“Association Living Ain’t Always Easy” – Attorney Kerry Bartell explains what you need to know before purchasing in a condominium, townhome, or homeowners association, and offers advice to association boards in working with first-time association residents. (18 mins.)
The KSN Podcast examines various aspects of association law, landlord/tenant issues, property tax appeals, and more. In each episode, KSN attorneys share their experience and knowledge as they discuss legal updates, best practices, industry trends, and more. KSN Podcast episodes are available at www.ksnlaw.com/podcast.
Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.
For more info about our law firm and legal services, please visit www.ksnlaw.com
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Since 1983, KSN has been a legal resource for condominium, homeowner, and townhome associations. Additionally, we represent clients in real estate transactions, collections, landlord/tenant issues, and property tax appeals. We represent thousands of clients and community associations throughout the US with offices in several states including Florida, Illinois, Indiana, and Wisconsin.
For more info about our law firm and legal services, please visit www.ksnlaw.com.
Episode Transcription
Katherine: You’re listening to the KSN podcast and today we’re talking about what to consider before buying a home in an association. Welcome to the KSN podcast where you’ll hear from Kovitz Shifrin Nesbit attorneys as they share their experience and insight on legal issues surrounding community associations, collections, property tax appeals, and landlord tenant law. I’m Katherine and today we’re joined by a KSN attorney, Kerry Bartell. Kerry is a highly accomplished attorney practicing condominium, townhome, and homeowner association law in Chicago and the surrounding suburbs for over 20 years. She is a principal at Kovitz Shifrin Nesbit, former board member and president of Illinois Community Association Institute, or CAI, and a frequent speaker at industry trade shows, training and seminars on association living. Welcome to the podcast, Kerry. Great to have you.
Kerry: Thanks. It’s great to be here as well.
Katherine: Our topic today is what to consider before buying a home in an association and Kerry you’ve been advising condominium, townhome and homeowner associations for years. You’ve probably seen and heard some interesting assumptions from first time association residents.
Kerry: That’s right, Katherine. It’s pretty amazing what first time condo, town home, or even home buyers assume considering how much condominium and association living is prevalent these days. A recent CAI study, in fact, claims that there are over 342,000 common interest communities in the US with over 69 million residents. That’s 21% of the US population living in associations, and those numbers continue to go up and up and up. So it is becoming the largest population of home buyers throughout the country.
Katherine: So Kerry, what are the big themes that you’re seeing with these first time residents? Things that they’re not quite understanding?
Kerry: I think one of the biggest and most common issues is the people who buy a home and a condominium homeowners or townhome association don’t know that they’re automatically a member of the association. Some owners or buyers think that they can opt in or it’s voluntary and that’s just not the case. To that point, buyers are not always gathering the right information before closing and the information that you gather before completing a purchase will help you understand how the association operates and potentially save from any surprises. What results is that unit owners aren’t always aware of the association rules. Being aware of the Association’s rules, as well as the provisions of the declaration can provide clarity for that person’s ownership so that they can enjoy their home.
Katherine: All right, Kerry, so we’ll get right into it. So what aspects should a potential buyer consider if they’re looking to purchase a home in an association?
Kerry: I think that the most important thing that a new buyer, or even a prior owner of a home, but who’s a first time buyer in an association, they need to look at the Association’s governing documents and by that, I mean the Association’s declaration number one, the bylaws, and then the rules and regulations. Owners or buyers should be aware that Illinois law permits a buyer to ask the seller to produce these documents before the sale is finalized. You also need to make sure that you’re getting all of the governing documents and again, by that, I mean the declaration and any amendments to the declaration or the bylaws. Sometimes the most important provisions are contained in the amendments. Purchasers can also ask for and should ask for others disclosures that are guaranteed under the Illinois condominium property act. Those include and I’m just going to go through the list from the statute, a statement of any liens including a statement of the account of the unit, setting forth any amounts of unpaid assessments and other charges that are due and owing.
Next you can ask for a statement of the status and amount of any reserve for replacement funds and any portion of such a replacement fund that is earmarked for any specified project by the board. The statement of any capital expenditures anticipated by the unit owners association with the current or succeeding to fiscal years. This is the big one that most people know to look for in the disclosure forms. This is where you’re going to find out whether or not there’s a special assessment pending for the building or any large capital projects that are anticipated. Next is a statement of the status of any pending suits or judgments in which the unit owner’s association is a party. So that’s any pending litigation. And then last, the act provides that you are entitled to a statement setting forth what insurance coverage is provided for all owners by the association. In other words, what coverage does the association provide versus what is the owner required to maintain? This becomes particularly important if you’re in a townhome association or a homeowner’s association because those are a little less standard than for a condo association.
