Q. I have always wondered about a practice of our homeowners association. Owners are permitted to attend the board meetings; however, owners are not able to pose questions to the board or comment on matters being discussed by the board. Is this legal?
A. This issue comes up frequently, and "yes," the board's practice is proper. The purpose of a board meeting is to conduct board business. It's not a meeting of the owners of the association. Owners do have a right to attend open board meetings, as observers. Owners do not participate in discussions and do not have a right to ask questions of the board.
That said, unit owner forums have become custom and practice at many board meetings, but are only required for common interest community associations. These forums are intended as a general comment period for owners. A specific amount of time could be allocated at the meeting (beginning or end) for this purpose. The amount of time should be relative to the length of the meeting, and it should take up a relatively short portion of the meeting. The time limit should be announced at the beginning of the forum so that it does not leave the incorrect impression that an owner is being arbitrarily cut off when time expires. If an owner has anything substantial to address with the board, the owner should contact the board in advance so that the matter can be formally placed on the agenda, if appropriate.
Q. Our association entered into an agreement with a contractor to paint the siding of our building. The contractor is about half way done with the work, and the quality of the work is terrible. Can we terminate the agreement and hire another contractor to finish the work?
A. The board may be able to terminate the agreement, but not yet. In general, the association needs to provide written notice to the contractor of the breach and provide the contractor with an opportunity to cure the default. If the contractor cures the default in the work, the agreement continues; if not, the association can terminate the agreement.
In practice, the written notice to the contractor should set forth, in detail, the material breach of the agreement by the contractor, and should also set out a reasonable deadline for the contractor to cure the default. The notice should also state that if the contractor fails or refuses to cure the breach to the satisfaction of the association by the deadline, the association deems the agreement terminated.
It's also a good practice to advise the contractor that if the agreement is terminated, the association will hire a third party to complete the work and will look to the contractor for damages. Those damages would generally be the difference between the amount the new contractor will charge to finish the work and the amount of the contract with the original contractor. Whether or not it is economically practical to pursue the original contractor will depend on the amount of damages, and whether there is an attorney's fee recovery provision in the agreement.
Q. Is there a time frame in which our association must dispute an invoice received from a contractor?
A. Yes. The Contractor Prompt Payment Act, to which associations of more than twelve units must adhere, describes and mandates very specific time frames and procedures for making payment to a construction contractor and, importantly, for disputing an invoice.
In a nutshell, an association is required to pay the amount that a construction contractor requests, in an invoice (known as an application for payment), no more than 15 days after the association approves the contractor's application for payment. Importantly, the contractor's payment application is deemed automatically approved 25 days after the association receives it, unless the association provides the contractor with a written statement of the amount being withheld from the contractor and the reason for withholding payment. That written statement from the association, disputing the invoice, has to be provided to the contractor before the end of the 25 days.
If the association does not provide the contractor with written notice of a dispute and the reason for withholding payment of an invoice within those 25 days after receiving the invoice, the payment application is deemed approved and the association will lose its rights to dispute the invoice!
If the association finds that a portion of the work is not in accordance with the contract, the association may withhold payment for the reasonable value of that portion of the work only. Payment must still be made for any portion of the contract for which the work has been performed in accordance with the provisions of the contract.
• 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.