Property Managers must review Association documents before entering into service agreements

In Alliance Property Management, Ltd. v. Forest Villa of Countryside Condo. Assoc., 15 IL App (1st) 150169 the Appellate Court of Illinois, First District upheld the trial court’s ruling that a property management contract for a term longer than allowed under a Condominium Association’s declaration was void. This ruling shifts the burden from the Board of Directors of a Condominium or Common Interest Community Association to a prospective property manager to review the Association’s Governing Documents and confirm that their service agreement complies with the Association’s declaration and Bylaws.

In Alliance Property Management, the First District held that any contract entered into by the Board of a Condominium Association for property management services was void and therefore completely unenforceable. The defect in the service agreement, according to the court, was that the term (length) of the agreement was longer than the Association’s declaration allowed. The contract at issue was renewed only a few weeks before the board decided to cancel the contract and terminate the property manager. The property manager sued to recover damages as provided in the contract, but ultimately received nothing because its contract was deemed void.

The declaration or Bylaws of an Association often contain a provision allowing the Board to hire a property manager to manage the Association, but limiting any such agreement to a term of two or three years. Under Alliance Property Management, we recommend that any property manager review the terms of a prospective client’s declaration and Bylaws to confirm that their property management service agreement does not conflict with the Association’s Governing Documents.

As always, the members of our Condominium and Common Interest Community Association practice group are available to address any questions or concerns you have about these or other recent developments in Condominium and Common Interest Community Association law. 

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: Adam K. Beattie, Associate