not a diminution of other owners’ interest and, despite other language in the Act, shall not require the unanimous consent of all owners.

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. 

 

NEW LAW AMENDING THE CONDOMINIUM PROPERTY ACT CLARIFIES A BOARD OF DIRECTORS’ ABILITY TO SECURE LOANS

Public Act 099-0849 was signed into law by Governor Rauner on August 19, 2016.  The new law changes the Condominium Property Act to clarify the inconsistency in within Section 18.4 of the Act.  The amendment to Section 18.4 (m) of the Act permits boards of directors, by majority vote, to execute various bank documents to secure a loan on behalf of an association.  Currently the language of Section 18.4 (m) has a qualifier relating to the “condominium instruments” and there is a concern that some old condominium declarations and by-laws may require up to two-thirds of the owners to vote when either pledging an association’s assets or assigning future income.  This change makes it clear that a board of directors, without owner approval, by majority vote can assign future income of an association and pledge the assets of an association.

This change in the Condominium Property Act takes effect January 1, 2017.

 

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. 

 

 

On July 15, 2016 Governor Rauner signed two important pieces of legislation for the community association industry.

CLOSED PORTIONS OF MEETINGS/EXECUTIVE SESSIONS     P.A. 099-0567

Section 18(a)(9) of the Illinois Condominium Property Act and Sec. 1-40 Common Interest Community Association Act. Meetings.

The new law changes both the Condominium Property Act and the Common Interest Community Association Act to clarify what items may be discussed by a board of directors during the closed portion of a meeting or executive session meetings.  Importantly, the new law the specifies that board members can meet in a closed portion of a noticed meeting, or separate from a noticed meeting to discuss certain enumerated executive matters.  The act details that Boards may discuss engagement, interviewing and dismissal of employees, independent contractors, agent or providers of goods and services.    Finally, the law makes it clear the Board members can meet with legal counsel outside to the presence of an open meeting.

SUCCESSOR DEVELOPERS – P.A. 099-0569

Sec. 1-15 Common Interest Community Association Act and Sections 4.1 and 18.5 (j) Illinois Condominium Property Act

The new law changes both the Common Interest Community Association Act and the Condominium Property Act to require successor developers to obtain written assignment of developer (declarant) rights and to require the successor to record the assignment prior to it being effective.  This alleviates the situation where a bank or subsequent purchasers of undeveloped portions of an association contends “they are the new declarant” without having anything in writing.

 THE RETURN OF LEASING AND RESTRICTIONS AT ASOCIATIONS

As Illinois and the rest of the nation recovers from the crash of the residential real estate market, the issue of leasing restrictions has, again, arisen. Many associations having survived the onslaught of foreclosures are awaking to realize that the formerly owner occupied properties are quickly being bought up by groups of investors. Sometimes this has occurred over a number of years, but for some associations it seems like it happened overnight. Associations may quickly see the number of rental properties in their communities go from a comfortable five to ten percent, to a painful or problematic thirty percent.

The increase in rental units can be concerning to community associations for a myriad of reasons. When such concerns arise, boards and the owners have choices when it comes to who may occupy individual living units. The first choice to be made is whether leasing of units should be restricted in any fashion. If the answer to that question is yes, there are several leasing restriction options available for consideration. Whether an association chooses to allow leasing or not, it is important for boards and the owners to know their rights with respect to enacting leasing restrictions.

When an association decides to enact a leasing prohibition, either outright, with a grandfather clause or a cap, the association must determine whether to include such prohibition or restriction as a rule or by an amendment to the declaration containing a restrictive covenant. The difference between a rule and a covenant could determine the enforceability of the prohibition/restriction. In Illinois the seminal case on leasing restrictions is Apple II Condominium Association v. Worth Bank and Trust Co., 277 Ill.App.3d 345 (1st Dist. 1995).

The unit owners in Apple II were investment owners who purchased their property at a time when the association had no leasing restrictions. However, the appellate court stated that “neither the fact that there were no restrictions on the property when the [complaining unit owners] purchased their unit nor the fact that the [complaining unit owners] purchased the property for investment purposes is relevant.” Additionally, the court in Apple II acknowledged that while leasing restrictions put in place by rule are legal, courts will employ a greater level of scrutiny since the rule was adopted solely by a board and not the owners.

Once an association determines that a leasing amendment restriction would be beneficial to their community, a decision must be made as to the nature and extent of such a restriction. Does the association want to completely ban leasing of all units? Does the association want to limit leasing only to those units that are leased as of the time the amendment is passed? Does the association want to allow all current owners the opportunity to lease their units but prevent any subsequent purchasers from being able to enter into leases? Does the association want to impose a percentage cap?   Each of these decisions need to be carefully considered and properly documented in the language of any proposed amendment.

