Q: I am a unit owner in a condominium association and have a question regarding board member criteria for competency. Our association membership unwittingly elected board members that are indifferent to resident concerns, have significant language barriers, and frankly, have questionable intelligence. Are there any criteria for experience or competency to serve on a condominium board?
A: Pursuant to Section 18(a)(1) of the Condominium Act, the only legal criteria for serving on a condominium board is to be a unit owner of a unit in the condominium association. There is no other legal criteria for serving on a condominium board in the Condominium Act
Nonetheless, directors have fiduciary obligations to the unit owners of the association under Illinois law. This requires condominium directors to act reasonably, act in the best interest of the association, and follow the terms of the condominium declaration and bylaws, which includes maintaining, repairing and replacing the common elements. Board members that breach their fiduciary duties may be subject to individual liability.
Therefore, board members who do not have any experience or knowledge about the role of directors serving on a condominium board should seek out the advice of professionals, and additionally, would benefit from reading resource materials regarding best practices of operating a condominium association.
Q: I live in a suburban condominium association where our condominium board terminated our management company for cause and hired a new management company this past year. After the termination, the board of directors issued a notice to all unit owners to pay unit assessments to the new management company. However, the original management company has rejected the termination notice and instructed unit owners to continue paying their assessments to them and threatened to file liens against units that do not comply. Who are we obligated to pay our monthly assessments?
A: Management companies are agents of the association. If there is a dispute between the board of directors and a management company, unit owners should follow the direction of the board of directors because it is the board that is granted legal authority under the condominium declaration and bylaws to collect assessments and enforce remedies against unit owners for nonpayment of assessments, not the management company.
If the termination of the management company was improper as the management company believes, depending on the actual facts, the management company may have a breach of contract claim against the association for damages; however, the management company does not have the authority to dictate where unit owners pay their assessments, file assessment liens against units without board approval and/or handle association funds after the effective date of the notice of termination.
Q: I am an owner in a small, 10-unit townhouse community association. Our board of directors raised the assessments $200 a month to $300 a month, which is a 50% increase. Is the board authorized to increase our budget so much?
A: The authority of a townhouse board to adopt budgets to meet expenses is outlined in the townhouse declaration and bylaws, and if applicable, the Common Interest Community Association Act (CICAA). The CICAA statute applies to residential community associations except for community associations with 10 units or less or an association with an annual budget of $100,000 or less, in which case those associations are exempt from CICAA.
If CICAA does apply and the newly adopted budget is more than 115% of the sum of the previous year’s regular and special assessments, per Section 1-45 of CICAA, 20% of the owners can file a petition within 14 days of the adopted budget for an owner meeting to be held within 30 days, and if the budget is rejected by a majority of the total votes of the members at the owner meeting, the budget will be rejected. If not, the budget is deemed ratified.
It should be noted in the last several years, due to inflation, the cost of labor and materials, utilities and vendor contracts have increased significantly for most community and condominium associations. Thus, most associations have experienced budget increases to meet expenses. An association having insufficient funds to pay for insurance policies for the common areas, utilities, maintenance contracts for services for the owners, or staff salaries is not a tenable situation, so owners needing to reconcile budget increases to meet reasonable expenses has become a reality of homeownership.
Got a question for the Condo Adviser? Email ctc-realestate@chicagotribune.com.
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