Breaking News Bar
posted: 5/26/2012 12:07 AM

Condo presidents do have a vote

hello
Success - Article sent! close
 

Q. The president of our homeowners association never votes on issues that come before the board, unless there is a "tie" vote. When asked about this, the president responds "it's the law." Is it?

A. "No," it is not the law. The board president, like every other member of the board, does have a vote and should exercise their right to vote. Unless there is a legitimate reason to "abstain" from voting on a particular issue, not voting is arguably a breach of a board member's fiduciary duty.

Q. The developer of our townhouse common interest community (we are not a condominium) required each owner to have property insurance on their own unit, a practice our association continued after turnover of control from the developer. Recently, we changed property management companies and management strongly urged us to change how we handle property insurance. Management suggests that the association procure property insurance for all of the buildings. Are there advantages/disadvantages to either the individual homeowners or association procured property insurance coverage for the community?

A. The association's declaration and bylaws need to be reviewed to determine whether the association or individual owners are required to procure property damage insurance for the units. That is, responsibility for procuring this insurance is not a decision that can be made, or changed unilaterally, by the board. If the board wants to change who is responsible to procure the insurance, the declaration or bylaws would have to be amended. From a practical standpoint, in the event of a catastrophic loss, it would be easier for the association to coordinate rebuilding if insurance is obtained by, and proceeds issued to, the association. It is much more difficult to chase individual owners to make claims with their individual insurance carriers and obtain insurance proceeds, and there could be a situation where an owner permitted their insurance to lapse. That could result in a problem trying to rebuild after a casualty loss. The board should review the association's declaration with counsel, and the insurance options with an insurance agent/broker, knowledgeable in association insurance.

Q. Our association has a "claims made" liability insurance policy and is considering changing to an "occurrence" insurance policy. What is the difference between the two types of policies, and is there a risk in making this switch?

A. A "claims made" insurance policy covers claims that are made during the term of the policy. The loss can occur before or during the policy term, so long as the claim is made during the term of the policy. An "occurrence" insurance policy covers losses that take place during the term of the policy. However, a claim under an occurrence policy can be made during or after the term of the policy, so long as the loss occurred during the term of the policy. Changing from a "claims made" policy to an "occurrence" policy could leave a gap in coverage. This happens when a claim is made after the expiration of the "claims made" policy and during the term of the "occurrence" policy for a loss that occurred during the term of the "claims made" policy. A "tail" endorsement to the old policy can be procured to cover that gap. The board should speak with its insurance agent/broker about these issues before making the switch.

Q. The board of our association has not yet adopted the year 2012 budget. We have been paying assessments at the 2011 rate. The proposed budget for 2012, to be adopted in June, calls for an increase in assessments. It also says that the budget and assessment increase would be retroactive to January 1. Can an assessment be enacted and payable retroactively?

A. "No," and this is a particularly absurd concept if units have been transferred between January 1 and the date the budget increase is adopted. Your declaration, which is typical, requires a budget to be adopted in advance of January 1 of each year, and the first monthly payment is due January 1. If a budget is not adopted timely, the same typical declaration goes on to provide something like the unit owners shall continue to pay the monthly assessment charges at the then existing monthly rate established for the previous period until the monthly assessment payment which is due more than ten days after such new annual budget shall have been mailed. Hence, an assessment increase in the 2012 budget to be adopted in June can only be applied prospectively. This means that an assessment increase that would have been spread over twelve months is just spread over fewer months; but it's still all due.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in Buffalo Grove. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.

Share this page
Comments ()
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the X in the upper right corner of the comment box. To find our more, read our FAQ.