Q–Members of our condominium board of directors announced to the unit owners that they have authorized a significant expenditure to retain legal counsel to fight a proposed high-rise near our property.
This development will have the effect of blocking the views of condominiums facing only one side of our property.
While I am sympathetic to the owners whose units face in this direction, they represent only 40 percent of all the units in this building. Units facing in the other three directions will not be directly affected by the development.
Is it legal or permissible for the board of directors to use general condominium funds to wage what could be a lengthy and costly legal battle, in order to prevent a development that will only have a negative effect on less than half of the unit owners?
The ownership has not received any notice, nor have we been given an opportunity to debate or vote on the expenditure.
It appears to me that the vacant parcel upon which this site is proposed was an obvious location for a future development; and that’s why I and others probably did not buy units on that side of the building.
What options or recourse are available to unit owners who do not want general condominium funds and reserves used for legal fees and expenses that are of no legal benefit to more than one half of the unit ownership?
A–You can challenge the expenditure as one not authorized by the provisions of the declaration and bylaws.
The board of directors is authorized to spend association funds for common expenses and other matters that are specifically or generally referenced in the declaration and bylaws. Common expenses affect the common elements of the property. In this case, the proposed development site is located outside the boundaries of the association and, thus, does not concern or affect the common elements.
Condominium bylaws may provide that the board has spending authority for matters affecting the general welfare of the property. If your association’s bylaws contain such language, the issue for the board and the ownership is whether a proposed development will increase traffic or congestion that interferes with the quality of life for building residents.
Legal action to contest the development on the basis of an expected decline in property values is highly speculative and, thus, does not give rise to a claim for damages.
The board has made the spending decision on this issue without a unit owner vote. However, the owners may question the board’s expenditure for legal action on this matter by calling a special meeting of the ownership. Twenty percent of the owners must submit a petition to the board to call this meeting.
If the directors proceed with the expenditure, dissenting owners have a legal basis to challenge their decision in court as one that is outside of the authority of the board under your governing documents.
The board of directors should discuss this controversial issue with the ownership and determine whether there is building-wide support to challenge the project.
Zoning matters generate substantial legal fees. For a matter that is not directly authorized by the declaration, the board should be very open with the membership.
In reviewing the board’s actions on this expense, you may also inquire as to where in the building a majority of the directors reside.
Q–One of the investor owners in our condominium association has been renting his unit to an individual for an extended period. Over the years, this renter has leased out one of the rooms in the unit to different tenants.
Now the investor-owner has decided to sell the condominium to his long-time renter.
Can this person continue to rent a room in the unit, or is there some restriction under the Condominium Act? For that matter, can any homeowner rent out a room in his or her condo?
A–No. While not specifically referenced in the Illinois Condominium Property Act, most declarations provide that unit owners or tenants may not rent a portion of a condominium unit. Units are not meant to be boarding houses.
This practice also violates standard provisions in condominium documents that prohibit an owner from engaging in an active business or permitting transient occupancy of a unit.
If the new owner continues this practice, the board may levy a fine, file suit to evict the bedroom occupant, or seek to obtain an injunction against the owner to stop the unlawful activity.
Q–Our board of directors recently approved a contract with a vendor for three years, with an automatic renewal for an additional two years. The contract states that if the association does not renew the contract for the additional period, we are subject to a penalty.
Our bylaws state that the board has no authority to approve any contract for a term of more than three years without the approval of a majority of the ownership.
Isn’t the board really approving a five-year contract in violation of our bylaws? Can the board circumvent the owners’ right to vote on this contract if the matter is not an emergency?
A–The fixed term of the contract is within the term limitations of the association bylaws. The association is not required to renew the it.
If your reading of the agreement is correct, the board can buy back the option given to the vendor and limit the term of the agreement to three years.
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Mark Pearlstein is a Chicago lawyer who specializes in condominium law. Write to him at the Chicago Tribune, c/o Condominiums, Real Estate Section, 435 N. Michigan Ave., 4th Floor, Chicago, IL 60611. Sorry, he can’t make personal replies.
