Jan 28, 2016

Overview of changes to the Common Interest Community Associations Act effective July 2016

Though this update mainly addresses changes that will go into effect in 2016, we are also making special note here that the Illinois Common Interest Community Associations Act (CICAA) was changed in July 2015 by Public Act (P.A.) 99-0041 to allow limited liability companies (“LLCs”), established by articles of organization and governed by operating agreements, to be an acceptable form for organizing or incorporating a Common Interest Community Association. P.A. 99-0041 specifically changed CICAA sections 1-5; 1-20(a); 1-25(g); 1-30(b), (c), (f), (g), (h) and (i); and 1-50(d)(1), adding the referenced LLC instruments to the definitions of community instruments, and also to the records available for inspection by owners. Articles of organization and LLC operating agreements are now part of the books and records available for examination under Section 1-30(i).

Amending and restating to address conflicting language in CICAA and declarations changed

Among the changes to CICAA effective in 2016, P.A. 99-472 appears to affect boards’ power to summarily correct or revise portions of their community instruments thrown into conflict with the new law when CICAA was first enacted. According to CICAA, these conflicting provisions in Associations’ declarations and bylaws were no longer valid and enforceable. They were effectively “severed” from the instruments as if they did not exist. A window opened at that same time for boards to revise their governing instruments without the need for a member vote in order to bring them into conformity with and reflect CICAA’s requirements. That window purported to require boards to make the referenced changes by early 2012, within approximately two years after CICAA went into effect, even though language remained in Section 1-15(b) which stated that “all provisions of the declaration, bylaws, and other community instruments severed by this Act shall be revised by the board of directors independent of the membership to comply with this Act.”

P.A. 99-472 will remove the quoted language in section 1-15(b), effective on June 1, 2016, leaving in its place the word “Blank.” A potential effect of this statutory change may be that amendments to Associations’ governing instruments made to conform them to CICAA’s terms will thereafter require approval by the percentage of its members that the declaration and bylaws expressly require for other amendments. If this change is interpreted to limit corrective amendments made to expressly import CICAA’s terms, boards of Associations that have not yet made changes that CICAA would require may be well-advised to consider making those changes before this change in the law goes into effect on June 1, 2016.

Ombudsperson Act compliance

An important change to CICAA added Section 1-90 as of January 2015. However, this new provision actually goes into effect on July 1, 2016. Section 1-90 provides that as of that date, all Common Interest Community 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 CICAA must have developed and adopted a written complaint 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 CICAA 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 CICAA Associations and other Associations, like Condominium 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 Common Interest Community 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