Q: We live in a town-home development facing age-related repairs. It appears the board has been liberal in interpreting “common area” as opposed to “limited common area.”
It has replaced concrete driveways that have cracked or sunk at the association’s expense. Now our reserves are limited with the outlook for more repairs troublesome. The board is asking an attorney to take another look at what constitutes common versus limited common property. Entrances and exits are specified as common property.
Do driveways qualify as such? Should repair and replacement of driveways be paid by the association or individual owners? Would past practice set a precedent?
A: Town-home associations not organized as condos are governed by the declaration and bylaws. Presumably, the language of your document is clear regarding responsibilities for maintenance. If certain areas are “limited common areas,” your document may give the board the discretion to pay for all or a portion of maintenance and replacement; or it may indicate the owners bear sole responsibility for them.
If the board has this discretion, the financial condition of the association is more pertinent than past practices. Your main problem is not the interpretation of the document but the lack of reserve funds. Past boards should have been more diligent in raising assessments and contributing to reserves.
If most of the driveways in your development need repairs, what is the difference between charging owners directly or having the association pay the expense from assessments collected from owners? Very little.
Q: Our town-home board puts out a statement at the annual meeting in November stating they need increases averaging 7 to 15 percent in our assessments every year. This statement does not offer a profit and loss rundown, balance sheets, cash balance, bank balances or reserve balances. We don’t even get a check register showing what has been paid.
Management and the board tell me I have to pay $25 per hour to inspect my association’s books.
Are they prohibited from producing a simple cash flow sheet or a P&L for the year? Many of us do not believe the board has accounted fully for all funds.
A: Your association board will not produce a P&L statement because it’s probably a non-profit corporation that operates only to meet their expenses.
As a town-home association, however, governed by Section 18.5 of the Illinois Condominium Property Act, the board should produce certain financial documents. These include an annual statement of income and expenses for the prior year. The board also should make financial books and records, including bank statements, income statements and reserve account balances, available to the owners for inspection and copying. The board should not charge you $25 an hour to inspect the books. If you want copies of any of these documents, you should pay a reasonable charge to the association for the cost of copying.
Q: I am the president of a small association. How does a builder decide how to register a development? We comprise three buildings with separate pipes and individual meters for utilities. We look like duplex units, but have only one common wall. The other common wall is the garage and deck for each unit.
Our declaration and rules and regulations are for a condo association, which is causing some confusion. Can we change our declaration to be a town-home association?
A: The developer determines whether to organize a community as a condo under the Illinois Condominium Property Act or form a homeowners association not covered by the condo statute.
Your board can modify the rules and regulations to conform more closely to the operations of the community.
If the association is governed by a document stating it is organized under the Illinois Condominium Property Act, the only way to change this is an amendment to the declaration and bylaws approved by three-fourths of the ownership.
The major distinction between a condo and a townhouse association is in the maintenance, repair and replacement of the common areas.
Insurance seminar: The Association of Condominium, Townhouse and Homeowners Associations will host an educational program on “Insurance: Getting Qualified Bids,” from 5:30 to 7 p.m. on May 21 at Harris Bank, 111 W. Monroe St. The program will include discussions on building valuation, liability limits and properly insurance coverage. Call ACTHA at 312-987-1906 or e-mail Gael@actha.org.
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Mark Pearlstein is a Chicago lawyer who specializes in condominium law and is chairman of the legislative committee of the Illinois chapter of the Community Associations Institute. Write to him c/o Condominiums, Real Estate, 4th Floor, Chicago Tribune, 435 N. Michigan Ave., Chicago IL 60611. You may e-mail questions to realestate@tribune.com. Sorry, he can’t make personal replies. Answers will be supplied only through the newspaper.
