ACM News

Manager Education- Legal Update

Posted on October 12, 2015

With the goal of keeping our managers well educated on legal affairs, KSN Attorney Michael Kreibich visited ACM and discussed with our property managers some of the legal updates that impact community associations. Here are some of the updates followed by the relevant take-away points.

ILLINOIS CONDOMINIUM PROPERTY ACT AMENDMENTS (ICPA)

  • EXPANSION OF THE POWER OF THE BOARD

 

  1. Amendment to the ICPA by Adding Section 18.8
  • Known as Public Act 98-1068 or HB4783.
  • Effective January 1, 2015.
  • New Section voids governing document restrictions that attempt to limit or restrict the rights of the Board.
  • Regardless of what the governing documents say, the Board shall no longer be required to obtain the prior consent of the unit owners to take any action, including the filing of a lawsuit or demanding a trial by jury.
  • Regardless of what the governing documents say (notwithstanding Section 32 of the ICPA), the Board shall no longer be required to arbitrate or mediate a dispute with the declarant or the developer or any person not then a unit owner prior to filing of a lawsuit or demanding a trial by jury.
  • A provision otherwise voided by this Section may be enforced if approved by a vote of not less than 75% of the unit owners at any time after the election of the first unit owner board.
  • USHERING IN THE ERA OF ELECTRONIC NOTICES/COMMUNICATIONS

 

  1. Amendment to Section 18.4 of the ICPA
  • Known as Public Act 98-0735 or HB4784.
  • Effective January 1, 2015.
  • Adds new Sub-Section (s) to 18.4 related to the adoption and amendment of rules and regulations related to electronic delivery of notices and other communications.
  • Such rules and regulations shall be related only to notices/communications required or contemplated by the ICPA.
  • Such rules shall authorize electronic delivery of notices/communications to each unit owner who provides the association with written authorization for electronic delivery and an electronic address.
  • Such rules and regulations shall authorize each unit owner to designate an electronic address or postal address (or both) on any list of members or unit owners which the association must make available pursuant to any valid records request.
  • ALLOWING TECHNOLOGY IN MATTERS REQUIRING MEMBER VOTES

 

  1. Amendment to Section 2 and 18 of the ICPA, and addition of 18.8
  • Known as Public Act 98-1042 or HB5322.
  • Effective January 1, 2015.
  • Adds the definitions of “electronic transmission” and “acceptable technological means” to Section 2 of the ICPA.
  • Adds provision to Section 18(b)(6) of the ICPA recognizing right of the Board to adopt rules and regulations relating to notice by electronic transmission.
  • Under the new provision in 18(b)(6), if the appropriate rules and regulations exist related to electronic notice, consent must still be given by the unit owner and the director/officer must certify in writing to the delivery by electronic transmission.
  • Adds provision to Section 18(b)(9) of the ICPA stating that if the appropriate rules and regulations exist, a vote or proxy may be submitted by electronic transmission, provided that the electronic transmission shall either set forth or be submitted with information from which it can be determined that the vote/proxy was authorized by the unit owner.
  • Adds provision to Section 18(b)(9)(B-5) of the ICPA addressing the Board’s right to adopt a rule (or if the Declaration or Bylaws so state) at least 120 days before an election to eliminate the use of proxies.
  • Under the new provision in 18(b)(9)(B-5), if such a rules has been adopted related to electronic transmissions, the use of acceptable technological means may be used to vote.
  • Under the new provision in 18(b)(9)(B-5), specific notice and deadline requirements are set forth related to notice, candidacy, balloting and how that is impacted by the use of acceptable technological means.
  • Adds provision to Section 18(b)(9)(D) of the ICPA stating that votes cast by electronic or acceptable technological means are valid for the purpose of establishing a quorum.
  • New Section 18.8 of the ICPA is created that specifically addresses the use of technology.
  • Any notice required to be sent or received or signature, vote, consent or approved required to be obtained may be accomplished by using technology generally available to that time.
  • This right to use technology extends to the association, unit owners and other persons entitled to occupy a unit.
  • A verifiable electronic signature now satisfies any requirement for a signature under the ICPA or the governing documents.
  • Voting on, consent to, and approval of any matter under the ICPA or the governing documents may now be accomplished by electronic transmission, provided that a record is created as evidence and maintained as long as the record would be required to be maintained in non-electronic form.
  • Going forward, subject to other provisions of law, no action required or permitted by the ICPA or the governing documents must be acknowledged before a notary public if the identity and signature of the person can be authenticated to the satisfaction of the Board.
  • Individuals must provide written authorization to conduct business using electronic transmission or other equivalent technological means. If they fail to authorize it, the association must (at its expense) conduct business with that person without the use of electronic transmission or other equivalent technological means.
  • REVISIONS TO INSURANCE REQUIREMENTS FOR ASSOCIATIONS

 

  1. Amendment to Section 12 of the ICPA
  • Known as Public Act 98-0762 or SB3014.
  • Effective June 1, 2015.
  • Amends the language in 12(a)(1)(iii) regarding property damage insurance and amounts of coverage.
  • Adds a provision to 12(a)(3)(D) related to directors or officers liability coverage requiring coverage for defense of non-monetary actions, defense of breach of contract, and defense of decisions related to the placement or adequacy of insurance. This coverage shall include past, present and future board members while acting in their capacity as members of the board, and managing agent, and employees of the board and managing agent.
  • Adds a provision to 12(b) that extends the definition of Improvements and betterments” to include “built-in cabinets installed by unit owners, or any other additions, alterations, or upgrades installed or purchased by any unit owner.”
  • Eliminates portion of 12(h) that allowed board to purchase insurance on behalf of an owner who fails to purchase it.
  • This amendment only applies to insurance policies issued or renewed on or after June 1, 2015.

