Q–The developer of our newly renovated condominium in Chicago turned over the building to our association at the beginning of this year.
Thirty days later, we received our final bank statement from the developer and found out that he had withdrawn all of our assessment money that had been paid to him.
When contacted, he claimed that he could not help in this matter because his accountant had drawn up the final bills and paid them from the account.
Because the developer took our money, we had to increase assessments 50 percent to pay our utility bills. We found out that he paid no bills during the renovation of the building.
Now that we are settling in, we have discovered many unfinished items. Basement electrical wires are exposed. An extension cord is being used for one light fixture.
There are no lights in certain areas. Locks on the entrance doors are cheap and one plate is broken. Paint is peeling off the wall in one entrance.
The developer did not install rear screen doors. There are numerous sections of the building that are unfinished.
What can we do to recover our assessment money, get our doors installed as promised, and get the unfinished work completed? We do not have money for a lawyer. Please provide us with some insight.
A–Your question illustrates a serious but common problem, namely, conversions by inexperienced developers who totally ignore the law. Your association has valid legal claims, but will either have to pursue action through city agencies or find the money in the form of special assessments to hire an attorney.
The developer must pay assessments on unsold units starting with the first sale. Within 60 days after the unit owners take control of the board, the developer must deliver certain documents, information and funds.
The documents include an itemization of income and expenses, plus association funds collected during the period of developer control.
If the developer had paid assessments on its units, but did not pay utility and other bills, he owes money to the association. The board can file liens on any unsold units in the development or file suit against the developer for assessments he owed until the units were sold.
The board is entitled to recover its legal fees for assessment collections.
The unfinished items are warranty claims. The board must notify the developer of these defects in writing and demand that the items be fixed within a reasonable time.
Given the fact that your developer does not communicate, the board will have to proceed with repairs and then seek to recover these costs.
As an alternative to hiring counsel, the board may notify the Chicago Department of Consumer Services, the Building Department and your alderman. Given the number of situations like yours, however, these departments have their hands full. Your alderman may be the key to resolving these problems, particularly if the developer seeks to have other projects in your ward.
There is a lesson to be learned from this familiar scenario. Do not buy from developers with no track record, and get references from residents of other developments of the builder. Be wary of purchasing a condominium from any developer who claims this is his first or second project.
Q–We have a six-unit condominium building that was managed by an outside professional, but it did not work out. We tried to obtain another manager, but it seems no one wants to do this job for such a small building; so we are trying to manage it on our own. Are there certain rules we must follow?
We are aware that a former manager used to fill out forms and send them to Springfield. We have received a letter from Springfield telling us that we are no longer exempt from taxes, because no forms were filled out and filed. Where can we get these forms?
A–You are referring to the filing of an annual report with the Illinois Secretary of State to maintain the status of the association as an Illinois not-for-profit corporation. The correspondence you received from Springfield is probably a letter from the secretary of state telling you that the association was dissolved for failure to file this annual report.
You can correct this problem and reinstate your association by obtaining annual report forms from the secretary of state’s office in Chicago or Springfield. Complete the forms and file them with the necessary reinstatement fees. By calling the corporate division of the secretary of state’s office, you will receive the necessary information needed to complete this process.
The association is not exempt from income taxes. The board of directors must file a tax return, but should have very little tax liability.
In addition to corporate and tax filings, condominium management includes collecting assessments, hiring contractors and paying labor and utility bills. If the residents do not have the time, energy or expertise to perform all of these functions, the board must hire someone to do them either individually or collectively.
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Mark Pearlstein is a Chicago lawyer who specializes in condominium law. Write to him c/o Condominiums, Real Estate News Section, 4th floor, Chicago Tribune, 435 N. Michigan Ave., Chicago, IL 60611. Sorry, he can’t make personal replies.
