Who can serve on the association board:?
Q. Our condominium association has a rule that states that an owner who is delinquent in the payment of their assessments is not eligible to serve on the board. Is this a valid rule?
A. The Condominium Property Act provides that all members of the board shall be elected at large. The exception to this is that if there are multiple owners of a single unit. In that instance only one of the multiple owners is eligible to serve as a member of the board at any one time. This law also provides that the association shall have one class of membership.
Reading these provisions together leads to the conclusion that a rule prohibiting a delinquent owner from serving on the board is susceptible to a successful legal challenge. Of course, it should be strongly debated whether anyone should vote for a delinquent owner even if they are eligible to serve on the board.
Q. I manage many condominium associations that want to proceed to obtain FHA certification; however, each is in a similar predicament concerning the owner/occupancy ratio.
A certain public housing authority has purchased and leased units in bulk in condominium associations I manage. The units are then leased to low-income persons. The issue with this is that the number of these units in individual condominium associations can be very substantial; sending the owner/occupancy ratio below 50 percent. As a result, such associations don’t meet the FHA owner-occupancy guidelines and can’t qualify for FHA certification. That limits the pool of lenders for purchasers of units and current owners who want to refinance.
The question I have is whether the public housing authority owned/leased units can somehow be included as owner occupied, for purposes of the FHA owner/occupancy ratio.
A. The short answer is “no.” There are a number of HUD regulations that exclude “eligible nonprofit and/or governmental housing programs” from certain regulations. However, there is no exception concerning the owner/occupancy ratio requirement for FHA certification. The units owned or leased by a public housing authority, and leased to third parties, cannot be counted as owner occupied for purposes of FHA certification.
It would seem appropriate for HUD to establish regulations to permit eligible nonprofit and/or governmental housing program units to be excluded from the determination of owner occupied condominium units. This would serve the dual purpose of implementing low-income housing policies and permitting condominium associations to qualify for FHA certification. Hello, Washington … are you listening?
Q. One of the board members of our association travels a lot for business. He insists he can give his proxy to another board member to vote on his behalf at board meetings. Is this permitted?
A. No. A board member may not act by proxy on any board matter. The rationale for this is partly because a board member is a fiduciary and votes following full discussion, consideration and deliberation on a matter.
There is a solution for the traveling board member. A board member may participate in and act at any meeting of the board through the use of a conference telephone or other communications equipment. The only caveat is that all persons participating in the meeting must be able to hear and communicate with one another. This is best accomplished with a speaker phone or by audio/video conferencing. The board member attending remotely via speaker phone or audio/video conferencing would be counted toward a quorum of the board, and can vote.
Q. When an owner in our condominium violates a rule, the board sends a letter to the owner advising that the board has levied a fine. One of the board members contends that the owner has to be given a hearing before the fine can be levied. What is the proper procedure to levy a fine?
A. The Condominium Property Act provides that the board can levy a fine for violation of the association’s rules or declaration/by-laws. However, a fine can only be levied by the board after the owner has been provided written notice of the violation and after the owner has been provided an opportunity for a hearing. After the hearing (if the board finds that the violation did occur), or if the owner does not appear for or request a hearing, the board can levy the fine. The board cannot first levy a fine and then give the owner a right to “appeal” the fine; that would violate the procedural due process required under the act.
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.