Condo Talk: Who gets the surplus of a unit taken over by board?

Q. Our association took possession of an owner’s unit after an eviction for nonpayment of assessments. The unit’s delinquency has been paid off, and the association continues to lease out the unit because the owner’s whereabouts is unknown. This has resulted in the collection of more money than is due to the association. Some board members claim this surplus belongs to the association, and others suggest it belongs to the unit owner. Who is entitled to the surplus that is being generated from leasing this unit?

A. The association is in an admirable position to have had the unit’s delinquency brought current through the eviction process. It demonstrates the value of an aggressive assessment collections procedure.

The association should use the surplus to pay assessments as they become due for the unit, and to pay for maintenance, repairs, and replacements within the unit as may be required of the association under the lease between the association and the tenant. Ultimately, the surplus belongs to the current unit owner, and the association should either keep the surplus in a separate account or keep detailed records showing the balance of the surplus. If the owner does not return to claim the surplus, the surplus will eventually have to be turned over to the state.

Q. The board of our association collected proxies over a year ago in connection with a vote on an amendment to the Declaration. A meeting was finally called to vote on the amendment, and ballots were cast using the year-old proxies. Was it proper to use proxies that were over 11 months old?

A. A proxy for a condominium or a common interest community association is valid for 11 months from the date it is signed by the owner, unless the association’s declaration or the written proxy itself provides otherwise. Both the association’s declaration and the proxy need to be reviewed to determine if they provide that the proxy is valid for more than 11 months. If they do not include this language, the proxies would not have been valid after 11 months from the date they were signed by the owner.

Q. We are a professionally managed association. The board is comprised of two factions that have a different vision for the association. The management company is caught in the middle, and the manager often receives conflicting directions depending on what board member is communicating with management. This leads to frustration and miscommunication. Any suggestions?

A. The board needs to appoint one person to act as the liaison between the board and the managing agent. Typically, this would be the president. The managing agent has a right to rely on the directions from this board member. If it turns out that the communication from this board member does not reflect the consensus of the board, then the board needs to appoint a different liaison. However, it is unreasonable to expect the managing agent to routinely deal with multiple board members or to attempt to interpret inconsistent directions from multiple board members.

Q. Our 2012 annual meeting is coming up shortly. One of the agenda items is review and approval of the minutes from the 2011 annual meeting. The secretary of the board, who was preparing the minutes, resigned a few months ago, and the draft minutes of last year’s annual meeting that he prepared are incomplete. How should the board proceed?

A. The secretary of the board is the custodian of the records of the association. However, the secretary is not necessarily the person who has to actually prepare the minutes. I suggest that the board members who were present at last year’s annual meeting get together and piece minutes together from their recollection of the events of last year’s annual meeting. Documents such as sign in sheets, ballots, proxies, vote tally sheets, notes from the former secretary, and the agenda can help the board to prepare the minutes for last year’s annual meeting.

The board should consider taping meetings for the limited purpose of preparing minutes, and have a policy placing a time limit on whoever is charged with preparation of the minutes. Once the minutes are prepared, it would not be unwise for the policy to provide for the disposal of the tape.

Ÿ 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.