Jan 28, 2016

Overview of changes to the Condominium Property Act for 2016

Changes to the Illinois Condominium Property Act (765 ILCS 605/1, et seq., the Condo Act) for 2016 are far fewer than in 2015 and will not go into effect until June 1. However, a number of the current changes affect critical provisions regarding open meetings, notice of meetings and amendments to condominium instruments. Another revision reduces the impact of the now-infamous Palm II ruling on Associations faced with the need for emergency action. The changes are summarized below.

Closed sessions expanded

By Public Act (P.A.) 99-472, the General Assembly in Springfield made additions and revisions to Sections 18 and 27 of the Condo Act. Note, however, that the changes are not scheduled to take effect until June 1, 2016. The first change reduces, from 30 days to 25 days, the minimum notice required prior to adoption of the budget as stated in Section 18(a)(6). P.A. 99-472 also revises and renumbers a portion of section 18 (a)(9) as subsection (a)(9)(A), which after June 1, will provide for a broader right to address litigation, employment issues, violations and unpaid assessments in closed session. Previously, boards were permitted to go into a closed or executive session during an otherwise open board meeting “to discuss” litigation filed and pending, or which the Board found to be probable or imminent, as well as rule violations and delinquent assessments; and could “consider information regarding” employment issues. With the amendments, boards will now be able to go into closed session “to discuss or consider information relating to” all of those subjects. Note also, that rule violations and delinquent common expenses have been designated as separate exceptions to open meeting requirements.

Telephonic or technological board meeting attendance and participation

P.A. 99-472 also adds new subsection 18(a)(9)(B), which will allow board members after June 1 to participate in board meetings by telephonic or other technological means that permit all meeting participants to communicate with each other, and to be deemed to be attending the meeting when they do. The Illinois General Not For Profit Corporation Act has had similar provisions (in section 108.15(c)) for some time that applied unless specifically prohibited by the condominium instruments. New subsection (a)(9)(B) expressly affords condominium boards this right regardless of limiting language that may in a rare instance be in the Association’s instruments.

The renumbered section 18(a)(9)(C) will limit members’ rights to recording only portions of board meetings that are open to the members, and removes the right to record meetings of the members, including annual meetings.

The renumbered section 18(a)(9)(D) amends the requirements for notice to board members as to board meetings and allows for waivers of notice, consistent with last year’s new provisions on electronic communications. Renumbered section 18(a)(9)(E) similarly adds provisions for giving notice of board meetings to those consenting members by electronic means.

"Acceptable technological means" in the Illinois Condominium Property Act as amended last January “includes, without limitation, electronic transmission over the Internet or other network, whether by direct connection, intranet, telecopier, or electronic mail.” See 765 ILCS 605/2. There is similar language via a 2015 change to the Common Interest Community Association Act as well. The Board’s accepting votes, sending notices or allowing board member participation at meetings using ‘technological means’ may require that your Association be capable of hosting, servicing and offering those technological means. Because the technological possibilities are practically endless, ranging from Facebook, to Twitter, to Snapchat and beyond, your board should specify which technological means affords sufficient security, reliability, identification and verifiability, as Section 18.8(b) provides. Without adopting a proper board resolution and appropriate rules, your Association may be required to be ready and willing to accept any and all technological means of communication that a Unit Owner or board member may wish to employ. It is important that Associations specify their acceptable technological means to avoid having to accommodate an ever-changing assortment of electronic communications.

Emergency action and subsequent ratification for boards

A new subsection (21) has also been added to section 18(a), which grants board members the power to act outside of a meeting in the event of an emergency (as defined in section 18(a)(8)(iv)) and to later ratify and confirm those actions, so long as within seven business days the Board gives all Unit Owners notice of the emergency occurrence and a general description of the actions taken to address the emergency. This provision addresses a problem that has arisen following the appellate court’s ruling in 2800 Lake Shore Drive Condominium v. Palm, 2014 IL App (1st) 111290 (May 2, 2014), (“Palm II”). The court in Palm II had strictly limited boards to acting at an open meeting held upon at least two days’ notice to all members, except for matters for which the Board had expressly delegated action authority to a property manager or other agent via a resolution. At the same time, however, the court ruled that the Board’s authority to delegate the power to act to its management agents is strictly limited by whether or not its Association’s declaration expressly grants the Board that authority. With the addition of section 18(a)(21) to the Act, that authority is available to all Condominium Associations, regardless of whether it is stated in their declarations. However, the scope of authority under section 18(a)(21) is limited to emergency occurrences, so it is recommended that each Association consult with its attorneys regarding its ability to delegate to property managers the power to take other potential actions.

Declaration and bylaw amendment changes

P.A. 99-472 also made changes to Section 27 of the Condo Act, which regards amendments to the condominium instruments. A change to subsection 27(a)(ii) clarifies that both mortgagees’ and lienholders’ approvals may be required for ‘regular’ amendments if the Association’s governing instruments specifically require it. For this discussion, a ‘regular’ amendment is one not required to correct an error, omission or inconsistency between the governing instrument and the Act or other statute. Subsection 27(b)(1) was revised to specify that no mortgagee or lienholder approval can be required in order for a board to approve an amendment that corrects an error, omission or inconsistency. These changes also go into effect on June 1.

Ombudsperson Act compliance

Note also that an important change to the Condo Act added Section 35 as of January, 2015. However, Section 35 actually goes into effect on July 1, 2016. Section 35 provides that as of that date, all Condominium Associations must comply with the Illinois Condominium and Common Interest Ombudsperson Act (the “Ombudsperson Act”). To be in compliance with the Ombudsperson Act, Common Interest Community Associations that are subject to the Condo Act must have developed and adopted a written complaint/grievance resolution policy for unit owner complaints. Further, under the Ombudsperson Act, Associations must also register with the Illinois Department of Financial and Professional Regulation (IDFPR).

Why this matters to you: failure to comply with the grievance policy and registration provision will subject Condominium Associations to the particularly stern penalties contained in Section 55(g) of the Ombudsperson Act. Section 55(g) allows the IDFPR to impose penalties on Condominium Associations and other Associations, like certain Common Interest Community Associations, for their failure to register. The penalties are not severe at first, but continued noncompliance has consequences upon Associations’ collection activity. Specifically, Section 55(g) states “if an Association fails to initially register as provided in subsection (a) of this Section or fails to timely renew its registration, the Department may impose a late charge or late fee against the Association. If an Association fails to properly register within 2 years after the effective date of this Act, or fails to renew its registration on 3 or more occasions, the Association is ineligible to impose or enforce a lien for common expenses or to pursue any action or employ any enforcement mechanism otherwise available to it in enforcement of a lien for common expenses until it is validly registered pursuant to this Section. A lien for common expenses previously filed during a period in which the Association was registered pursuant to this Section shall not be extinguished by a lapse in the Association's registration, nor shall the common expense debt reflected by the lien or court action be deemed invalid, but any pending enforcement proceedings related to the lien shall be suspended and any applicable time limits tolled until the Association is again validly registered pursuant to this Section. Nothing contained herein shall be deemed to invalidate any claim for common expenses or other enforcement mechanism, even if the claim arose while the Association was not registered.” See 765 ILCS 615/55(g) (2016).

This means Condominium Association Boards should take care that they (or their manager or attorney) updates their registration annually and does not let it lapse. 

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client Alert authored by: James P. Arrigo and 
James R. Stevens, Principals