“2022 Legal Updates for Community Associations” – KSN attorneys Kelly Elmore and Joshua Weinstein discuss the 2022 legal updates for community associations. They review case law updates, Fannie Mae and Freddie Mac changes, and more. (52 mins.)
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Episode Transcription
Nikki: You’re listening to the KSN podcast and today we’re talking about legal updates. Welcome to the KSN podcast where you’ll hear from KSN attorneys as they share their experience and insight on legal issues surrounding community associations, collections, property tax appeals, and landlord tenant law. I’m Nikki and today we’re joined by two KSN attorneys, Josh Weinstein and Kelly Elmore. Josh practices condominium, townhome and homeowner association law in the city of Chicago and surrounding suburbs while Kelly practices condominium, townhome and homeowner association law as well and has an extensive background as a litigator in the city of Indianapolis as well as in Chicago. Please note that this is a previous webinar recorded on February 2nd, 2022.
Kelly: Hey everyone. Thank you so much for joining us this evening for legal updates. My name is Kelly Elmore and I’m a principal at KSN
Josh: And my name is Josh Weinstein. I’m also a principal at KSN. Thanks everyone for joining us here.
Kelly: Yeah, so we know you have a lot of things to do on this beautiful non-winter storm evening. So, this evening we’re going to be talking about legal updates in Illinois and Indiana and as we go, if you have questions, please feel free to shoot us a message in the chat or raise your hand, although I’m not sure if we can see all the hands raised on the format we have, but we are just going to get started and let us know as we go if you have any questions. So first and foremost, we wanted to talk about an issue that is affecting thousands of community associations across the nation. So many of you might have heard that Fannie Mae, which is the federal national mortgage association, released some new guidelines that have become effective January 1st, 2022.
So, as many of you might be aware in Surfside, Florida earlier last year, there was a condominium association building that collapsed and as a result of that collapse and all of the media attention that was focused on what occurred in that situation, there was a lot more focused attention on condominium association projects and other types of community association projects involving buildings. And specifically, the issue of board of directors in community associations handling things like deferred maintenance, annual maintenance capital expenditure projects and things like that and in October Fannie Mae released a press release explaining their new requirements and specifically advised that they were created to address a growing concern across the nation of condominium and co-op residential buildings with aging infrastructure and significant deferred maintenance.
So, I think Josh and I could probably tell you many stories of associations that we have worked with where unfortunately just due to the financial conditions, certainly after 2007 and the financial market that was going on at the time, a lot of associations just did not have money to handle certain types of capital expenditures. And so unfortunately a lot of associations were forced to defer maintenance. Certainly, many associations where you might have a lot of more senior homeowners living on fixed incomes, they were just not in a financial position to spend money on certain maintenance projects. Well, unfortunately the result to that is now I think been highlighted by this example out of Florida where the federal government is saying, now we really have to make sure we have a renewed effort on making sure when we are ensuring property, we need to make sure that the associations are doing what they need to be doing as far as protecting the property and the collateral that we’re going to ensure.
So just really quickly for those of you curious as to which type of associations this supplies to. This is again, federal, so this applies throughout the country. It’s not just limited to Indiana and Illinois. The requirements apply to all loans secured by units in projects with five or more units, regardless of the type of project review or review waiver. So, it wouldn’t be surprising for us as you know, we represent all kinds of community associations. I think we’re anticipating a lot of these questions being directed at condominium associations, but would not be surprised if we actually see a lot of these requests still coming on HOAs and other types of community associations. And as I mentioned, it is effective for loans purchased on or after January 1st, 2022 and for loans delivered into MBS pools with issue dates after January 1st, 2022 specifically. So, what are they looking for? What are the things that they want to know from you as an association? If you’re a board or a property manager, what do you have to be prepared to respond with?
