Appellate Court Opines On Propriety Of Communications Between Condominium Board Members

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On the heels of the long-awaiting reversal of the Spanish Courts II appellate decision, condominium associations have been hit again with a First District Appellate Court ruling which has the potential to drastically impact the operation of many boards. 

The Illinois Appellate Court’s March 21, 2014, order in Palm vs 2800 Lake Shore (“Palm II”) interprets the open meeting requirements of the Illinois Condominium Property Act (“ICPA”) and the authority of a condominium board to delegate in a manner which is inconsistent with how most boards currently operate.

ICPA Section 2(w) provides that a “meeting of the board” occurs only when a majority of a quorum of the members of the board gather for the purpose of conducting board business. The original language of Section 2(w) defined “meeting of the board” as any gathering of a majority of a quorum of the members of the board held for the purpose of discussing board business. On January 1, 1994, Section 2(w) was amended to change the word “discussing” to “conducting.”  Conducting board business has since been generally interpreted to mean voting, and some associations adopted procedures to discuss matters at working sessions or otherwise outside of open, properly noticed board meetings. A “meeting of the board” entitles all owners to notice and the opportunity to attend the meeting.

The Appellate Court in Palm II rules that merely discussing association business, without making decisions, constitutes “conducting board business,” so that a closed or informal gathering of a quorum of the board is an unlawful “meeting of the board.” The Court in Palm II found that board workshops and similar gatherings that were not open to unit owners are unlawful.

Pursuant to the Court’s analysis in Palm II, a quorum of the board cannot lawfully gather to talk about association business unless the association’s owners receive advance notice and are allowed to attend. 

Further, the Palm II decision restricts a board’s ability to delegate board responsibilities to representatives, committees or management. It is common practice for boards to delegate authority for specific matters (e.g., authority to sign contracts, waive rights of first refusal, pursue collection of delinquent assessments, all specifically cited in the Palm II case) to a property manager or the board’s officers, in lieu of a formal board vote on such decisions. The court ruled that this delegation of authority was improper because it again constituted acting outside of an open board meeting. According to the court, a board can lawfully delegate authority to a manager (or a “commission” of board members) if such delegation is expressly authorized by the association’s declaration; however, if the declaration authorizes a delegation of authority, such delegation must still require approval of a majority of the board.

Finally, in Palm II, the court also addressed the common practice of polling or canvassing board members via email or other means in advance of open board meetings. Consistent with the court’s view that the open meeting requirements of ICPA 18(a)(9) are violated whenever a condominium board votes on, discusses or considers any association affairs outside of an open meeting, Palm II also found it unlawful for a board to make decisions by polling or canvassing board members via email or other means.

The Palm II ruling is a “Rule 23” opinion, which is not binding on other Courts. However, the ruling speaks to the disposition of the Circuit Court of Cook County and the First District Appellate Court.  Condominium boards should be cognizant of the ruling and govern their operations accordingly until the ruling is reversed or affirmed on appeal or mooted by legislative efforts.

 

Topics:  Board of Directors, Condominium Associations, Condominiums, Quorum

Published In: Business Organization Updates, General Business Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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