(First of two articles on condominium law.)
Condominium owners in Illinois will receive a boost of consumer protection starting in 2018, when a long-awaited major rewrite of the Illinois Condominium Property Act and Common Interest Association Act goes into effect.
However, the state of Florida—reacting to a flurry of condominium scandals—recently passed a much tougher condo law that imposes criminal penalties on violations such as electoral fraud, theft of funds, conflicts of interest and rigged bids, legal experts say.
“The Florida Condominium Act is the first state law in the nation to have any teeth—criminal penalties for violations,” noted condo owner Sara E. Benson, managing broker of Benson Stanley Realty, and president of Association Evaluation, LLC, a Chicago-based real estate data-analytics firm.
“The new Florida law introduces the concept of conflicts of interest, including kickbacks, and forbids soliciting and accepting bribes from vendors or proposed vendors,” Benson said. “These are radical changes to the act.”
Effective January 1st in Illinois, the new, improved Omnibus Condominium Act will target finances of associations and makes access to documents and records easier and quicker for owners.
While the Omnibus Condominium Act will soon be in effect, House Bill 3755—proposed condo legislation for reimbursement of attorney fees to prevailing unit owners involved in litigation with their association—did not pass the Illinois Senate and currently is stalled in committee.
In stark contrast, both the Florida Condominium Act and the progressive California Davis-Stirling Common Interest Development Act state that a unit owner who prevails in a civil action to enforce homeowner rights is entitled to reasonable attorney’s fees and court costs.
In Illinois, an estimated 60% of association-governed communities currently are involved in litigation, legal experts say. In 90% of Illinois litigation between unit owners and their association, the association still recovers attorney fees from the aggrieved homeowner even when the owner wins.
“For decades, Illinois condominium owners have experienced more abuse of power, selective enforcement of rules and regulations, discrimination, and rampant breaches of fiduciary duties in association-governed communities than anyone could ever imagine,” Benson said.
“With the exception of going to court, there are absolutely no viable resources available to homeowners who seek to live in harmony with their neighbors,” Benson noted. “The constant threat of association-born legal fees being passed on to a homeowner when filing suit in a court of law creates tremendous strife and trauma.”
The new Illinois Omnibus Condominium Act requires associations with 100 or more units to use generally acceptable accounting principles in fulfilling accounting obligations.
In addition, up to 10 years of association books and records—including the declaration, bylaws, plats of survey, board-meeting minutes, rules and regulations, articles of incorporation and insurance policies—must be made available for examination by owners for any purpose within 10 days of a request. No longer is an undefined “proper purpose” required for unit owners to view documents.
The condominium law firm of Becker & Poliakoff provided the following review and summary of key points in the tough Florida Condominium & HOA Act, which amends Chapter 718 of the state statute. The Florida act is monitored by the Department of Business and Professional Regulation (DBPR), a state agency that has the power to punish violations.
Criminal Penalties. A Florida condominium association officer, director, or manager may not solicit, offer to accept, or accept any thing, or service of value, or “kickback” for which consideration has not been provided for his or her own benefit or that of his or her immediate family. If this provision is violated, it could result in criminal penalties.
• Forgery of a ballot envelope or voting certificate used in a Florida condo association election is punishable as a crime. So is theft or embezzlement of condo association funds.
• Destruction of official records, or the refusal to allow inspection or copying of records to prevent investigation of a crime is punishable as tampering with physical evidence, or as obstruction of justice.
• A Florida condo association officer or director charged by information or indictment with a crime referenced above must be removed from office and the vacancy shall be filled until the end of the officer’s or director’s period of suspension or the end of his or her term of office, whichever occurs first.
Conflicts of Interest. A Florida condo association may not hire an attorney who represents the management company of the association.
• A Florida board member, manager, or management company may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments or take title by deed in lieu of foreclosure.
• A Florida condo association may not employ or contract with any service provider that is owned or operated by a board member or with any person who has a financial relationship with a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer.
• Companies providing maintenance or management services to a Florida condo association, or an officer or board member, may not purchase a unit at a foreclosure sale resulting from the association’s foreclosure of its lien for unpaid assessments, or take title by deed in lieu of foreclosure.
Financial Reports. A Florida condo association containing fewer than 50 units must prepare a financial statement based on its total annual revenues, not just a report of cash receipts and expenditures.
• The association must mail or hand deliver a copy of the most recent financial report to any unit owner within five business days after submission of a written request to the association for a copy of such report.
• All Florida condo associations must provide an annual report to the DBPR containing the names of all of the financial institutions with which it maintains accounts, and a copy of such report may be obtained from the department upon written request of any association member.
Term Limits. Florida condo board members may not serve more than four consecutive two-year terms, unless approved by an affirmative vote of two-thirds of the total voting interests of the association or unless there are not enough eligible candidates to fill the vacancies on the board at the time of the vacancy.
NEXT WEEK: Florida condo associations containing more than 150 units are required to publish financial records and documents on an Internet-accessible web page for unit owners and employees of the association.
For more housing news, visit www.dondebat.biz. Don DeBat is co-author of “Escaping Condo Jail,” the ultimate survival guide for condominium living. Visit www.escapingcondojail.com.