COMMON INTEREST COMMUNITY ASSOCIATION ACT AMENDMENTS (CICAA)

  • ALLOWING TECHNOLOGY IN MATTERS REQUIRING MEMBER VOTES

 

  1. Amendment to 1-5 and 1-25 of CICAA, and addition of 1-85
  • Known as Public Act 98-1042 or HB5322.
  • Effective January 1, 2015.
  • The amendments and addition in CICAA are identical to those discussed above related to the use of technology. Review those points set forth as #3 under the Illinois Condominium Property Act.
  • COPY OF LEASE MUST BE GIVEN TO ASSOCIATION

 

  1. Amendment to Section 1-35 CICAA
  • Known as Public Act 98-0842 or SB3057.
  • Effective January 1, 2015.
  • Under member powers, duties and obligations, “Unless otherwise provided in the community instruments, with” is added to the beginning of “regard to any lease entered into subsequent to the effective date of this Act, the unit owner leasing the unit shall deliver a copy of the signed lease to the association or if the lease is oral, a memorandum of the lease, not later than the date of occupancy or 10 days after the lease is signed, whichever is first.”

ILLINOIS CODE OF CIVIL PROCEDURE AMENDMENTS

  • ASSOCIATION’S RIGHT TO RENT CLARIFIED

 

  1. Amendment to Forcible Entry and Detainer Act
  • Known as Public Act 98-0996 or HB4782.
  • Effective January 1, 2015.
  • Upon obtaining an order of possession, an Association has up to 8 months from the expiration of the stay date to have a lease commence.
  • The term of a lease may not exceed 13 months from the date of commencement of the lease.
  • The Court MAY upon motion by the Association, permit or extend a lease for one or more additional terms not to exceed 13 months (per term).
  • SERVICE OF PROCESS AND ACCESS CLAFIFIED

 

  1. Amendment to Civil Law Practice related to service of process on individuals
  • Known as Public Act 98-0966 or SB3286.
  • Effective January 1, 2015.
  • Amendment requires an employee of a gated residential community to grant entry into the community, including its common areas and common elements, to a process servicer who is attempting to serve process on a defendant or witness who resides within or is known to be within the community.
  • Under the amendment, gated residential communities include a condominium association, housing cooperative, or private community.

SIGNIFICANT COMMUNITY ASSOCIATION CASELAW IN 2014

1010 LAKE SHORE ASSOCIATION V. DEUTSCHE BANK NATIONAL TRUST COMPANY, 2014 IL. APP. 1ST, 130962.

  • On August 12, 2014, the Illinois Appellate Court First District issued an opinion that clarifies when a lien created under Section 9(g)(1) of the Illinois Condominium Property Act is extinguished.
  • Specifically, the Court held that a lien created under Section 9(g)(1) for unpaid assessments by a previous owner is not fully extinguished following a judicial foreclosure and sale until the purchaser makes a payment for assessments incurred after the sale.
  • This ruling is significant insofar as it clarifies what has been a misunderstanding within the community association industry that a preexisting lien for unpaid assessments is extinguished automatically upon the sale of a foreclosed property.

PALM V. 2800 LAKE SHORE DRIVE CONDOMINIUM ASSOCIATION, 2014 IL. APP. 1ST 111290.

  • On May 2, 2014, the Illinois Appellate Court First District issued an opinion that addressed a number of very important topics effecting the day to day operation of a condominium association and the functions of the board of director.
  • Those important topics in which the Palm opinion gives guidance include the conducting of business, voting by e-mail and canvassing, emergency decision making, delegation of authority, and the handling of association finances, including reserves, operating surplus and shortages, amongst others.

SPANISH COURT TWO CONDOMINIUM ASSOCIATION V. LISA CARLSON, 2014 IL 115342.

  • The alleged failure to maintain common elements could not be raised as a defense to a forcible entry and detainer lawsuit because it was not germane, under 735 ILCS 5/9-106 (2008), since a unit owner’s liability for unpaid assessments was not contingent on the association’s performance, as the owner could not “avoid” the duty to pay the assessments, and the association could not refrain from enforcing that obligation, and such a nullification defense would conflict with 765 ILCS 605/9.2 (2008), which was adopted to provide a quick method to collect assessment arrearages.

OTHER IMPORTANT LEGISLATION TO BE AWARE OF

  1. Condominium and Common Interest Community Association Ombudsperson Act

On December 27, 2014, Illinois Governor Pat Quinn signed legislation (House Bill 4204, now known as Public Act 98-1135) aiming to protect condominium and other community association members throughout the state. The new law would be effective in July 1, 2016 and introduce an Ombudsperson within the Department of Financial and Professional Regulations. The Ombudsperson’s responsibilities would include dispute resolution and education for associations and their members beginning in 2019.

There are many provisions within the legislation that will need to be addressed. Notably, all community association’s will be required to have written policies in place related to dispute resolution and proceed to register its policies with the Department of Financial and Professional Regulations. Eventually, the proposed Ombudsperson would be available to mediate between a member and the association but only if the parties mutually agree to participate in dispute resolution.  Additionally, the Ombudsperson will need to take into account the covenants, conditions, and restrictions within an association’s unique corporate framework.

As this new law does not affect associations for almost 18 months, associations should keep these deadlines in mind and watch for future legislation that may clarify or even alter this law.

KSN

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