The saying is “the more things change, the more they stay the same.” Following this adage could lead to costly mistakes. Paying attention to new or amended legislation and how and if it applies to your association is critical. Today we will explore recent changes to the Illinois Condominium Property Act (“ILCPA”) and the Common Interest Community Association Act (“CICAA”) as well as recent cases affecting how boards meeting and communicate with each other and unit owners.
There have been a number of recent changes to ILCPA and CICAA that affects how board meetings are conducted.
Effective June 1, 2016, Section 18(a)(9) of the ILCPA was amended.
Effective January 1, 2017, Section 18(a)(9)(A) of the ILCPA and Section 1-40(b)(5) of CICAA were amended to allow the board to discuss more issues in a closed meeting or even meet to discuss these issues outside a regularly scheduled board meeting or in a board workshop closed to the other owners or discuss them by phone or email. This change mitigates the constraints placed on the board by Palm II and allows the board to more effectively administer the association’s day-to-day operations. However, a board vote on these issues must still take place in a scheduled board meeting open to all owners.
These amended sections provide that the board can close any potion of a noticed board meeting or meet separately from a noticed meeting:
Any vote on these matters shall take place at a board meeting open to any owner.
The board can now send notice of meetings via e-mail. Effective January 1, 2015, several sections of ILCPA and CICAA were amended to provide for electronic notices.
Section 18(b)(6) of the ILCPA was amended to provide that notice of membership meetings can be sent via electronic transmission if permitted by the association’s governing documents or adopted rules and consented to by the owner. The director/officer or his agent must certify in writing to the delivery by electronic transmission.
Section 18.4(s) of the ILCPA was added to allow an association to adopt or amend its rules to authorize the delivery of notices and other communications required or contemplated by the Act via electronic delivery (i.e. email) with written authorization of the owner. It also provides that an owner can designate an email address in addition to, or in replacement of, his or her mailing address on the list of members which an association is required to provide upon request under the Act or the association’s governing documents.
Section 18.8(a) of the ILCPA and Section 1-85 of CICCA were added to provide that any notice required to be sent under the governing documents or the Act may be sent by acceptable technology means so long as the owner provides written authorization to conduct business using electronic means; if an owner does not provide such authorization, the association must, at its expense, conduct business with that person without the use of technological means. As subsection (g) provides, this section does not apply to notices required for a forcible lawsuit or a foreclosure action to enforce a lien.
Effective June 1, 2016, Section 18(a)(9) of the ILCPA was amended to provide for electronic notices of board meetings.
“Acceptable technological means” has been defined to include, without limitation, electronic transmission over the Internet or other network, whether by direct connection, intranet, telecopier, electronic mail, and any generally available technology that, by rule of the association, is deemed to provide reasonable security, reliability, identification, and verifiability. §2(z) of ILCPA and §1-5 of CICAA.
An association can now conduct elections with electronic voting by unit owners. Effective January 1, 2015, several sections of ILCPA and CICAA were amended to provide for electronic voting.
Section 18(b)(9) of the ILCPA was amended to allow electronic voting:
Section 1-25 of CICAA was amended to allow electronic voting.
Section 18.8(a) of the ILCPA and 1-85 of CICCA (as discussed above for electronic notices) also provide that any signature, vote, consent, or approval required to be obtained under the governing documents or the Act may be accomplished by using acceptable technological means.
Emergency Powers of the Board
Effective June 1, 2016, Section 18(a)(21) was added to ILCPA to empower the board to act in emergency situations (those that involve an immediate danger to the structural integrity of the common elements or to the life, health, safety, or property of the unit owners) so long as the board notifies the owners of the emergency and the actions taken to address it within 7 days.
Effective June 1, 2016, Section 18(a)(6) of ILCPA was amended to reduce the number of days prior to the adoption of the budget that members need to receive a copy of the proposed annual budget from 30 to 25. This allows an association to also comply with Section 18(b)(6), which requires that notice of a meeting of the owners be mailed or delivery no less than 10 and no more than 30 days prior to the meeting
Amendments to Governing Documents
Effective June 1, 2016, Section 27(b)(1) of ILCPA was amended to allow the board to correct errors, omissions, or inconsistencies in the governing documents to conform them to the Act and other applicable laws by board vote, without a vote of the owners, regardless of what the governing documents state. It further provides that a provision in the governing documents requiring approval from, or notice to, mortgagees or other lienholders of record is not applicable to an amendment to correct errors, omissions, or inconsistencies to conform the governing documents to the Act and other applicable laws.
Owner Disputes Involving Discriminatory Conduct
Effective October 14, 2016, the Department of Housing and Urban Development (“HUD”) adopted new rules under the Federal Fair Housing Act (“FHA”) that may make it mandatory for associations to take action in resolving a dispute between owners if it involves discriminatory conduct by one of the owners or occupants.
