Q. Our community has extensive rules and regulations relating to common areas and modifications to the exterior of our townhomes. However, over the last 10 years, consecutive boards of directors have not been enforcing the association’s rules and regulations, specifically to exterior modifications including windows and doors. What can owners do who want the board to enforce the rules and regulations?
A. Boards of directors of community associations — whether condominium or common interest communities — have fiduciary obligations to the association and the owners to enforce the governing documents. Failure to do so could lead to a breach of fiduciary duty claim against individual board members for failure to enforce the governing documents.
The first practical step for a group of dissatisfied owners is to remind the board of directors of their fiduciary obligations to enforce the governing documents, and list examples of alleged shortcomings. Should such a reminder not result in proper enforcement, the next practical step would be for the dissatisfied owners to organize and run candidates for the board to elect like-minded directors to enforce the rules. Legally speaking, a lawsuit could be filed for declaratory relief seeking a court order that would force the board to enforce the association’s governing documents, but such litigation would be costly.
Q. I am on the board of directors of a small condominium association. We have an elderly unit owner who seems unable to live by herself any further. Recently, the unit owner left the gas stove on without a flame causing gas fumes to permeate the floor for hours. The fire department had to be called. How should the board of directors handle this delicate situation?
A. From time to time, community associations experience an issue where elderly or disabled owners are no longer able to live by themselves without assistance. The board, and its managing agent if professionally managed, should first discuss this issue with the unit owner’s emergency contact or family to get the proper assistance for the owner.
From a legal remedy perspective, the board is limited to levying fines for violations of the governing documents or filing a declaratory lawsuit seeking a court order for the unit owner to cease violations of the governing documents, and if the condominium declaration allows, seek a judicial sale of the unit. But courts are reluctant to require a judicial sale unless the facts truly warrant such a drastic remedy.
Q. I heard that transfers of shares in a residential cooperative are now required to be reported to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) in certain circumstances. Would you explain the new rule and when it takes effect?
A. FinCEN implemented a new rule (31 C.F.R. § 1031.320) effective March 1, requiring reporting to FinCEN of certain residential real estate transfers to entities such as trusts, LLCs, corporations, etc. that are not financed (i.e. no mortgage or other qualifying institutional loan secured by the property).
The new rule outlines exempt transactions and also lists the order of priority of who the reporting person shall be. The following transactions would require reporting if the aforementioned criteria are met: conveyances of shares in a residential cooperative, condominium unit conveyances and purchase of land for a structure to house one to four families.
If the transaction is not a reportable transfer or there is another reporting person as defined in the statute, the board of directors of a residential cooperative or condominium association will not be required to report to FinCEN themselves or take any action under the new rule.
Got a question for the Condo Adviser? Email ctc-realestate@chicagotribune.com.
