Q–I own a unit in a condominium development that consists of two buildings of 39 units each. Unit owners have expressed an overwhelming desire to eliminate non-resident ownership. Currently, we have five non-resident owners. We feel that a building occupied solely by resident owners will enhance our property values.
It appears, however, that we are thwarted by a provision in our bylaws that states rentals can only be amended upon the vote of all voting members, or the written consent of all owners.
If that provision means that we must get 100 percent of all unit owners to eliminate rentals, that will be an impossibility.
Our condominium declaration was recorded in 1995. I notice that the Condominium Property Act states that after a certain date, condominium bylaws shall require no more than three-quarters vote of the unit owners.
Do we still need unanimous consent to eliminate leasing in our buildings?
A–You are correct. The provisions to the condominium act supersede any conflicting provision in the declaration or bylaws.
Section 27 of the act states, that for a condominium property whose declaration was recorded on or after July 1, 1984, no condominium instrument shall require more than three-quarters vote of the unit owners to amend the bylaws.
Because your condominium declaration was recorded in 1995, the bylaw provision relating to leasing exceeds the limitations of the law. Owners may amend the bylaws to eliminate rentals of units by a vote of no more than three-quarters of the unit ownership.
Based upon the case of Apple II Condominium Association v. Worth Bank and Trust Co., the association can prohibit leasing and apply that restriction to current unit owners.
The amendment will not cancel current leases, but will prevent a unit owner from leasing the unit after the expiration of the lease.
Given the fact that the board must obtain approval of 30 of the 39 owners, and five units are currently leased, the directors must convince substantially all of the resident owners that the amendment will be in their long-term best interest.
Even considering the prevailing sentiment of association members, the board may still want to consider an exception for hardship situations. That would cover unforeseen circumstances such as the death of an owner or employee transfer.
Q–I purchased my condominium unit in July 1999. Upon attending my first board meeting later that year, I was shocked to learn that my building was going to need $1 million in structural repairs and I was facing a special assessment of approximately $13,000 due in full by March 2000.
When my attorney handled the closing, he received a standard letter from the managing agent stating that all assessments were paid in full. I was advised by the listing agent that there was a special assessment of $400 for the year 1999.
Because the agent lives and owns a unit in the building, I assumed that this special assessment was the only charge facing the unit owners in the future. It appears that she misrepresented the state of the association’s finances.
I am currently on the board of directors and have since learned that everyone in the building knew about the large special assessment. My question is, whose duty was it to inform me of this assessment?
A–The real issue is what questions did you ask during the contract stage of your transaction?
Information is available to prospective unit owners if they make the proper request. Section 22.1 of the Illinois Condominium Act states that the board of directors shall make certain information available for inspection to a prospective purchaser “upon demand.”
The available information includes a statement of any capital expenditure anticipated by the association within the current or succeeding two fiscal years, and a statement of the status and amount of reserve funds and whether any portion of the fund is earmarked for specified projects by the board.
In addition to the statutory questions, it is good practice to seek a representation in the sales contract regarding any special assessments charged to the unit or notice of any future special assessments.
In addition, a prudent buyer or the buyer’s counsel should request and review board meeting minutes for the last year. Minutes will indicate the existence of any significant problems.
It does not appear from your letter that you obtained a disclosure under Section 22.1 of the state condo law or obtained assessment representations in your contract. In that case, do not look to the seller or the real estate broker for relief.
Q–On behalf of our 24-unit condominium building in the northern suburbs, we have a question. Can a member of the board of directors, who performs an occasional item of labor, expect to be paid for his services?
Is this legal? I have been a member of this board for the last 15 years and spend many hours, but only on a voluntary basis.
A–First review the declaration and bylaws of the association.
Most bylaws either provide that directors will not receive compensation for their services as an officer or must obtain the approval of a percentage of the unit ownership to obtain compensation.
Transactions between board members and the association are not illegal, subject to certain conditions.
However, the director who is a party to the transaction may not vote on the agreement.
Therefore, a director may not receive compensation for his or her services to the association as an officer unless the bylaws specifically provide for this form of reimbursement and with requisite consent of the owners.
A director may perform particular services or labor if notice of the agreement is given to the ownership and the director does not vote on the transaction.
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Mark Pearlstein is a Chicago lawyer who specializes in condominium law. Write to him c/o Condominiums, Real Estate Section, 4th Floor, Chicago Tribune, 435 N. Michigan Ave., Chicago, Ill., 60611. Sorry, he can’t make personal replies.