If a board and the owners at an association decide that restricting leasing of units would be beneficial to the association, the board should take several steps. First, the board should consult the association’s governing documents and review what they say about leasing. The next step the board and the owners must determine is the nature and extent of leasing restriction to be enacted. Finally, the best approach is for the board to propose an amendment to the governing documents and then have the proposed amendment voted on by the owners. While there are several options available to the board and the owners, it is up to the board and the owners to decide which leasing restriction best suits their community before it’s too late.

The 2014 Illinois Legislative Session was quite active for condominium and common interest community associations. Over nineteen (19) pieces of legislation were introduced effecting associations. A total of nine (9) pieces of legislation passed the House of Representatives and Senate and were sent the Governor for signature. Eight (8) new acts were signed by the Governor and the foreclosure legislation was vetoed with an amendatory veto. There was no override or approval of the amendatory veto and, accordingly, it failed.

The following a description of new public acts passed into law effective in 2015. Below each synopsis is a link to the actual legislation.

PUBLIC ACT 98-0996 LEASE OF UNITS AFTER POSSESSION. This act amends the Illinois Forcible Entry and Detainer Act regarding leasing of units by associations. The act provides that an association may enter into a lease at any time within 8 months of expiration of the stay on its possession order. The lease entered into, within that 8 month period, may not exceed 13 months. Currently the statute provides that the term of a lease entered into by an association cannot exceed 13 months following the expiration of the stay of the order of possession. Additionally, the amended language to the Act reflects that the court may, upon motion, extend the time to lease for additional 13 month periods.

This amendment to the Act will aid association in leasing units by affording more time to complete any necessary repairs and locate tenants. The act took effect January 1, 2015.

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=098-0996

PUBLIC ACT 098-1068 VOIDS CERTAIN DEVELOPER PROVISIONS IN CONDOMINIUM INSTRUMENTS. This act amends Section 9.1 of the Illinois Condominium Property Act. The act provides that any condition in a condominium instrument which either: (1) requires the prior consent of the unit owners in order for the board to take certain actions, including the institution of any action in court or a demand for a trial by jury; or (2) requires the board to arbitrate or mediate a dispute with a developer, declarant or any person not then a unit owner prior to litigation or a demand for a trial by jury – is void. This act effectively voids restrictions in governing documents that seek to thwart or place oppressive procedural hurdles upon an association’s pursuit of claims against the developer found in many declarations. The act took effect January 1, 2015.

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=098-1068

PUBLIC ACT 098-0735 ELECTRONIC NOTICE. This act amends Section 18.4 of the Illinois Condominium Property Act. For condominium associations this act supplements, the Electronic Voting Act discussed below. The act grants a board the power to adopt rules and regulations permitting electronic delivery of notices and other communications, but only upon an individual unit owner’s authorization. Additionally the act permits each unit owner to designate an electronic address, a U.S. Postal Service address, or both, as his or her contact information to be kept on the list of unit owners. This will be an important piece of legislation that will allow associations to take advantage of technology while satisfying the various notice requirements in the Condominium Property Act and the various governing document. The act took effect January 1, 2015.

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=098-0735

PUBLIC 098-1042 ELECTRONIC VOTING, NOTICE AND USE OF TECHNOLOGY. This bill, introduced by CAI, amends both the Illinois Condominium Property Act and the Common Interest Community Association Act. The bill permits boards to adopt rules and regulations concerning the use of acceptable, verifiable means of technology, including electronic means for unit owner notice, voting, signatures, consents and approvals. The bill establishes that electronic votes are valid and may be used for the purpose of establishing meeting quorums. The bill also provides that a verifiable electronic signature satisfies any requirements for signatures on documents. It acknowledges that if an owner either does not have the capability or desire to conduct business electronically, an association shall make reasonable accommodation, at its expense, for the person to conduct business without the use of electronic or other means. This act took effect January 1, 2015.

For a more thorough review of the act and its requirements please see our discussions of Public Act 098-1042 here.

http://www.ilga.gov/legislation/publicacts/98/PDF/098-1042.pdf

PUBLIC ACT 098-0762 AMENDMENTS TO INSURANCE REQUIREMENTS FOR CONDOMINIUMS. This act amends Section 12 of the Illinois Condominium Property Act regarding insurance requirements. The amendment to the act clarify issues regarding amount of coverage required for replacement costs of the insured property, defense costs obligations of condominium insurance and improvements and betterments coverage. The act provides greater specificity as to the types of defense coverage required under an association’s directors and officer’s liability policy. Additionally, the act will remove the right of an association to purchase mandatory owner insurance and charge the cost of such insurance back to the owner. This act takes effect June 1, 2015.

