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TIME TO UPDATE RULES AND REGULATIONS REGARDING

CONDOMINIUM ASSOCIATION RECORD REQUESTS AND USES FOR COMMERCIAL PURPOSES

With the adoption of Public Act 100-0292, which will take effect on January 1, 2018, several significant changes will take place with respect to the rights of owners within condominium associations to inspect and copy records of a condominium association as outlined in the Condominium Property Act (765 ILCS 605/19).  One significant change that will occur is that owners will be entitled to obtain from their condominium association the e-mail addresses and telephone numbers of their fellow owners, in addition to those owners’ names and addresses.  Accordingly, it is important for condominium association boards to review their procedures for handling such requests.

An owner requesting the names, addresses, e-mail addresses and telephone numbers of their fellow owners, as well as requesting to see copies of ballots and proxies from recent owner votes, may only make such a request for a purpose that relates to the association.  To help make sure that owners are not requesting this information for purposes unrelated to the association, Section 19(e) of the Condominium Property Act provides that a condominium association may require an owner requesting this information to certify in writing that the information contained in the records will not be used by the owner for any commercial purpose or any other purpose that does not relate to the association.  Additionally, condominium association boards of directors are authorized to establish and impose a fine against any owner that makes a false certification.

Therefore, in anticipation of these statutory changes that will take effect on January 1, 2018, condominium association boards may want to consider taking a couple of steps before then.  The first step a condominium association board should consider taking is establishing a standard written certification form they will require any owner requesting the aforementioned information to fill out.

The second step a condominium association board should consider is adopting a fine structure that they will impose on any owner that make a false certification and uses the information provided by the condominium association for commercial purposes or other purposes unrelated to the association.  While the Condominium Property Act permits an association board to fine owners for making such a false certification, in order to impose a fine a board must first take the steps necessary to vote to establish and adopt a fine for this purpose.  While the statutory changes will not take effect until January 1, 2018, boards can act now to put a fine structure in place prior to January 1, 2018.

If your condominium association has questions about the changes that will take effect on January 1, 2018 and/or would like assistance in preparing a certification form and/or fine structure as outlined in this article, 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. 

 

 

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. 

 

 

THE OMBUDSPERSON:  2016 AMENDMENTS AND UPDATE

On August 12, 2016 Governor Rauner signed Public Act 99-0776 which makes several significant changes to the original Ombudsperson Act.  This article will provide quick highlights of certain changes contained in P.A. 99-0776.

Registration of Community Associations

Critical to all associations, the requirement that all common interest communities and condominium associations register with the Department of Financial and Professional Regulations has been removed.  No registration is required.

Association Internal Dispute Resolution Policies

All associations subject to the Condominium Property Act and the Common Interest Community Association Act must adopt their own policies for resolving complaints made by owners no later than January 1, 2019.  The original bill required the policies to be in place by January 1, 2017 so associations have been afforded two additional years to develop these policies.  The Act current provides that these policies must include a form on which an owner may make the complaint, a description of the process by which the complaint must be submitted, the timeline in which the Association will resolve the complaint, and the requirement that the Association make its “final” decision within 180 days.

The Current Role of the Ombudsperson

No later than July 1, 2017, the ombudsperson is to begin offering training, outreach and educational materials to the public and it may also offer courses related to the management and operation of community associations, the Condominium Property Act and the Common Interest Community Association Act.  The ombudsperson is to also offer a toll-free number for contact and inquiry purposes in addition to providing information regarding alternative dispute resolution providers (arbitrators, mediators) and methods available to communities and their members.  The ombudsperson does not have authority to consider any matters involving claims under the Illinois Human Rights Act or that are properly brought before the Department of Human Rights or the Illinois Human Rights Commission.  The amendments to the Act provide that certain information reported to the Ombudsperson is not be subject to certain Freedom of Information Act requests.

Reporting to the General Assembly

The Department of Financial and Professional Regulation is required to provide its first written report of the ombudsperson’s activities to the General Assembly no later than July 1, 2018 and beginning in 2019, annual reports of the office’s activity are to be filed no later than October 1st. It is expected that the General Assembly and administration will use these reports to evaluate the proper, future role of the ombudsperson.