Well, first and foremost, they are looking at whether or not you have any significant deferred maintenance or unsafe conditions. So, if you have a citation or evaluation issue that goes to the specific structural condition of the property, that is going to be a major issue that they are going to be reviewing. They will be asking questions about special assessments reserve requirements and asking for documentation to support this inquiry. So, already we have seen a number of associations this has already affected just already in January. One month in, we’ve had a number of requests. So, what is it your association needs to do? So first and foremost, you will likely be receiving if an owner in the Association’s looking to do a sale or refinance and the lender or more [Inaudible: 06:26] by Fannie Mae you will likely get a questionnaire from Fannie Mae requesting this information that I’ve detailed and we are advising our associations, absolutely, you need to seek advice of legal counsel in preparing responses to these questions.
As many of you know regardless of which state you’re in, there’s a requirement that as a community association, you answer certain types of information on behalf of the association no different as far as the Fannie Mae requirements, it’s just additional information that’s going to be needed with respect to these specific issues. So, I can tell you that as far as KSN is concerned, we have developed a program to handle specifically these requests as they’re coming in. We have a questionnaire we’ve created for our clients to fill out, answer information so that we can prepare these responses on behalf of associations and really sort of take the legal burden off of the board to make sure that they are answering the questions correctly and also on behalf of management. So, I think that is the Fannie Mae issue in a nutshell. Josh, if I have missed anything, please jump in.
Josh: I think you summed it up pretty well. I mean, I think the important thing to remember is this is a Fannie Mae requirement. It’s coming from Fannie Mae who obviously issues mortgage backed, securities and insurers retail mortgages, right? So any lenders that are getting mortgages insured by Fannie Mae are going to likely ask associations to provide this information and at least in Illinois, it’s not specifically required by law that you answer these disclosures much like some of the other disclosures you would’ve gotten before this requirement went into effect, but practically speaking, if you don’t answer them, it’s going to sort of have a chilling effect on the ability of prospective purchasers to obtain mortgages, thereby sort of depressing the property values. And one of your obligations as a board is– part of your fiduciary duty would be to make sure that the property values of the units are protected. And so, refusing to answer these questions and provide these disclosure responses is going to have almost certainly a negative impact on property values. So, I just wanted to throw that in there.
So, Kelly, if there’s nothing else, I think we can move right along here to some of the Illinois legal updates. We have a number of them in what Kelly’s sharing in on the screen here. I’m going to just go through the ones that I find are probably the most interesting or important for associations to know about. There’s a number of them that may apply to associations, but maybe aren’t the most interesting or aren’t the most critical issues to go over. So, the first one would be the Cook County RTLO. So, for any of you that are landlords or even managers or board members, you may be familiar with something called the Chicago RLTO, which is the Chicago residential landlord tenant ordinance. Basically, it’s an ordinance, a law in Chicago that requires landlords to do certain things with respect to renting a unit and by extension for an association, if an Association’s renting a unit, there are certain requirements they have to follow.
So, this Cook County RTLO, not to be confused with the Chicago RLTO, and I’m convinced they did this just to confuse everybody. I don’t know why they changed the letters around, but essentially it applies to any Cook County municipality that doesn’t already have a landlord tenant ordinance. So outside of Chicago, Evanston, Oak Park, Morton Grove might have one. Anyone that doesn’t have one located in Cook County, this ordinance effectively applies to that suburb and it effectively states the same things that are in the RLTO Chicago. We could do a whole seminar, and I think we may even have done a whole seminar on what that entails and what this new Cook County ordinance entails but effectively it’s in terms of associations, if you are an association located in suburban Cook County and your municipality doesn’t already have a landlord tenant ordinance, you need to abide by this RTLO for any association rented or owned unit.
