Legislation that will take effect on January 1, 2018 will impose new obligations on Illinois condominium associations, including a requirement that every association maintain an official unit owner list that includes every unit owner’s phone number and email address. The legislation also covers a wide range of other issues, including authority for boards to resume granting exclusive use of unused common element space when units are legally combined, a statutory “deemed consent” arrangement when mortgagee approvals are needed for Declaration amendments, and expanded deadlines for submission of unit owner override petitions.
Important changes are coming to the Illinois Condominium Property Act (“ICPA”) and the Illinois Common Interest Community Association Act (“CICAA”), effective January 1, 2018. Public Act 100-292 addresses many different subjects, and includes some controversial changes to the ICPA. Here are the highlights:
Expanded “On Demand” Owner Access To Association Records: ICPA Section 19 has long required that associations maintain certain records and make them available for examination and copying by unit owners under certain circumstances. Some records (e.g., the Declaration, Articles of Incorporation, meeting minutes, etc.) have been available “on demand” to any unit owner who makes a written request to see them, while other records (e.g., annual election ballots, the official unit owner list, active contracts, and association financial books and records) have been available only to a unit owner who makes a written request that is supported by a statement of proper purpose.
Effective January 1, 2018, the categories of records available on an “on demand” basis has been expanded to include all active association contracts and 10 years of financial books and records, and a unit owner no longer must provide a proper purpose to obtain access to these documents. Moreover:
The time within which an association must make requested records available has been shortened from 30 days to just 10 business days.
If an association fails to make contracts, financial records or other “on demand” records available in a timely manner and the requesting unit owner prevails in a lawsuit to compel review of those records, the association must pay the unit owner’s attorneys’ fees and costs. (ICPA Section 19 currently requires that the requesting unit owner convince a judge that the board acted in bad faith as a condition of recovering attorneys’ fees when contracts or financial records are not provided.)
The provision in ICPA Section 19 that obligates the requesting unit owner to pay for the cost of retrieving and making requested records available has been changed to allow (but not require) a charge-back to the unit owner for retrieval and copying costs.
When the new law takes effect, of the nine categories of records that every association must maintain, only election ballots and the official unit owner list will not be subject to examination on an “on demand” basis.
Unit Owner Phone Numbers and Email Addresses: The ICPA requires that every Illinois condominium association maintain a current “unit owner list” that is subject to examination and copying by owners under certain circumstances. Under current law, the unit owner list must contain each unit’s percentage ownership interest and the name and address of its owner, and a written request supported by a statement of proper purpose is required to access an association’s unit owner list.
However, effective January 1, 2018, there will be two important changes.
Unit Owner List Must Include Phone Numbers and Email Addresses. The information that must be on the unit owner list will be expanded to require the phone number and email address of the owner of each unit, in addition to the owner’s name and non-email (postal mailing) address. Requiring that the unit owner list include phone numbers represents an about-face by the Legislature. In 1990, the ICPA was amended to require that the unit owner list for a master association include unit owner phone numbers, but that requirement was eliminated in 1995. Now, more than 20 years later, the ICPA has been revised again to require that the unit owner list of every Illinois condominium association include unit owner phone numbers.
The Legislature is also sending confusing signals about access to email addresses. Section 18.4(s) was added to the ICPA in 2015 to authorize electronic distribution of official notices. That section – which is still in full force and effect – expressly authorizes adoption of electronic notice rules that allow a unit owner to direct that only his or her postal mailing address – without an email address -- appear on the association’s official unit owner list. The new requirement that email addresses be included on the unit owner list appears to be in conflict with Section 18.4(s), and reconciling those inconsistent ICPA provisions may be a matter for the courts to address.
Relaxation of Requirements to Access the Unit Owner List. The requirements for an owner to access an association’s unit owner list, including unit owner phone numbers and email addresses, will also change significantly. For many years, ICPA Section 19 has allowed owners to access the unit owner list only if the requesting owner submits a written request supported by a statement of proper purpose (e.g., to communicate with other owners about association issues). However, effective January 1, 2018, an owner will no longer have to assert a proper purpose to examine and copy an association’s unit owner list. Instead, if an association feels that a unit owner is requesting the unit owner list for a “commercial purpose,” such as advertising or promoting the sale of goods or services, the association must still provide the list but may require that the requesting unit owner certify that the unit owner list will not be used for any such “commercial” purposes. (Regrettably, the legislation does not allow boards to withhold unit owner list access for non-commercial purposes unrelated to condominium association business, such as charitable solicitations, electioneering for governmental office, etc.)