Public Act 099-0567 was signed into law by Governor Rauner on July 15, 2016.  This Public Act made a few significant changes to both the Illinois Condominium Property Act (765 ILCS 605/1 et. seq. and herein referred to as the “Condo Act”) and the Illinois Common Interest Community Association Act (765 ILCS 160/1-1 et. seq. and herein referred to as the “CICAA”) related to the closed portion of board meetings, often referred to as the executive session portion of board meetings.  These changes will take effect on January 1, 2017.

Currently, Section 18(a)(9) of the Condo Act provides that those matters which can be discussed by a board of a condominium association within executive session are limited to discussion of litigation, either then pending or that the board finds to be probable or imminent, discussion of the appointment, employment or dismissal of an employee, the violation of the association’s rules and an owner’s unpaid assessments.  Similarly, Section 1-40(b)(5) of the CICAA currently contains these same limits on what can be discussed within executive session by a board of a common interest community association subject to CICAA, with the addition of permitting a board to consider third party contracts within executive session as well.

Beginning January 1, 2017, Section 18(a)(9) of the Condo Act, as amended by Public Act 099-0567, will permit the board of a condominium association to meet in executive session for the following matters:

(1)      Discussion of litigation that is either pending or that the board finds to be probable or imminent;

(2)      Discussion of the appointment, employment, engagement or dismissal of an employee, independent contractor, agent or other provider of goods and services;

(3)      To interview a potential employee, independent contractor, agent or other provider of goods and services;

(4)      Discussion of violations of the association’s rules and regulations;

(5)      Discussion of an owner’s unpaid assessments; and

(6)      To consult with the association’s attorney.

So, for condominium associations, this new language creates the right of a board to discuss within executive session matters related to retaining or dismissing contractors and agents, such as property management companies, landscape contractors, maintenance contractors, etc., and not just employees of the association as the Condo Act currently provides.  This new language also permits the board to interview potential employees, property management companies and other contractors outside of an open meeting.  Additionally, the changes grant a board the specific right to have discussions with the association’s attorney outside of an open meeting.

Furthermore, the changes that will take effect on January 1, 2017 will also permit a board executive session to take place during an open board meeting, which is already permitted, but also separately outside of an open board meeting.  Thus, if a board solely wants to engage in those types of discussions that may take place during executive session, as of January 1, 2017 it will no longer be necessary to call an open board meeting, with all required notice of same provided to owners, and then call the open board meeting to order and then immediately adjourn into executive session, which is what is required now if a board solely wants to hold an executive session.

However, as a reminder, all votes of the board must take place at an open board meeting, notice of which has been provided to the owners.  This requirement is not changed by Public Act 099-0567, so all of the additional matters which may as of January 1, 2017 be discussed within executive session by a board still need to be voted upon by the board at an open board meeting.  Therefore, if a board elects to forego an open board meeting and hold just an executive session without notice to owners, as boards will be permitted to do beginning on January 1, 2017, no votes of the board will be able to be taken at such executive sessions.  If a board wants to vote on a matter that is discussed at an executive session, it will then either need to call a subsequent open board meeting with the required notice, or else continue to hold executive sessions during a portion of open board meetings as is currently required.

Beginning January 1, 2017, Section 1-40(b)(5) of the CICAA will also include all of the items listed above for condominium associations which may then be discussed within executive session, and will also still include the ability of a board of a common interest community association subject to CICAA to discuss third party contracts within executive session.  As with condominium association boards, the board of common interest community associations subject to CICAA will also, beginning on January 1, 2017, be able to meet in executive session that is held separate from an open meeting.  However, all votes by such association boards will still need to be taken at an open board meeting with the required notice provided to owners.

Therefore, as of January 1, 2017, Public Act 099-0567 will give boards of associations subject to either the Condo Act or CICAA several additional topics that they may discuss within an executive board session.  Moreover, these boards will also have the option of meeting for purposes of discussing matters that may be discussed within executive session without the requirement of holding an open board meeting with notice to owners.  This should provide such boards greater flexibility to meet to discuss such items and potentially result in a cost savings for those associations who have previously been holding open meetings, and incurring the costs of providing notice for same, solely for the purpose of then adjourning into executive session.  Additionally, the new changes expressly provide that a board may meet and have discussions with the association’s legal counsel during executive session, which eliminates a potential grey area under the current open meeting language within the Condo Act and CICAA.  However, these new changes do not give boards the right to hold general “workshops” on all matters that the board may want to discuss; rather, the items that may be discussed by the board outside of an open portion of board meetings are limited to only those items that will specifically be included within the Condo Act and CICAA as amended by Public Act 099-0567, as outlined above.  Board discussion of items not specifically included within these statutes, as amended, must continue to be held at open board meetings.