The next thing I want to talk about is the Chicago shared housing ordinance amendment that was passed. It makes a number of changes to the Chicago shared housing ordinance, which was passed a couple of years ago but essentially, it’s geared toward limiting the ability of individuals to Airbnb their units. So, the critical prohibition that’s included in this amendment is a prohibition on one day rentals. We’ll get into in a little bit a case that sort of discusses why that might be a little bit confusing in terms of whether an Airbnb actually is a rental but that’s what it was geared towards doing, sort of curbing the ability of individuals to rent their units or their properties for sort of transient purposes for one day. So that was the Chicago shared housing ordinance amendment. The next thing I want to talk about is probably the most critical amendment to the law here that affects condominium associations. It’s an amendment to section 18 of the condominium property act and what that did was provide for an association who is adopting a declaration who is first coming into existence after January 1st of this year, or who amends their declaration after January 1st of this year to allow that association to put in a requirement that a majority of the board members have to reside on the property.
So, some of you may live in, or may have managed or operated, be a member of the board of associations that had old declarations that said in order to be a board member, you have to reside on the property, right? Well, that’s not enforceable. By virtue of having that preexisting provision in your declaration, you can’t enforce that and say that all unit owners who are going to be members of the board have to reside on the property an even if you had that, you can’t now say, okay, that means now that a majority of the board members have to reside on the property. In order to enforce this, you’d have to amend the declaration, again, if you had a preexisting declaration prior to January 1st of this year, you’d have to amend your declaration if you wanted to put any requirement at all that some board members have to reside on the property. And specifically, the law says that you can’t provide that more than a majority of the board members must live on the property, must reside on the property.
So, what that means is if you got a three-member board, let’s say, and you amended your declaration to put in place this requirement, you could only require that two out of the three board members live on the property, right? You couldn’t require all three. Similarly, if you had a five-member board, you could only require three of the five to live on the property. You couldn’t require four of the five or five of the five to live on the property, because that would be more than just a simple majority. So again, if your declaration already and assuming your declaration was recorded prior to January 1st, 2022 if you have a requirement in there that says all the board members or some of the board members must reside on the property, that’s not effective. If you want to enforce that requirement at all, you’d have to amend your declaration and go through the amendment procedures that are outlined in that declaration. So, that’s the long and short of this sort of most critical amendment to the condominium property act.
Again, this is an amendment to the condominium property act. It only applies to condominiums, doesn’t apply to HOAs or townhome associations or community associations that are not condominiums.
Kelly: And Josh, I can add to that, you know, over the years we’ve seen a lot of associations have this issue where there are these requirements about board members and residency. And so, it’s nice to see that there’s now some clarification from the legislature acknowledging, well, you can have a requirement that some of the board members must be residents. It will be interesting, I think, to see how this plays out logistically. So, with many provisions and sections that have been adapted into the condo act over the years logistically we’ve sort of anticipated there could be issues. As many o, you know, board members sell units, board members pass away, there are vacancies suddenly created. So, it will be interesting just to sort of see how this provision is implemented and what functions over the years.
Josh: Yeah. Excellent point, Kelly. I think this was driven by a lot of support for the fact that individuals want their board members to reside on the property. So, this was sort of a middle ground this legislature came up with, but again, the bottom line is if you want to have a requirement that requires board members to reside on the property, you have to amend your declaration, unless of course your association being created after the first of this year, in which case the developer can put that language in the declaration. The next thing I want to go through is it’s very, very simple, the Illinois notary public act was amended, as you probably can imagine because of the pandemic, that allows a notary to notarize documents essentially virtually. You can have a two-way audio or video communication; notaries can notarize any documents that you may need notarized for condominiums. Those documents are few and far between for associations, at least.
There’s a provision in the condominium property act that says. Essentially unless there’s some specific provision of the law that requires you to have a notary, you don’t need to have a notary for any of your documents. But it could apply to community associations. It could still apply to some condominium associations that are notarizing a document that is required by law to be notarized. So essentially a notary can notarize, you don’t have to go in person to a notary anymore. They can notarize things electronically or virtually, I should say. The notary has to apply for an electronic notary commission, but assuming they do that, that notary can notarize documents virtually.
