Q–For years, members of our town home association have been paying into a reserve fund for replacement of patios and garage doors.
Now comes the latest newsletter from our town home association: it cites “limited common elements” in attempting to hand over responsibility to owners for these patios and garage doors.
The board is indicating that it wants the owners to pay these costs from their own funds.
We have looked into our declaration and bylaws and find no such reference to the term “limited common elements,” relating to the patios and garage doors, as contained in Section 4 of the Illinois Condominium Property Act.
What happens now?
A–A declaration must contain a description of both common elements and any limited common elements. Limited common elements are those portions of the common area located outside the boundaries of a unit which are assigned and used exclusively by a particular unit.
Examples of limited common elements are porches, balconies, patios, perimeter doors and windows.
Based on the language of the Illinois Condominium Property Act, a declaration may specifically describe areas classified as limited common elements. However, if your declaration contains no reference to this term, areas of the property are either part of the unit or part of the common elements.
The board of directors has the authority to charge owners for repair and replacement of limited common elements if the declaration classifies portions of the property under this term and specifically gives the board the authority to charge owners for expenses to limited common elements.
Section 9(e) of the condominium act states that the condominium instruments may provide for the assessment for expenditures to limited common elements to those units to which limited common elements are assigned.
Thus, the board has the authority under your documents to charge owners for limited common element expenses. Without this authority, the board cannot charge, or, as you state, give responsibility, to owners for these areas.
The classification of areas as limited common elements is less important than whether the board has the power to require owners to pay for these expenses.
To clarify the reserve issue, the board allocates a portion of unit owner assessments for reserves. The purpose of reserves is to repair or replace major portions of the common elements.
The designation of common elements, for which reserves are used, is based upon the declaration. However, the board does not have to use reserves for limited common elements.
Q– We are a small condominium association of only six units. How big should our reserve fund be in proportion to our annual budget? The little information we find on this subject seems to apply to large complexes, but not to us.
A–There is no simple answer to your question, nor is there any formula that will guide your association in determining the size of a reserve fund.
The basic answer is that the association must accumulate sufficient funds to pay for repair and replacement of major portions of the common elements.
The association board should hire an independent contractor or engineer to determine the estimated useful life and repair and replacement cost of major components of the property. These components include building surfaces, equipment, and energy systems.
To determine the amount of the reserve fund, the board also must consider the return on investment of reserves and, from a practical standpoint, the financial impact that assessment increases for reserves will have on the owners. In other words, how much can the board raise assessments to accumulate reserves without creating a hardship for the owners?
Building a reasonable reserve takes financial discipline and cooperation of the owners. Owners must realize that paying assessments to maintain the reserve fund today will prevent large special assessments in the future.
Working together
The enforcement of community association rules by the board of directors often leads to disputes and resentment in the community association.
Rule enforcement, however, is needed to preserve the quality of life for the residents of the community.
To assist a board in reaching a balance between enforcement and owner cooperation, the Community Associations Institute has published a book entitled “Be Reasonable! How Community Associations Can Enforce Rules Without Antagonizing Residents, Going to Court or Starting World War III”–very noble goals for an association board.
To order this text, contact the CAI at 703-548-8600 or visit the Institute’s Web site at WWW.CAIONLINE.ORG.
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Mark Pearlstein is a Chicago lawyer who specializes in condominium law. Write to him c/o Condominiums, Real Estate Section, Chicago Tribune, 435 N. Michigan Ave., Chicago, IL 60611. Sorry, he can’t make personal replies.