We maintain that your purchase agreement for your home should specify that the transaction itself is contingent on your receipt, review and approval of the information. We strongly recommend that the disclosures are reviewed as well by your real estate attorney. I would also ask the seller if he or she is aware of any proposed amendments for the association cause what we see is that when the disclosure is required for the sale, the association may not have formally gotten the necessary votes to approve an amendment and then a month after the buyer purchases, suddenly there’s a new document. So just be asking as many questions as you think are necessary.
Katherine: Well, and Kerry, We should remind our listeners, Kovitz Shifrin Nesbit, we represent associations, not necessarily individual unit owners. So consulting with a real estate attorney is really crucial here.
Kerry: Absolutely, absolutely. And I would make sure when you are engaging a real estate attorney, ask them if they have experience with buying and purchasing a home in an association specifically, but we are very clear in our office that we only represent associations and we assist boards to provide the necessary information and review all of these disclosures to prospective buyers, to make sure that our clients are accurately and effectively filling out the documents so that they’re in compliance with the statutory requirements.
Katherine: All right, well, Kerry and I are going to take a quick break, but when we get back, we’ll get into more aspects that you should consider before purchasing a home in an association.
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Katherine: And we’re back. I’m here with attorney Kerry Bartell, and we’re talking about what to consider before buying a home in an association. So Kerry, we’ve talked about all of the legal documents that a prospective buyer needs to have. What other considerations should a potential buyer weigh when they’re looking to purchase in an association?
Kerry: I think the next biggest issue is always assessments. Certainly money always talks and new buyers into an association need to be aware that an association and the residents pay fees or dues to cover collective maintenance expenses, such as landscaping, exercise room upkeep, parking lot lighting, snow removal, and maintenance of the common facilities. Assessments are typically collected on a monthly or an annual basis and can change based on the needs of the community. What we see is that some first time association residents don’t budget for the assessments when they purchase the property and then they are surprised when a bill comes from the Association. I do also think it’s important, kind of goes back to what we were talking about earlier, that when you’re looking at buying a new property that’s in an association, read the declaration of bylaws and understand what those assessments cover.
The secondary issue that comes up with assessments and budgets is people buy in thinking, oh, it’s a maintenance free community and more akin to a rental unit and that’s not the case for 99% of the associations. Even a condo, there are going to be portions of their unit and portions of the property that are still going to be your financial responsibility regardless of the assessments that you have to pay. Again, it’s especially important in a townhome or homeowner’s association because the maintenance responsibility can often be very detailed due to the fact that in a townhome or homeowner’s association you own your lot as opposed to just the percentage of ownership in the common elements. So just make sure you’re reading your declaration and understand what you’re paying for.
Katherine: So when we talk about maintenance and upkeep, we’re talking about the unit itself. As a unit owner, I would have control over most of my units, right? So we’re talking exterior, interior, what kind of boundary is there?
Kerry: So probably 25% of my practice is dealing with owners who don’t understand that they can’t do whatever they want. What you’re trading off when you buy into an association is contributing to a group to pay for maintenance of the common portions of the building in exchange for uniformity, both in aesthetic and maintenance control. So many associations, in fact, most associations can and do place restrictions on exterior improvements or alterations to not only the common areas, but your individual units. You should definitely confirm if there are any community standards regarding patios, decks, sheds, paint colors, lighting fixtures, siding fence height. I mean, it could be any number of portions of the property and if you change something without approval of the board, the board has the ability to force you to change it back at your own cost and expense. So it can actually give you a pretty poignant example. I have a client down in the city and they have rooftop decks and one of the owners had permission to build out their rooftop deck and sort of expand the perimeter of the decking, not their space, but the decking and this owner then took it upon himself without getting approval for the additional work. He thought it was good to put in not only an outdoor kitchen, but then a sort of second floor walkout on the deck.
So it was a whole structure with stairs and the whole thing. Not only did the association find out about it, but the city found out about it and of course it was not to code. And so this poor owner who spent probably tons of thousands of dollars for this deck addition then had to pay again 10,000 and so dollars to take it down and he was not able to put it back up. So he could have avoided all of that expense by just making sure he was giving full disclosure of his plans to the board and then seeking the proper approval for the entirety of the project. We constantly have lawsuits where an owner asks for one thing, gets approval, but then does something else and they say, “But you said I could do it.” Well, you’ve got to comply with those specifications. So just be sure that you’re aware of what the restrictions are, what the association controls and then stick to those parameters because it can get quite expensive.