The next thing I want to discuss is the amendments to the smoke detector act. What this basically did was– So, I should start by saying the smoke detector act previously applied to essentially every place in Illinois, except for Chicago. There was an exception for applying certain requirements to municipalities with over a million inhabitants. What does that mean in Illinois and in Chicago? I don’t know that there are any other municipalities that are over a million inhabitants, but what this did is remove that exclusion such that the smoke detector act now applies to all municipalities, including those over a million and a half. So, it’s pretty straightforward basically, you know, you have to have a smoke detector that’s 15 feet away from a bedroom and that’s the critical piece of it, but essentially what this did was make it so this act applies to Chicago properties.
The next thing we can go through here, I think the next pertinent amendment here is the amendment to the county’s code and what this did is pretty common sense, honestly. It basically says that, you know, like you probably already guessed, any restriction or covenant that you have in a governing document that purports to forbid or restricts sales or occupancy on the basis of race, color, religion, or national origin, those are void and what the association can do if for some reason you still have those covenants somewhere what the association can do is by a majority vote of the board, amend the declaration. So rather than obtaining the two thirds or 75% of the owners to remove this restriction prohibiting sales of units to Jewish people, you can amend your declaration by vote of the board and you actually have to do it if you get a request from an owner saying, remove this restriction. So, you don’t necessarily have to do it.
I imagine that those of you on this call, the vast majority, if not all of you don’t have any covenant that have any sort of attempts to prohibit sales or conveyances or occupancies by these protected classes, but the extent you do, probably want to amend your declaration. The last thing, and sort of the hot button topic that we’ve been dealing with a lot here at KSN is this amendment to the homeowners’ energy policy statement act. A lot of people call it the solar panel law. This act has actually been in place for a number of years and effectively it said that the buildings that are less than 30 feet in height, owners have to be allowed to put solar panels on their houses. And if they do, and they request the association provide a solar panel policy or what its policy is on solar panels, you’d have to adopt a policy, you have to amend your declaration as well and you have to let them know where they could put their solar panels and the like provided that you don’t impede the effective use of the solar panel.
So, this amendment, what it did basically make it so this is only applicable to non-condominium, non-townhome associations, essentially only homeowners associations that are single-family home style homes. And I mean, you could have a condominium of course, that that has single family home style units but in any case, assuming that you do, and you’re a condominium association, this law still wouldn’t apply based on this amendment, because this requirement that you allow solar panels doesn’t apply to buildings, number one, that greater than 60 feet in height, which is actually more than the original 30 feet in height that was in the law, but it also doesn’t apply to any building that has a shared roof and is subject to a homeowner’s association, common interest community association, or a condominium association, and a shared roof means a roof that serves more than one unit. So, a contiguous roof, like in some townhome associations, or it’s part of the common elements of the common area.
So even if you had a condominium association that had single-family home-style units, almost certainly the roofs are part of the common elements and if they are, assuming they are, that would trigger this exclusion from the association being subject to this act, meaning the association could effectively prohibit the use of solar panels if you wanted to. But if you don’t have shared roofs, meaning you don’t have roofs that are connected or are not part of the common elements or the common areas by and large, that means single family homeowners associations, where you have single family homes assuming they’re less than 60 feet in height, which most are, that would be a pretty tall house you do need to permit solar panels if an owner requests to install them, and you can then create this policy. If you get a request you have to adopt a policy within 90 days of the request by an owner. The association has to approve an application within 75 days of receipt of the application. It used to be 90 days. And there’s more restrictions on how you can limit where the solar panels go.