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=098-0762

PUBLIC ACT 098-0842 LEASING AND COMMON INTEREST ASSOCIATION. This act amends Section 1-35 of the Common Interest Community Association Act and adds a qualification to which leases must be provided to the association when a unit is not owner occupied. The new language of the law provides, “Unless otherwise provided in the community instruments” leases are required to be provided to the association. As such the act amends CICAA to allow associations to provide limitations in their instruments (declaration, by-laws or rules) on requiring owners to provide leases.  Generally, speaking this legislation will only have effect on an association if its board determines that it does not want copies of leases – which should be rare. This act took effect January 1, 2015.

http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=098-0842&GA=98

PUBLIC ACT 098-0966 PROCESS SERVERS IN GATED COMMUNITIES. This act amends Section 2-203 of the Illinois Code of Civil Procedure regarding service of process on individuals. The act, as amended, requires employees of “gated residential communities” (including condominiums, cooperatives and private communities) to permit entry to a process server (as defined under the Code) for the purposes of serving process on a defendant or witness who resides or is known to be in the community. This act takes effect January 1, 2015.

http://ilga.gov/legislation/publicacts/fulltext.asp?Name=098-0966

PUBLIC ACT 098-1135 Ombudsperson BILL. This act (amended several times after it was originally filed) creates an Office of Condominium and Common Interest Community Ombudsperson under the authority of Illinois Department of Financial and Professional Regulation. Starting July 1, 2018, the Ombudsperson would be charged with offering training, educational materials and courses to condominium unit owners, condominium associations and boards. This bill requires the Ombudsperson to maintain and post certain information on the Department’s website. The bill requires that by January 1, 2017 every association covered by the Act to create and enact an internal dispute resolution policy with forms for filing complaints, a timeline for the complaint process and a mechanism for deciding complaints. Commencing July 1, 2019 the Ombudsperson would be authorized to provide assistance to owners in resolving disputes with their associations. Participation in such dispute resolution would be entirety voluntary. Further, each association would be required to register with the Office of Ombudsperson. The registration will require a renewal every two years. There is no fee provided in the legislation for such registration. However, in the event that the Association either fails to initially register or fails to register a late fee can be imposed. In the event the Association fails to initially registered two years after the effective date or fails to renew its registration on three or more occasions, the association right to enforce its claim for unpaid assessments, would be suspend during the period of non-registration. Finally, the Office of the Ombudsperson would be required to submit every October (starting in 2020) a report to the General Assembly detailing the disputes the Office has been involved in between owners and associations.

This act takes effect January 1, 2016.

For a more thorough description of the legislation please see here.

http://ilga.gov/legislation/publicacts/fulltext.asp?Name=098-1135

PLEASE NOTE THE BELOW BILL DID NOT PASS

HB2664 – CONDOMINIUM FORECLOSURE BILL.

This bill sought to amend only the Illinois Condominium Property Act by changing condominium association’s right to collect unpaid common expense on foreclosed. While the bill increased the months from 6 to 9 the expansion would only apply to regular assessments and not to any other unpaid common expense. Further, while attorney fees and costs of collection can be charged to the third-party buyer, in no event can the total balance collected exceed an amount equal to 9 months of regular assessments. It was anticipated that in large part this would reduce the amounts associations would be able to recover following a foreclosure sale.

In addition, the bill amended Section 2 of the Act to include definition of “regular monthly assessments.” The bill would remove the “initiation of an action” prerequisite to collecting these amounts. Finally, the bill amends Section 22.1 of the Illinois Condominium Property Act and reduces the days an association (or its management company) has to respond to a request from a purchaser for information from 30 days to 14 days, if the association is managed. If the association is self-managed it has 21 days. Currently the law requires the information to be made available within 30 days. On April 8, 2014 this bill passed the entire Senate and was sent to the House. That following a heated debate, May 22, 2014 this bill passed the House with a slight majority. This bill was sent to the Governor for signature, however, the Governor issued an amendatory veto.

The Governor’s veto kept the language of the bill substantially intact, but added that any unpaid amounts not covered by the third-party purchaser in the payment of 9 months regular assessment would be paid by the mortgage holder. Effectively, the mortgage holder would need to make-up any unpaid amounts and the association, following the foreclosure, would be made whole. In vetoing the bill Governor Pat Quinn stated the following:

SB 2664 limits condominium associations from collecting more than the sum of nine months of regular monthly assessments from the purchaser of a foreclosed condominium.  Following the procedure in SB 2664 would force the rest of the homeowners in the condominium association to bear the costs of a foreclosure. While it is reasonable for a new homeowner to pay up to nine months of regular assessments when they purchase a property coming out of foreclosure, the lender who owns the mortgage should also contribute to the costs that the homeowners in a condominium association incur when a lender forecloses on a property.