Katherine: Then I would say get everything in writing, I’m sure.
Kerry: A hundred percent. Yeah. I mean, as much as we harp on our boards to make sure that they do everything in writing and get everything in writing, the same is true for an owner. There are a lot of times where an owner says, well, I had approval for such and such alterations 10 years ago and I say, show me the paperwork and they can’t provide it. So just dot your Is and cross your Ts.
Katherine: Kerry, I want to push a little bit on that fencing one. Say I have a dog, I want to have a fenced in yard. Is that something that I would be able to do in any condo, townhome or homeowner association, are there limits on that?
Kerry: It’s possible. It would definitely depend on the Association’s declaration and rules and regulations, but that kind of raises another issue, which is pets. Pets have become a very common issue as associations seek to address dogs, cats, other animals. Associations can have recorded covenants or amendments to their declaration regarding whether or not an owner can have a cat or a dog or birds, fish, other pets. They can also regulate the types, sizes, and number of animals allowed in a unit within the community. Again, I realize I’m probably beating a dead horse, but you need to make sure you understand what those governing documents provide for.
Katherine: Now that we know that we really have to be specific about reading those government documents, we should address some of their other limitations, like new trends that you’re seeing.
Kerry: Sure. Lately, I think one of the most popular issues that have been coming across my desk, addresses increased complaints by associations regarding leasing and short term rentals. Of course, this is more common and prevalent in the city because during the busy summer season demand skyrockets for safe, convenient and amenity filled rentals. There’s just not a whole lot of hotel space. So all buyers and frankly, current owners should keep in mind that while profiting from your unit may be appealing, many associations prohibit short term leasing or otherwise. Websites such as Airbnb and Vrbo have provided convenient platforms for owners to rent their units on a short term basis. But these short term rentals raise a lot of concerns in associations around having non-residents on the property. If an association has put restrictions in place, we’ve seen a trend where the violations that arise out of those unpermitted rentals can include hefty fines and ultimately legal action. So, just be careful.
Katherine: Kerry, you’ve touched on quite a few concerns. Obviously first time association buyers have a lot to consider. Again, knowing that we advise association board members, property managers, what can you recommend for those who are looking for more guidance on handling first time owners?
Kerry: Sure. I think the association and the board specifically needs to be ready to educate new residents, especially first time association residents. I think in associations who have the capability to do it, something like a welcoming committee does a lot of headway towards helping new buyers avoid violations because they just simply didn’t know. That always seems to be a good idea. Most importantly, and it probably sounds self-serving, but it’s true, make sure as an association and as a board member that you have an experienced attorney that can help you with these types of issues. Because as a result of the association having to prepare the 22.1 disclosure forms and all of these documents that are associated with closings, you have liability with that and if the information is incomplete or incorrect, the board can be exposed to potential litigation or liability. So you really want to make sure that the documents and the disclosures are accurate and that your attorney has reviewed those forms and what you’re stating.
I also think it’s very important that home buyers consult with a real estate attorney, as I said before, and that that real estate attorney is familiar with association documents and purchases so that they can help guide that buyer through the process. Purchasing a house, condominium or a townhome is a significant financial decision. I think that due diligence by the unit owner before they close on that purchase will go a long way to ensure many years of happiness in the association
Katherine: That was KSN principal attorney Kerry Bartell. Kerry has been practicing condominium, townhome and homeowner association law in Chicago and the surrounding suburbs for over 20 years. Kovitz Shifrin Nesbit 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 past 35 years. If you’d like to reach Kerry or any of KSN experienced 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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Please note the material contained on the KSN Podcast is for informational purposes only and does not constitute legal advice. No attorney-client relationship is established by your review or receipt of the information contained on the KSN Podcast. You should not act on the information discussed on the KSN Podcast without first obtaining legal advice from an attorney duly licensed to practice law in your State. While KSN has made every effort to include up-to-date information on The KSN podcast, the law can change quickly. Accordingly, please understand that information discussed on the podcast may not yet reflect the most recent legal developments. Material is not guaranteed to be correct, complete, or up to date. KSN reserves the right to revise or update the information and statements of law discussed on the podcast at any time, without notice, and disclaims any liability for your use of information or statements of law discussed on the podcast, or the performance of the podcast generally. The KSN Podcast may be considered advertising in some jurisdictions under applicable law/s and/or ethical rules/regulations. © 2020 Kovitz Shifrin Nesbit, A Professional Corporation.