So, you can’t restrict them from being on the roof at all or even on certain faces of the roof, but you can sort of restrict how they’re oriented, provided that you’re not reducing the production of the solar energy system or the panels by more than 10%. You can sort of dictate what the specific configuration of those solar panels is. So, like I said, the bottom line on that is effectively the vast majority of condominium associations, this law doesn’t apply to anymore. Most townhome associations it’s not going to apply to and many homeowners’ associations it may not apply to, although, some it may. So obviously if you have questions about that or whether it specifically applies to your association, contact us, contact the Association’s attorney and we can give you an opinion on that. So, those are the critical, I think updates to the law in Illinois. I think Kelly, Indiana has a couple of things to discuss, not many.
Kelly: Couple would be generous. Yeah, so I’ll just do my quick Indiana update and then I know we have some questions, so we’ll take some questions before we then move on to some of the case laws. So, as many of you might be aware of CAI, the community association Institute, I am the president for the Indiana chapter, and we’ve done a lot of work recently with the legislative action committee here in Indiana to really sort of promote various issues with community association. One of the biggest issues that’s going on right now is like Illinois, the solar panel legislation. So, for those of you tracking where this issue is in Indiana there was a bill proposed that I think was shut down in around April or spring of 2022. It looks like it’s going to be and is being reposed as a bill in the current session. So, it does seem like there’s a lot of support and what that bill would essentially do would create legislation that allows for owners in homeowner associations to be able to install solar panels.
Now, I think the devils and the details on how it’s written and what exactly the extent will be, you know, I don’t think it’s unfettered that any owner can just put up a solar panel. The panels will have to conform to, I think, certain restraints or restrictions in the association. Kind of similar to when we talk about an association being able to regulate election signs or something like that, the association can regulate size and things like that and placement but it remains to be seen. So, if that legislation ultimately is we will certainly be sending out updates on our end but that concludes the Indiana update for the 2021 year. I think a lot of the legislators that we know said they were just really focused on other issues, especially issues pertaining to COVID this past year or so not a whole lot of time addressing community association issues. So, I do expect to see more in the coming years but that concludes the Indiana update.
Josh: Why don’t we move on then to the case law? So, there are a couple of cases I want to go through and Kelly, I don’t know if you want to go through one case that you actually recently became aware of that relates to section 15. Do you want to?
Kelly: Yeah, absolutely. So, some of you might know, so in Illinois there is a provision in section 15 of the Illinois economy property act that states that generally speaking, if you’re a smaller association, this might not apply, but if 75% or more of owners vote in favor of a sale of all units, then all unit owners have to execute the closing documents to sell. So, this is an issue that really took off in 2015. We have a lot of associations who for various reasons decided to move forward with deconversion sales or section 15 sales. And so, there now have been a number of proposals of various legislation to revise that section for various reasons; to make it more clear, to address certain rights and things like that but one of the big issues was with section 15 and with these deconversion sales is that what the act states is that in order to move forward with the sale, you need to get 75% vote of owners to approve it. Not 75% owners who show up at the meeting, but 75% of the entire ownership.
Now, if you’re in the city of Chicago, there was an ordinance adopted a couple years ago that increased the threshold to 85%. So that only applies to buildings in the city of Chicago. But if you’re an association in Illinois, it’s 75%. Well, as more and more of these sales occurred there were certainly some owners over the years who objected to these sales, didn’t want to move, didn’t want to sell their units that weren’t aware of section 15, which many, many individuals were not. And so, a case was filed. There was an association in downtown Chicago that decided to move forward with the deconversion sale process, and the board received an offer and they negotiated a contract and put it out to the ownership and there was an owner who filed suit saying the board does not have the authority to move forward with even talking about a sale until you’ve taken a vote of the ownership, because section 15 says you need two thirds vote of the ownership.
Well, what the condominium association argued, in our opinion was the correct argument, is the plain language of section 15 says that a vote of the ownership is required of the owners when it’s a vote on the sale of all units, not a vote to decide whether to list the property, not a vote to decide whether or not to invest in it, not a vote to hire a broker or something like that. So, this argument to the condominium association filed a motion to dismiss and said, we have no obligation to seek a vote of the entire ownership until we were ready to vote on the sale. Well, the trial court agreed and granted the motion to dismiss, and the unit owner appealed, and the Illinois appellate court just released it’s an unpublished decision, but we assume it’ll be published at some point but issued a decision on January 14, confirming that a board of directors does not have an obligation to take a vote of the ownership until such time as you are voting on the sale of all units.