On November 24, 2014, with no action taken on the bill, the bill died in the Senate.

Unfortunately many associations face difficulties when damages to common elements are discovered. Typically an association is compelled to bear the expenses of fixing or replacing the damaged common element. However, what if the damage is caused by a unit owner or associated with an individual unit? Most condominium declarations provide that the expenses incurred in repairing a common element damaged by a unit owner can be assessed against that owner or unit. A more unique question is encountered when the association cannot determine who caused the damage, yet the common element is either solely accessible by one unit or obviously under the control of a single unit.

One Association was faced with such a problem. The supporting members of a roof truss system had been removed in the attic space of a unit to seemingly create additional storage space. The roof trusses were defined as a common element but were accessible solely through the living space of a single unit. Due to safety concerns the Association notified the unit owner of the damage and requested that the trusses be repaired or replaced immediately. When he unit owner failed to undertake the repairs, the Association contracted to have the work performed. Following the repair of all the damaged roof trusses the Association assessed the unit owner’s account for the cost of repair. The unit owner refused to pay.

The Association instituted suit for reimbursement of the expenses for the repairs. The Association’s Declaration provided that all expenses incurred in repairing damage of common elements should be borne by the unit owner or unit causing such damage. Further, the Declaration provided that all covenants contained within the Declaration “run with the land,” meaning all impositions, obligations, and rights are transferred from owner to owner. While the Association could establish that the damage to the common elements was related solely to this unit, it could not determine or establish who removed the trusses or when they were removed. The Association argued that it need only prove the existence of the covenant and its breach to receive reimbursement. The current unit owners argued that they did not remove the trusses. The current owners contended that the Association should sue the prior unit owners who they contended had sold them the unit with the removed trusses.

The trial court determined that the Association could recoup its expenses from the current unit owner. The obligation to pay for repairs to the common elements, related solely to this unit, was an obligation of the current unit owner. Accordingly, a judgment for the entire amount of the repair work was awarded against the unit owner. Additionally, the trial court, in accordance with the Declaration, awarded attorneys fees in favor of the Association and against the unit owner.

The unit owner appealed the trial court’s decision to the appellate court. The appellate court affirmed the trial court’s ruling (in an unpublished opinion) and held in favor of the Association. On appeal the unit owner argued that the trial court, in effect, imposed strict liability without requiring the Association to establish that the current owners caused damage to the trusses. In response, the appellate court stated that “the existence of a covenant and the existence of a breach are the relevant issues in this type of case; once the covenant and breach are established, enforcement is entitled.”

This decision is particularly beneficial to associations in that it recognizes the mechanism of recovery for damage to common elements. Similarly, the decision stands for the proposition that new unit owners, by virtue of their ownership, assume all responsibilities and obligations which could have been assessed against the prior owners. If the prior owner damaged the association’s property within the unit, the new owner can be held responsible for the costs and expenses. Similarly if the prior unit owners had failed to pay all of their assessments, the new unit owner would be responsible for bringing the account current. Moreover, the association is not required to pick up the tab for the repair work merely because the unit may have been transferred since the damage was done.

Subsequent to the sale of the unit in the case described above, in 1991, the Illinois General Assembly passed a law which may have some impact on Associations and repairs or alterations to common elements. The statute, 765 ILCS 605/22.1(a), requires the Board of Managers to provide several statements when a unit owner, other than the developer, decides to sell his or her property. One of the required statements that the Board must make is that “any improvements or alterations made to the unit, or the limited common elements assigned thereto, by the prior unit owner are in good faith believed to be in compliance with the condominium instruments.” (765 ILCS 605/22.1(a)(8)). The burden is on the unit owner selling the unit to request these statements from the Board in writing. But after the request is made to the Board, the Board is required to furnish the statements to the unit owner within 30 days. The burden is then on the prospective purchaser of the unit to demand the Board’s statements from the seller to whom the Association provided the information.

With this in mind, it is important to note that the Board is not required to automatically provide a statement under 765 ILCS 605/22.1(a)(8) every time a unit is sold. Rather, the Board’s issuance of a statement is dependent upon several occurrences. First, the prospective purchaser of a unit must request a statement by the Board from the current unit owner. The current owner must then request the statement from the Board. If these two events occur, then the Board must provide the required statement to the current unit owner within 30 days. If either of these events do not occur, then the Board is not required to make a statement for that particular unit.