Requiring that the unit owner list include phone numbers and email addresses is controversial. It remains to be seen whether the Legislature has struck an appropriate balance between the desire to facilitate communications between owners, and unit owners’ desire to maintain their privacy and avoid unwanted telephone calls, emails and text messages from owners airing grievances or seeking election to the board.
Operating Surpluses and Deficits: The governing documents of some condominium associations require that annual operating surpluses be promptly refunded to owners, and that annual operating deficits be immediately satisfied by a special assessment. Strict compliance with these provisions has proven troublesome: distributing a small operating surplus is administratively burdensome, especially when most associations would prefer to move the excess funds into their replacement reserve fund. Likewise, imposing an immediate special assessment to satisfy a deficit is not the preferred approach for most condominium boards, especially if the deficit is small.
Unfortunately, Public Act 100-292 highlights the problems created when associations are subject to such provisions, but does not help those associations deal with them. New ICPA Section 9(c)(5) will give boards discretion to handle surpluses and deficits in various specified ways, but only if the association’s governing documents do not already specify how deficits and surpluses must be handled. Therefore, the legislation will provide no relief for associations whose Declarations already mandate how surpluses and deficits must be handled, and associations whose Declarations were silent on handling surpluses and deficits will soon be limited to the options listed in ICPA Section 9(c)(5), subject to a unit owner over-ride of the board’s decision.
Deemed Approval of Mortgagees to Declaration Amendments: The Declarations of some associations require that a specified percentage of the holders of liens and mortgages on units affirmatively consent to Declaration amendments. Since most mortgagees routinely ignore requests for consent to Declaration amendments, some associations have been unable to implement needed amendments to their governing documents. Effective January 1, 2018, the holder of a lien or mortgage on a unit will be deemed to have given its consent/approval to a Declaration amendment unless the lienholder or mortgagee delivers a negative response to the request within 60 days after a request for appoval is mailed by certified mail.
Use of Generally Accepted Accounting Principles: Generally accepted accounting principles (“GAAP”) is a set of accounting principles, standards and procedures that large companies must follow when they compile their financial statements. Effective January 1, 2018, a condominium association or common interest community association with 100 or more units must use GAAP in preparing its financial statements.
Section 15 Bulk Sales (“Deconversions”): ICPA Section 15 provides that if the owners of units representing at least 75 percent of the total percentage ownership interests in a condominium association vote to sell the entire condominium, all owners are bound by that decision and all owners must sell their units. In a Section 15 sale, each owner gets a share of the purchase price based on the percentage ownership interest of that owner’s unit.
Under the new legislation, a unit owner who does not vote in favor of a Section 15 transaction may be entitled to additional compensation. A Section 15 dissenter who makes a timely written objection to the transaction gets (1) the value of his or her unit as determined by three professional appraisers, or (2) the amount required to satisfy any underwater mortgage on the unit, whichever is greater. In addition, relocation costs (e.g., reimbursement for moving expenses and payments for the added cost of renting or purchasing comparable replacement housing) will have to be paid to any objecting unit owner. This legislation takes effect on January 1, 2018, and will apply to Section 15 transactions that are pending as of that date.
Expanded Deadlines for Unit Owner Override Petitions: The ICPA authorizes unit owners to seek to override certain board decisions by submitting a petition signed by 20 percent of ownership. Starting in January, the time period for submission of such petitions is extended in various situations:
The deadline for submission of a petition seeking to override a special assessment or a budget with a large assessment increase is extended from 14 days to 21 days after the board vote.
The deadline for submission of a petition objecting to a proposed contract with a board member is extended from 20 days to 30 days after delivery of notice of the board’s intent.
The deadline for submission of a petition seeking to override adoption of a direct voting rule is extended from 14 days to 30 days after the board’s vote to adopt the rule.
The deadline for submission of a petition seeking to override a large expenditure for a “replacement improvement” is extended from 14 days to 21 days after the board vote.
Authority to Grant Exclusive Use of Hallway Spaces In Connection with Legal Combination of Units: When two or more adjoining condominium units are “legally combined” (that is, when the Declaration and plat of survey are amended to reflect one unit in place of multiple units), ICPA Section 31 authorizes condominium boards to grant the combined units exclusive use of common element hallway space between those units that is not needed by the association. However, in 2011, the Illinois Appellate Court ruled in Picerno v.1400 Museum Park Condominium Association that Section 31 was unconstitutional because it conflicted with another section of the ICPA. Because of the Picerno ruling, associations have not been granting owners exclusive use of common element space between units that are being legally combined. By re-validating ICPA Section 31, the new legislation will override the Picerno ruling and empower boards to resume granting exclusive use of unused common element space when units are legally combined.