Meaning the board did not have an obligation to go out and take a vote or a survey, or otherwise pull the owners to investigate a sale or list the property or anything like that. So, that case is Glazer versus the Private Residences at the Ontario Condominium Association. But very significant just because it clarifies what we’ve been advising clients for years on this issue and clarifies the role and the duty of the board who are involved in a potential sale.
Josh: Very interesting one. I know that that’s sort of been a hot topic issue. Kelly’s been dealing with a lot of those over the last five to seven years here. So, there’s a couple of other cases that I want to go through quickly that I think are important to note here. The first one is entitled Wood versus Evergreen Condo Association. This is an Airbnb case. And so, what happened was there’s a unit owner who was Airbnbing her unit, and the board said because of these two provisions of our declaration that is a violation of the declaration and so they levied fine. Then the two provisions that they had, you’ve probably seen some of these if you have a condominium association, you live in one, you manage one, or you’re a board member, the two provisions and these are critical parts of this. One is that there’s a provision that says no unit shall be leased, subleased or assigned for a period of less than 30 days.
A lot of associations have tried to rely on that to say, well, okay, you can’t Airbnb your unit then because it’s necessarily going to be for less than 30 days. The other provision they relied on was the provision that’s in a lot of condominium declarations most of them I would say that says no industry, business, trade, occupation, commercial activities shall be conducted or maintained in any unit or on the property. So, when this owner sued the association, what the court ultimately said is, well, the provision that says you can’t lease your unit for less than 30 days doesn’t apply to an Airbnb situation because an Airbnb occupancy or arrangement is not a lease. It’s a license, right? So, this is critical. You have sort of the language in there that you have been relying on, or you intend to rely on that says you can’t lease your unit for hotel or transient purposes, or you can’t lease your unit for less than a certain amount of days.
You can’t only rely on that provision to say that because someone’s Airbnbing their unit, they’re in violation of declaration and critically because the court said Airbnb arrangements are not leases, they’re licenses, which are legally distinct things. But what the court did say is because they have this restriction on commercial use of a unit the Airbnbing of a unit is that sort of commercial or business use of a unit. So, because that language is in the declaration that constitutes a violation of the declaration. And it makes sense, right? A person’s Airbnbing their unit ostensibly because they’re trying to get money from it. Now, whether or not someone profits off Airbnb or not, or they’re just sort of breaking even on their mortgage or whatever, that’s irrelevant, the court essentially said. It doesn’t matter whether they actually get a profit from it, it’s a commercial purpose. They’re using the unit by Airbnbing it for a commercial purpose.
So that was sort of the critical holding there. And if you do have language and declaration that you’ve been relying on to say people are Airbnbing their units in violation of the declaration, and it’s only the, you can’t use your unit or lease your unit for less than 30 days, you might want to consider an amendment to your declaration that addresses licenses. Or otherwise rely on this other provision that I mentioned. So the next case that I want to talk about is Westgate versus Perch and what that case relates to is– it’s sort of– if you remember from a year ago or a few years ago, if you’ve been attending these seminars before there was a case called Boche versus 111 East Chestnut Condominium and it dealt with what sort of things might constitute a violation in terms of an owner’s speech or speech conduct and you know, what sort of documents or evidence an owner might be entitled to as part of a hearing related to a violation and that case sort of outlines some very specific things that an association has to do when there’s a violation hearing, for example, like give that owner upon and requests all of the evidence you’re using against them.