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. 

July 22, 2016

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.

Senate Bill 1374 Signed Into Law: Developers’ Loophole Closed

On July 14, 2015, Governor Rauner signed Senate Bill 1374 (Public Act 99-0041), which was sponsored by Senator Mike Hastings and Representative Kelly Burke, and authored by Douglas Sury of Keay & Costello, P.C., as a member of the Association of Condominium, Townhouse and Homeowners Association’s (ACTHA) Legislative Action Committee. The bill closed a loophole that was being exploited by developers when establishing non-condominium communities. Over the past couple of years, Doug had seen a number of new townhome communities formed by developers not as not-for-profit corporations, but rather as limited liability companies. Forming associations as limited liability companies allowed developers to avoid subjecting their communities to the governance of the Common Interest Community Association Act (CICAA) and the mandatory turnover provisions found within Section 1-50(b). A plain reading of CICAA appears to only subject communities formed as not-for-profit corporations to its governance. Since the newly formed communities were not subject to CICAA, a developer could record a declaration that allowed it to retain control of the board and the association’s finances for whatever time period it deemed appropriate. That is no longer the case, as now associations formed as not-for-profit corporations and limited liability companies are subject to CICAA and its mandatory turnover provisions. In addition to amending CICAA, Senate Bill 1374 amended portions of the Forcible Entry and Detainer Act to clarify that common interest communities formed as limited liability companies may use the Forcible Act to collect unpaid assessments.

Public Act 99-0041 is effective immediately and a link to the entirety of the Public Act is below. Doug would like to extend his thanks to Senator Hastings, Representative Burke, ACTHA, ACTHA’s lobbyist John Carr and the Illinois Chapter of CAI for their hard work and support of this bill that will have a significant impact for all newly-formed common interest communities.

 http://www.ilga.gov/legislation/publicacts/fulltext.asp?Name=099-0041

 

THE OMBUDSPERSON: COMING SOON TO A STATE NEAR YOU

 On December 29, 2014, outgoing Governor Pat Quinn signed into law the Condominium and Common Interest Community Ombudsperson Act, following its passage during veto session. With Governor Quinn’s signature, Illinois became the fifth state to enact some form of Ombudsman/Ombudsperson legislation.[1] The bill is the final version of a piece of legislation that Representative Elaine Nekritz has introduced in various forms over the previous five legislative sessions. Through several substantial changes, the Illinois Legislature crafted a bill that is part mandate and part aspirational. In any event, the legislation that has been extensively discussed, debated and reviewed is almost here. While passed in 2014, the Act does not take effect until July 1, 2016.

The true purpose of the Act and the argument supporting the need for an Ombudsperson can be found in the Act’s “Findings”, which preface the legislative requirements. As part of the law, the

General Assembly finds . . .Unit Owners and persons charged with managing condominium property or common interest community property may have little or no prior experience in managing real property, operating a not-for-profit association or corporation, complying with laws governing condominium property or common interest community property, and interpreting and enforcing restrictions and rules imposed by applicable instruments or covenants. “

Additionally, the Act notes:

Unit owners may not fully understand their rights and obligations under the law or applicable instruments or covenants. Mistakes and misunderstandings are inevitable and may lead to serious, costly, and divisive problems.”

The Act is an attempt at a legislative solution to these issues.

On its face the Ombudsperson Act has several different components. Initially, the Act creates the “Office of the Condominium and Common Interest Ombudsperson.” The office will exist under the umbrella of the Illinois Department of Financial and Professional Regulation.   The Ombudsperson, and other staff, will be employed by the Department. Further, the Ombudsperson will “have the powers delegated to him or her by the Department, in addition to the power set forth in [the] Act.” Currently, there is no mechanism in the Act describing the selection or appointment of the Ombudsperson, however the Act does empower the Department to adopt rules for administration and enforcement.

The powers and obligations granted to the Ombudsperson, and the compliance requirements for Associations can be found within the Act. The first impact comes from the requirement that every association is required to adopt a formal, written policy for resolution of complaints made by homeowners. This policy must include a form on which to make the complaint, a description of the process by which the complaint must be submitted, the timeline in which the Association will resolve the complaint, and the requirement that the Association make its “final” decision within a reasonable time. This provision has an effective date “no later than 180 days after the effective date of this Act.”, Accordingly, every association in the state bound to the requirements of the Condominium Property Act or Common Interest Community Association Act, must have adopted their complaint resolution policy adopted no later than January 1, 2017.

