Legislative Update to The Illinois Condominium Property Act and Common Interest Community Association Act
November 10, 2017
Due to the adoption of Omnibus House Bill 189, a number of amendments to the Illinois Condominium Property Act (“Act”) and the Common Interest Community Association Act (“CICAA”) become effective January 1, 2018. Below is a “plain English” description of those amendments:
AMENDMENTS TO THE ACT AFFECTING CONDOMINIUMS
1. New Section 9(c)(5). The amendment addresses how a board may handle surplus operating funds (i.e., funds in the operating account that were not spent during the fiscal year) at the end of the fiscal year. Remember, it's important to account for excess operating funds to ensure the Association does not have a tax liability to the IRS at the end of the year. The new section states that unless the condominium documents contain a provision to the contrary, the board may handle surpluses using any of the following methods:
- Transfer the surplus in the association's reserve account;
- Credit the surplus to unit owners against remaining monthly assessment payments in the fiscal year (i.e., unit owners get a reduction in assessments owed);
- Credit surplus to unit owners via direct payment (i.e., issue a check to unit owners);
- Keep surplus in the operating account and include it as a credit on the subsequent fiscal year's annual budget.
If the fiscal year ends in a deficit, unless the association's declaration or by-laws state otherwise, the board may incorporate the deficit into the budget for the subsequent fiscal year. Basically, this means that the deficit is built into the next year's budget and must be paid back.
If the unit owners disapprove of the board's choice, they have the option of overturning the board decision (i.e., 20% of unit owners submit a petition requiring board to call a unit owner meeting within 30 days of date of delivery of petition. Unless a majority of the total votes of the unit ownership select a different option for the surplus, the board's decision stands).
2. Section 15. Section 15 allows 75% of the unit owners in a condominium association with 4 or more units to vote to sell the entire property (all units and common elements) to a third party (usually a developer, but not necessarily). Any unit owners objecting to the sale in the vote, and who file a written objection with the board, may now receive the greater of the following two options:
- The value of his or her unit as determined by a fair appraisal, less any unpaid assessments; or
- The outstanding balance of any debt secured by the objecting unit owner's unit (i.e., unit owners will get a payout of the amount owed on a mortgage note, which is sometimes higher than the value of the unit.)
The objecting unit owner will also receive reimbursement for relocation costs as determined by federal law.
3. Section 18(a)(8)(i). Increases the number of days the unit owners have to petition the board to reject a special assessment from 14 to 21 days from the date of the board decision.
4. Section 18(a)(16). Increases the number of days that a unit owner has to petition the board to object to the board entering into a contract with a current board member, board member's family, or company in which a board member has a 25% or greater interest from 20 days to 30 days from the date of the board's decision.
5. Section 18(b)(9)(C). Increases the amount of time a unit owner has to petition the board to object to the board adopting a rule for absentee balloting or electronic voting from 14 days to 30 days from the date of the board’s adoption.
6. Section 18.4(a). Increases the amount of time a unit owner has to petition the board to object to funding a capital improvement project that exceeds 5% of the annual budget from 14 to 21 days from the date of the board's decision.
7. New Section 18.10. Condominium associations with 100 or more units must now employ generally accepted accounting principles (GAAP).
8. Section 19(a)(7). Requires the board to maintain the names, addresses, weighted vote and now, also e-mail addresses and phone numbers of unit owners and provide same to a requesting unit owner subject to the restrictions contained in the revised Section 19(a) – (d).
9. Section 19(a) – (d). Removes the "proper purpose" requirement for examination of the association books and records. For information related to subsections 7 and 8 of Section 19 (i.e. email addresses, phone numbers and ballots and proxies), the amendment states that the board may require the requesting unit owner to certify, in writing, that such information and documents will not be used for a “commercial purpose”, which is defined in the new Section 19(d-5) as “for sale, resale, or solicitation or advertisement for sales or services.” The revised language also expressly allows a board to levy fines against any unit owner who falsely certifies the non-commercial purpose written confirmation.
Section 19 was also amended to reduce the time in which the board must respond to requests from 30 business or calendar days (depending on the request) to 10 business days for all documents.
10. Section 27. States that any mortgagee or lienholder approval of an amendment to the association governing documents (i.e. declaration, by-laws) will be deemed granted unless the mortgagee objects within 60 days (the request for approval and amendment must be sent via certified mail).
11. Section 31. Allows a unit owner as part of a unit combination amendment to take a limited portion of the common element hallway and record a revised survey designating that portion of the hallway as a limited common element to the unit; however, the portion of the hallway taken cannot be necessary nor practical for use by any other unit owners (which decision would be made by the board). The amendment expressly states such action is not a diminution of the other unit owners’ interest, and thus, unanimous consent of the unit owners is not required.
AMENDMENTS TO CICAA AFFECTING HOA’S
1. New Section 1-20(e) – States that any mortgagee or lienholder approval of an amendment to the association governing documents (i.e. declaration, by-laws) will be deemed granted unless the mortgagee objects within 60 days (the request for approval and amendment must be sent via certified mail).
2. New Section 1-45(i) – CICAA associations with 100 or more units must now employ generally accepted accounting principles (GAAP).
Filed under: Community Association
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