So, including testimony of witnesses and complaints and of course videos, if you have videos of things. So, in this case we’ve got an owner that– Well, first the association filed an action to evict this owner for non-payment of assessments and the amounts that was owed the association was all based on fines that were assessed against the unit owner for the unit owner allowing her dog to urinate on the neighbor’s lawn. So, this wasn’t a case where you have assessments that were owed, right. You had fines that were owed and the association wanted to evict on that basis and the evidence that gave rise to the violation, the underlying violation, which led to these fines was a video from the neighbor showing the dog urinating on the lawn. So, the board viewed the video. They didn’t allow the unit owner to view the video though and then they conducted a hearing and found the unit owner was in violation of the rules and then levied the fines, right?
So, the long and short of this was is that because the association didn’t give the owner the right to view the video, which was the evidence they were relying on in determining that this constituted a violation of the governing documents that they couldn’t then evict the owner on that basis because they didn’t give the owner their due process. So, they said, because none of the evidence was turned over to the owner the owner was deprived of an opportunity to respond to the video evidence before the board made its determination and because the board didn’t timely turn over all the available evidence to the owner the trial court, which said that the board didn’t act in good faith and couldn’t evict, they are correct. So again, it’s sort of reaffirming the Boche decision in that if owner requests evidence you’re using against them in relation to a violation, you need to give it to them.
The next case I want to go through is the Board of Directors versus Bordage and this case was, well, addressed a couple of different things. First the board of directors of, they’re called Winnitt Park Condominium Association, they filed a complaint to evict this owner on a couple of different counts and the first count was non-payment of assessments and the second count was seeking the sale of the unit basically asking the court to sell the unit because of multiple violations of the governing documents. Again, this is a case where the unit owner essentially alleged that, hey, I wasn’t provided an opportunity to defend myself because I wasn’t available on the date that the board was holding a hearing on these violations. So what the association did was as a certain date, they held a hearing at one of their board meetings about these violations, even though the association knew that the owner would be out of town on that date there’s all kinds of discussion in this case that shows that the owner told the association that they weren’t going to be available on certain dates and the board, nevertheless, proceeded to say, well, this is the time we’re going to hold the hearing and you show up or you don’t sort of thing.
The association tried to claim that the owner refused the hearing by not selecting one of the dates that they offered, even though, like I said, the dates were either she was out of town or they knew that that date or time the owner was at work and could not attend so essentially the board made it so she couldn’t really attend the hearing in order to defend herself on these violations and effectively what the court said is look, you can’t do that, you can’t insist on a hearing date where you know an owner cannot attend. Now, does the court say that you have to give owners multiple opportunities for hearings and do hearings have to be rescheduled over and over again? They didn’t specifically say that. We get this a lot where you have an owner that says, okay, I’m going to attend this hearing on this date and then a day before the hearing, they say, oh, I’m sick or I’m not going to be available, so reschedule the hearing.
My theory is you sort of got to try to accommodate as much as you can you don’t have to do it in perpetuity, but this case sort of lends itself to the idea that you at least have to try to get them to a hearing if they want one on a violation. So, if the one-time thing happens where the owner says the day before, sorry, I’m not available, I got called into work or something; probably good to reschedule the hearing for one more time and not just go ahead with the hearing on that date. So some reasonable attempts to have the hearing what that means, remains to be seen in terms of what’s reasonable, but if you do your best to accommodate the owner and get them to a hearing on a date and time when they’re available cause if you don’t, the court may rely on this holding here and say, they’re denied their due process and therefore you can’t take whatever enforcement action you intend to take, whether it’s levy fines or find them in violation or evict them for some reason and so on and so forth.
Kelly: Josh, there was a question related to the rule violations and I think this probably goes to the Boche case. Can violations be anonymous due to potential retaliation?