Additionally, the Act requires registration from every association in the state subject to either Act. No later than July 1, 2017 (provided the appropriate rules for registering and forms have been created) every association must be registered with the Department of Financial and Professional Regulation. This registration will be valid for a period of two years, and has specific items which must be reported to the Department. As of now, there is no registration fee required. However, non-compliance with the registration requirement could result in an Association being assessed a late fee or penalty Further, continued non-compliance could eventually suspend and association’s ability” to impose or enforce its lien for common expenses or to pursue an action or employ any enforcement mechanism otherwise available to it in enforcement of a lien for common expenses until it is validly registered…” Be aware that this provision will not invalidate an association’s lien for common expense or its ability to collect such a debt, will suspend, during the period of time the association is unregistered, its ability to pursue the claim.

Starting July 1, 2018 the Ombudsperson is charged with offering education and training to owners, boards and associations relative to the statutory laws affecting associations and the “operation and management” of associations. Additionally, the Ombudsperson is charged with creating an informational website containing the Illinois Condominium Property Act and the Common Interest Community Association Act, along with other relevant and useful information. The website will also contain information regarding services provided by the Office of the Ombudsperson, including, non-judicial dispute resolution. The Act notes in Section 20(c):

Information and advice provided by the Ombudsperson has no binding legal effect and is not subject to the rulemaking provisions of the Illinois Administrative Procedure Act.

It is not until July 1, 2019 that the Ombudsperson will begin accepting requests for assistance from homeowners. It is important to note several stipulations in Section 40 of the Act, which outlines such requests. First, dispute resolution is only between an association and a homeowner:

The Ombudsperson shall not accept requests for resolutions of disputes with Community Association Managers, supervising community association managers, or community association management firms…

Also, in order for a complaint to be heard, the individual bringing the complaint has a number of conditions related to standing, prior attempts at resolution, and specific timeframes that must be met. Specifically the homeowner must meet the following requirements: the homeowner cannot owe any outstanding assessments or fees (unless the amounts are the subject of the dispute); the disputed issue must have been initiated or occurred within the past two calendar years; the homeowner must have first made written complaint to the association and followed its internal procedures; the homeowner must have received a final adverse decision from the association; and the homeowner must have filed the request for dispute resolution within 30 days after receiving the association’s final response.

Once these conditions have been met, and the Ombudsperson’s Office receives a written complaint, the Ombudsperson will assist in efforts to resolve the dispute. It is imperative to note that this process is not mandatory. The Act provides clearly that “[t]he Ombudsperson shall assist only opposing parties that mutually agree to participate in dispute resolution.” Further, any decision is non-binding, and no penalties or enforcement provisions have yet been enacted.

On October 1, 2020, the Office of the Ombudsperson will be required to submit an annual written report to the legislature, which must include statistics on all complaints heard, and an analysis of the most common types of complaints heard. This information will then be used to formulate new legislation and reform to “reduce the frequency or severity of those disputes.”

The Condominium and Common Interest Community Ombudsperson Act will face its first true hurdle almost immediately. A new, unfunded office has been created within the Department of Financial and Professional Regulation, and the Ombudsperson will need to be appointed by the new Republican Governor, Bruce Rauner. Given the ongoing battles over Illinois’ current financial standing, it is likely that several “trailer bills” may be proposed and passed before there is much movement toward full enactment and implementation of the Ombudsperson Act. Illinois has taken its first step toward providing homeowners with an avenue to bring complaints without the costly, lengthy, and intimidating process of filing a formal lawsuit. It will now be up to the Democratic controlled legislature and the newly elected Republican Governor to see the process through. Even then, the effectiveness of the Ombudsperson Act may not be known for many years.

 

[1] Florida, Virginia, and Nevada all have Ombudsman Offices. Colorado has a similar program, however its function is informational only for homeowners.  For an excellent discussion of the various existing offices see CAI’s Publication “Memorandum on Offices of Community Association Ombudsmen” – March 2014. http://www.caionline.org/govt/Documents/Ombudsman_Report.pdf

 

Patrick Costello, Keay & Costello, P.C & Co-Chair of the Illinois Legislative Action Committee

Charles Perry, Lieberman Management Services, Inc., & Co-Chair of the Illinois Legislative Action Committee

 

 

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.