Mar 07, 2017

A summary of the 2017 changes to the Condominium Property Act and Common Interest Community Association Act

Meeting requirements: Relaxed for vendor, third party, and counsel meetings in executive sessions, which may not require notice

Public Act 99-0567 amends the Condominium Property Act and Common Interest Community Association Act (CICAA). P.A. 99-0567 allows for an executive session to be held as part of an open meeting or as a separate event with no notice requirement for the separate event. This provision has been hailed as full relief from Palm II. However, this is not such a complete overturn or repeal of the principles at issue in Palm II. This new provision allows for some changes but the prior boundaries still exist.

The revised Section 18(a)(9)(A) states: “that every meeting of the board of managers shall be open to any unit owner, except that the board may close any portion of a noticed meeting or meet separately from a noticed meeting to: (i) discuss litigation when an action against or on behalf of the particular association has been filed and is pending in a court or administrative tribunal, or when the board of managers finds that such an action is probable or imminent, (ii) discuss the appointment, employment, engagement, or dismissal of an employee, independent contractor, agent, or other provider of goods and services, (iii) interview a potential employee, independent contractor, agent, or other provider of goods and services, (iv) discuss violations of rules and regulations of the association, (v) discuss a unit owner's unpaid share of common expenses, or (vi) consult with the association's legal counsel; that any vote on these matters shall take place at a meeting of the board of managers or portion thereof open to any unit owner.”

Condominium and Common Interest Boards may now discuss and meet with independent contractors, agents or other providers of goods and services in an executive session, including a separate event without notice. This allows a Board to interview and meet with these third party providers privately. This amendment also specifically allows Boards to meet with their legal counsel in executive session, without recitation of the prior imminent legal threat language. This means that Condominium and Homeowners’ Association Boards can now meet with these third party providers, including their counsel, at a separate meeting, without notice.

What this amendment does not do is preclude Boards from acting only in open session. There is no provision we read here that would allow a Board to take action without a properly noticed open meeting. Further, this amendment does not include Master Associations under Section 18.5 of the Condominium Property Act who remain, for this moment, in a Palm II world. While we anticipate that this exclusion is an oversight by Springfield, Master Associations should remain careful in how they do their Board business. This amendment also does not repeal, overturn or excuse any other legal principles articulated in Palm II so it is not exactly a watershed moment.

This Public Act also addresses assignments of developer rights in Condominium and Common Interest Associations which must, now, be made specifically in writing and recorded against the property before they are effective. For Associations, this answers some of the discord in prior case law that addressed assignment of developer rights and confirms that these assignments must be written and recorded.

Amended and restated Declarations for CICAA properties by Board vote

Public Act 99-0627 (effective Jan. 1, 2017) amends the Common Interest Community Association Act by confirming that only a two-thirds majority vote of the Board is needed to approve an amended and restated Declaration regardless of any inconsistent provisions requiring Owner approval. This will simplify the process for Common Interest Boards in updating their Governing Documents which is a very useful activity.

Assessments as security for loans confirmed

Public Act 99-0569 (effective Jan. 1, 2017) amends the Condominium Property Act to resolve a frequent impediment many Associations with older Governing Documents faced when applying for and closing loans. This provision confirms and allows Condominium Associations to pledge their future Assessment income or property as security for a loan. This resolves an old problem that many Declarations and Bylaws had which was a provision requiring Owner votes or precluding pledging Assessment income to get a loan. This change allows Boards to enter into loan agreements and pledge future Assessment income as a “security” or asset that may be seized in the event of default in repayment. Unlike a Unit Owner who can pledge their equity in their Unit to get a loan or a mortgage, Associations’ main asset is their Assessment income. This amendment resolves this problem and makes it easier for Associations to obtain loans.

Technology definitions changed, slightly

Public Act 99-0612 (effective Jan. 1, 2017) amends the Condominium Property Act and Common Interest Community Association Act with an expanded definition that now includes “any generally available technology that, by rule of the Association, is deemed to provide reasonable security, reliability, identification, and verifiability.” This will be applicable to Associations that now use technological means for their meetings, voting and other functions.

As we have noted before and often discuss when drafting technology provisions for Associations, adopting electronic means for doing business comes with a major caveat that the Board must be careful to craft a rule that adequately identifies—and more importantly limits—what will be acceptable technological means. In order to avoid multiple social media posts, fax messages, teletype reports and anything electronic that beeps, a Board should consider what technology it deems safe, reliable, effective and usable for electronic participation. This provision also notes that this determination is made “by rule” of the Association which also requires that any rule be presented and passed properly by the Board.

Ombudsperson Act compliance extended

The compliance date for the Ombudsperson Act is extended to Jan. 1, 2019.

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 R. Stevens, Principal

This alert originally appeared in the Condominium & Community Association Focus newsletter.