Josh: I mean, essentially, no because part of due process is that the person has a right to confront their accuser. Now, that doesn’t mean the owner has a right to go and challenge the person to a fight. It means you have a right to who is accusing you of something. So, in the context of a condominium association or a homeowner’s association if there’s a violation, what does that mean? Well, if we’re relying on an owner’s complaints or multiple owner’s complaints in issuing a notice of violation and finding someone in violation to the extent that that person who we’re finding in violation or attempting to find in violation is requesting all the evidence we’re using, we have to give them those complaints and the complaints then can’t be anonymous because otherwise we’ve sort of violated that whole idea of due process where the owner has a right to know who’s complaining about them in order to properly defend themselves so no.
The answer is no, complaints cannot be anonymous, even if you’re worried about retaliation. I mean, that’s the whole idea, right. Look, if you’re going to complain about somebody you can’t just be anonymous. You can’t just hide under the veil of the association and say someone submitted this complaint and you can imagine why that is the way it is because if you’re in court, the court’s likely to say, well, what evidence are you relying on here? Well, we’re relying on this anonymous complaint. Well, how do we know if the complaint is valid if it’s just made anonymously? So, there’s also, I think, a follow up there. It says, what if you have a picture of the violation? If you’re relying on the picture then yes, that’s okay. You can have a picture of the violation but if an owner requests the picture, you need to provide it. So, the last case I want to deal with, then we can address some of these other questions too.
Last case is a new one. Shannon versus Westward Management. Some of you may be managers with Westward even here. I don’t know, I haven’t gone through the list here but basically this is a case where an owner or actually a seller of a unit sued a management company because the management company was charging a specific fee for disclosure documents under section 22.1 of the condo act. So, section 22.1 of the condo act provides that the board at the request of a prospective purchaser has to produce a number of different documents and information that relate to the unit and the association and the section critically does say that a fee can be charged for that. So, there’s two issues and actually this case doesn’t really give us the guidance most of you want which is what’s a reasonable fee. Was the fee here reasonable? If I recall correctly the fee that the management company charged for obtaining these documents that were required to be produced was $245 and the management company moved to dismiss the claim against them on the basis that this section of the act doesn’t apply to a management company, it applies to the association or the board.
So, you unit owner, you can’t sue the management company for this fee that you think is unreasonable. It’s not the management company that’s obligated to provide this stuff to you, it’s the board, it’s the association. The holding in this case is essentially that no, that argument doesn’t fly. A seller or an owner has a right to sue management the company for this cause of action, this theory that there is an unreasonable amount being charged and that’s because, as you might imagine, the management company is acting on behalf of the board, they’re taking direction from the board or the association. They’re empowered by virtue of their management contract to do these things that the board would otherwise do. So, because the management company is charging the fee, the court said, yeah, the owner, seller or purchaser would have standing to sue the management company for this.
The Court didn’t address yet whether the substantive issue here, which is whether the fee itself was actually unreasonable, they didn’t address that yet. So, the trial court still has to decide that issue but what they did decide is critically the prospective purchaser can sue the management company for this. So that’s the critical case law. There are some other cases in Illinois that came out that are less interesting, I think but those are the few that I think we think are most important here. Thank you. Yeah, thank you everyone for joining. I see some of the claps in there, I appreciate that. Thanks everyone for coming. Hope everyone’s staying warm, staying inside and relatively snow-free as much as you can. So, contact us if you have any questions and we look forward to seeing you guys at another one of these lovely seminars.
Kelly: Thank you all. Have a wonderful night.
Nikki: That was KSN attorneys, Josh Weinstein and Kelly Elmore. They both practiced condominium, townhome and homer association law. Josh works out of our Chicago office while Kelly works out of our Indianapolis office. KSN is an experienced legal resource ready to provide you with quality advice and exceptional service. We look forward to demonstrating how we’ve earned the trust of thousands of clients over the last 35 years. If you’d like to reach Josh, Kelly or anyone of KSN’s experience attorneys, please call 855-537-0500. You can also visit ksnlaw.com and complete the contact form to send us a message. Thanks for listening.
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