Under the FHA, an association can be directly liable for its own conduct that results in discriminatory housing practice as well as for failing to take prompt action to correct and end discriminatory housing practices by its employees and agents, where it knew or should have known of the discriminatory conduct. Further, under the new rules, an association can also be liable for failing to take prompt action to correct the conduct of third-parties (including owners and occupants in the association) if it knew or should have reasonably known about the discriminatory conduct and had the power to correct it. Most governing documents give an association power to correct such violations.
These new rules may change the way an association addresses disputes between owners. If an association’s usual policy is to not become involved in disputes between owners, the policy may need to be amended. An association may need to become involved if an owner dispute has any hints of being motivated by a protected class (race, color, religion, sex, handicap, familial status, or national origin). Under the new rules, the owner does not even need to complain to the association for the association to be liable; an association could be liable for third party discrimination it knows or should have known about it (i.e., if a board member or employee witnesses the conduct).
Action by the association to correct and end the discrimination by a third party must be prompt, and the association must use all means available to it to end the discrimination including fines, suspension of privileges, and perhaps even litigation to seek an injunction against, or eviction of, the offender.
Relevant Case Law
Leasing Restrictions by Rule – A case decided by the Appellate Court of the First District of Illinois on February 3, 2016 held that the board does not have the authority to adopt rules that restricting an owner’s right to lease his unit when the association’s declaration permits leasing. In Stobe v. 842-848 West Bradley Place Condominium Association, the Court found that because the association’s declaration when read as a whole provided for leasing (even though it did not specifically state that owners had a right to lease their unit), any change in an owner’s right to lease his unit must be accomplished through an amendment to the declaration voted on by the owners and not just by a rule approved by the board. Beyond just leasing restrictions, this case cautions a board from adopting any rule that conflicts with the declaration on any matter. Only if the declaration is silent on the matter can a board place restrictions by rule unless the declaration specifically provides that the matter is subject to regulation by the board; otherwise the declaration should be amended by a vote of the owners.
Board Vote to File Forcible – A case decided by the Appellate Court of the First District of Illinois on March 31, 2017 held that an association is not required to prove that the lawsuit was authorized by a board vote at a properly notice meeting open to all unit owners as an element of recovery in order to prevail in a forcible entry and detainer lawsuit against an owner for non-payment of assessments. In reaching its decision in North Spaulding Condominium Association v. Cavanaugh, the Court reviewed ILCPA, the Forcible Entry and Detainer Act, and Palm II. However, this case should be taken with a grain of salt; the Court did not rule that an board does not need to vote before filing a forcible nor did it address whether an owner could raise the failure to vote as a defense to an association’s forcible action. As such, we recommend that an association have a collection policy in place that specifically states when a delinquent owner will be referred to collection or have that authority delegated to the association’s property manager; if the association does not have such a policy or is self-managed, the board should vote at an open meeting before referring an owner to the attorney for collection.
Charge-back for Insurance Deductible – A case decided by the Appellate Court of the First District of Illinois on February 14, 2017 (Gelinas v. The Barry Quadrangle Condominium Association) found that the association had properly charged the insurance deductible back to the account of the owner from whose unit the damage (fire) originated as the association’s governing documents and Section 12 of ILCPA authorize an association to charge an owner for damage caused by his act or neglect to the extent not covered by insurance, after providing notice and an opportunity to be heard.
Pending Legislation to Keep an Eye On
HB2400 seeks to amend Section 18 of ILCPA and Section 1-25 of CICAA to provide that all voting shall be on a non-cumulative basis. This bill has been referred back to the Rules Committee.
HB2627 seeks to amend Section 19 of ILCPA to remove the requirement for a proper purpose to inspect certain association records. This bill has been referred back to the Rules Committee.
HB2696 seeks to amend Section 1-45 of CICAA to provide that each member must receive a copy of the proposed annual budget at least 25 (rather than 30) but not more than 60 days prior to the meeting to adopt the budget. It also seeks to amend Section 18.5 of ILCPA for Master Associations to reduce the number of days prior to the adoption of the budget that members need to receive a copy of the proposed annual budget from 30 to 25 and to allow the board to close any potion of a noticed board meeting or meet separately from a noticed meeting to discuss those topics allowed in Section 18(a)(9) of the ILCPA and Section 1-40(b)(5) of CICAA. This bill has been referred back to the Rules Committee.
HB2931 seeks to amend Section 18 of ILCPA to provide that the bylaws shall provide that notwithstanding any provision in the condominium documents to the contrary, the board has discretion to: (i) address any budget surplus by transferring the surplus funds or portion thereof to the association’s capital or operating reserves or applying the surplus funds to any other common expense; and (ii) address any deficit by incorporating the deficit into the following year’s annual budget. This bill has been referred back to the Rules Committee.
Drafted by: Stephen G. Daday of Klein Daday Aretos & O’Donoghue