Although construction of new Associations has substantially decreased, a question still arises to when an Association should be turned over to the members. By turnover, we are referring to the time when the developer of the Association resigns from the Board of Directions, holds the first annual meeting and the unit owners are elected to serve on the Board of Directors. Under Section 18.2(b)(1) of the Illinois Condominium Property Act (“Act”), if your Association is a Condominium, or Section 18.5(f)(2) of the Common Interest Community Act (CICA), if your Association is a Townhouse or Homeowners Association, the developer is required to turn the Association over to the owners not later than sixty (60) days after the conveyance of 75% of the units or three years from the date the Declaration is recorded, or whichever occurs first. If the developer fails to call the meeting, the unit owners have the right to call the meeting and hold the election. A petition signed by homeowners having 20% of the total vote is generally required to call such a meeting.
In some instances, owners are hesitant to request the turnover of the Association due to outstanding construction issues and the fear that once the Association is turned over, the developer is no longer responsible to address these issues. This concern is unwarranted.
The turnover of the Association only relates to a change in who is responsible for the administration of the Association. Prior to turnover, it is generally a Board appointed by the developer. After turnover, it is a Board elected by the unit owners. Since turnover only deals with who is responsible to administer the affairs of the Association, the developer is not relieved of any responsibility that it may have to correct construction defects or fulfill obligations that it owes to the Association.
In fact, the unit owners want turnover to occur as soon as possible. The reason is that once the unit owners are in control of the Association, the Board then has the authority to speak on behalf of all members of the Association rather than each owner dealing with the developer on an individual basis. This gives the owners greater leverage to deal with the developer.
After the first election (turnover) is completed, Illinois law provides that the developer must turn over all books, records and funds within sixty days. In some instances, the developer fails to turn over the books, records and funds. In such instances, it may be necessary to proceed with legal action to enforce compliance. Currently, under Illinois law, if the Association does have to proceed with legal action, there is no statute which would allow the Court award the Association its attorney’s fees and court costs. However, seeing the need for such a provision, the legislature recently passed a bill which provides that in the event an Association has to proceed with legal action against the developer for the turnover of the books, records and funds, the Association may be entitled to reimbursement for its attorney’s fees and court costs. This provides incentive to developers to comply with Illinois law and turn over the documents as required by the statute. This bill should be signed by the Governor shortly.
Based on the above, it is our suggestion that all unit owners purchasing new construction strive to get their Association turned over as soon as possible. This will help bring a more expedient resolution to developer disputes and let the Board move onto their intended business of keeping the Association a great place to live.
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 have four office locations, serving hundreds of clients and thousands of communities throughout Illinois, Indiana, and Wisconsin. Our attorneys are also licensed in Arizona, Florida, and Missouri.
If our law firm can be of assistance, please call 855-537-0500 or visit www.ksnlaw.com.