Q–The board of directors of our 49-unit condominium building ran into opposition when it presented the 2001 budget. A few of the older homeowners are concerned about their longevity in relation to our reserve fund.
These owners say they will not live long enough to reap the rewards, so why should they worry about things that need to be repaired or replaced 10 years from now?
I am no spring chicken, but want to keep up the value of the property, which will enable me to sell it for a good price in the future.
I understand that buyers are getting smart and are not likely to pay top dollar if our reserve fund is not adequate. The building will soon be 6 years old, and our reserve fund is only $75,000.
One of these owners said she would prefer to pay a special assessment for a major project than a 5 1/2 percent increase each month. Other owners think that bills should be paid from the reserve fund, and the board should discontinue building up the fund because it is sufficient.
What do you think?
A–The owners who have voiced these objections are oblivious to the legal requirements for a condominium.
Reserve funds are required by law. The purpose of a reserve fund is to build an account for long-term repairs; not to benefit current residents.
The board cannot pay operating expenses from reserve funds, except in cases of emergencies, because the law prohibits that practice.
Section 9(c)(2) of the Illinois Condominium Property Act states that a condominium board must consider certain factors in determining the amount of reserves. The most important factor is the repair and replacement cost and the estimated useful life of the major components of the property.
This legal requirement obligates the board to determine the long-term condition of the building or buildings and save for future repair and replacement of common elements.
The basic requirement of property management, whether it be a residential, industrial or commercial building, is to plan for and accumulate funds necessary for long-term repairs.
Condominium unit owners cannot simply run the association to benefit current residents.
While I am not aware of the details of your property, an outside engineering firm can determine whether the sum of $75,000 is reasonable for a 6-year-old, 49-unit building.
Given the fact that most major repair projects take place every 10 to 15 years, I would question the reasonableness of the fund the board has accumulated to date.
Q–Our condominium association of some 200 units has an on-site manager who works for a large management company. Aside from her everyday duties, the manager provides names of prospective buyers for our units.
These prospects are either walk-ins to her office or they contact her through a listing in the Yellow Pages.
The manager is usually compensated by the seller or buyer, or both. At times, she solicits the sales of units well in advance, before condos are put on the market.
She suggests her own values for the unit. It is not unusual for the manager to show a potential buyer the property for sale.
Is this the usual way condos are bought and sold?
A — When does your manager have time to manage the property?
The agent must be a licensed salesperson to show properties or sell real estate. The individual, and possibly the association, could face sanctions from the Illinois Department of Professional Regulation for her activity if she doesn’t have a license.
However, the potential monetary sanction is less significant than the fact that your manager is spending more time on sales than on property management.
The association board is not meeting its obligation if it allows this type of activity by the on-site manager.
The board has the primary obligation to ensure that the property manager and the management company fulfill their duties under the management agreement; that means the on-site manager must devote full-time attention to the property.
If the agent is spending an inordinate amount of time gathering listings and showing units, she is not minding the store; particularly if an emergency arises.
The solution is simple. Either the manager devotes her attention to the job and the agent’s contractual obligations to the property, or she should resign and pursue real estate sales on a full-time basis.
Q–I own a condominium in the northwest suburbs which is part of a 12-unit building. I have a major problem on the exterior portion of my balcony.
There is a big gap in the overhang where the plywood meets the brick. Various types of insects, including hornets and wasps, get in that area and make their way into my unit.
Although the management company scheduled a carpenter to fix the problem, the board vetoed this expense. I became so frustrated that I held up my association assessments for two months to try to get the board to fix this gap.
What other recourse do I have?
A–I know this is bugging you, but you cannot withhold assessments.
The balcony exterior is probably a limited common element, and your association declaration may give the board the right to refuse payment of this expense.
While that position may not seem fair or practical, your alternative is to hire the carpenter directly to fill the gap. If the board will not pay for the expense, there is no valid reason for the directors to refuse your action to have the repair made directly.
Remember that the board and the association are not responsible for deficiencies arising from the original construction.
While it does not appear that the expense is great, if the board will not take the initiative, the directors should permit you to obtain the necessary work to eliminate the problem.
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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, 4th floor, 435 N. Michigan Ave., Chicago, Ill., 60611. Sorry, he can’t make personal replies.