For each instance that the Board is requested to make a required statement, the Board should take certain steps to make sure that it complies with the Illinois Condominium Property Act when it makes the required statements. If the Board is making a statement regarding alterations or improvements, then it should make an inspection of the unit. In inspecting the unit, the Board should look for all alterations or improvements made in the unit and the limited common elements assigned to the unit. The Board should ascertain whether or not each alteration or improvement complies with the Association instruments. In its required statement, the Board should clearly identify each and every alteration or improvement in the unit or limited common element which the Board in good faith believes does not comply with the Association instruments.

Accordingly, as Ben Franklin once wrote, “[a]n ounce of prevention is worth a pound of cure.” If prospective buyers require that all the applicable disclosures under 765 ILCS 605/22.1 be complied with, the described situation could be avoided. Additionally, if an Association is making an affirmative representation about alterations or improvements, it should make sure that either no alterations have been made or that any alterations are in compliance with the governing documents. Otherwise, despite language in the declaration which may hold a unit owner responsible, the association, not the owner, would be responsible to repair or replace the damaged common elements.

As any person who has served on their association’s board of directors can tell you, it is a thankless job. While you are required to undertake the business of a not-for-profit corporation and assume fiduciary responsibilities to the other unit owners, you receive no form of compensation or special treatment. Furthermore, what you do get is panoply of responsibilities, phone calls and headaches. Unfortunately, most of the education is on the job training. With this in mind, what happens when the members of the association, beyond the typical complaints and disagreements, decides to “remove” you from the board of directors. Some would say, “If you want the job it’s yours.” However, others might not so readily turn the business of the association over to those with opposing viewpoints.

Section 18(a) (4) of the Illinois Condominium Property Act requires that the bylaws of an association must provide for a method of removal from office of the members of the board of managers. (765 ILCS 605/18(a) (4)). Each association should examine their respective bylaws to determine the “method” applicable to their board. Additional concerns associated with removal are notice provisions, voting and proxy requirements, quorum and reelection procedures.

Typically, the board does not “call” a meeting, on its own initiative, for the removal of the Board. The first hurdle in removing a board or board member it scheduling and calling the meeting. Section 18(b) (5) provides that “special meetings of the members (usually where a board member would be removed) can be called by the president, board of managers or by 20% of unit owners.” The unit owners seeking the removal of a board member or the entire board would then petition the president of the board, with signatures representing 20% of the ownership, to call a special meeting for the purposes of removal. The “Notice” of the special meeting must be mailed or delivered to all the unit owners no more than 30 and at least 10 days prior to the meeting. (Sec. 18 (b) (6)).

The second hurdle to overcome is obtaining sufficient attendance at the meeting, either by person or proxy, to constitute a quorum. If a quorum is not present, the meeting will not and cannot proceed. When a quorum is established, the bylaws should be followed to vote on the removal. An obvious method of gaining a sufficient number of votes is through the use of proxies. As any unit owner who regularly attends meetings is aware, most of your neighbors do not attend in person. Proxies can be used to secure the necessary votes either in favor or against the removal. It is important that the proxies are properly prepared in order to be considered valid. The proxy must name a proxy holder who will be present at the meeting. Additionally, the proxy should acknowledge whether the proxy holder is instructed to vote a certain way or whether the proxy holder can use the vote however he or she sees fit. Further, the proxies should be dated and contain the unit owner’s name and address for proper balloting.

A final concern is after the vote is taken; there must be a method to replace the removed members on the board. Section 18(a) (13) of the Act requires that bylaws provide for a method of filling vacancies on the board which must include authority for remaining board members to fill the vacant positions by two-thirds vote. The member elected to fill the vacant position will hold that position until the next annual meeting, unless the unit owners again petition the board to call a special meeting to fill the vacancy for the remaining term. This petition must be delivered to the board within 30 days of the vacancy and must be signed by at least 20% of the ownership. The meeting to fill the vacancy then must be called within 30 days.

An interesting concern is where the entire board is removed. In such a situation there are no remaining board members to fill the vacancy. Therefore, members must be ready to nominate other members to serve on the board. Members also should be prepared with the necessary proxies to cast votes for new board members. The bylaws should be carefully reviewed to examine both the nominating procedures and voting procedures for strict compliance.

Overall, the process of removing members from the board of managers is sophisticated and technical. Failure to follow any of the steps can result in the invalidity of either the removal or the subsequent election. A thorough understanding of the bylaws and the procedures required is imperative in protecting both the validity of the removal and preserving the rights of all the members of the Association.