Boards must release common condo expense reports

Q. Thank you for your recent column on budgets. The board of our condominium association does not produce a year-to-date report showing the expenses for the current year when they present the proposed budget for the following year. Please let me know if this is legal. Also the proposed budget did not have a line item listing real estate taxes as mentioned in your article.

A. The board is not required to provide a year-to-date report of expenses in connection with the budget adoption process. However, the board is required to annually supply to all unit owners an itemized accounting of the common expenses for the preceding year. So, the accounting would be provided after the current fiscal year.

The accounting must show common expenses actually incurred or paid, together with an indication of which portions were for reserves, capital expenditures or repairs, or payment of real estate taxes (if any). The accounting must also include a tabulation of the amounts collected pursuant to the budget, and show the net surplus or shortfall of income over expenditures plus reserves.

With respect to a line item for real estate taxes, condominium associations seldom own real estate upon which real estate taxes are levied. This may be why the budget for your association did not include such an expense.

Q. The outdoor light fixtures at garages and door entrances of units of our townhouse association are 20 years old. They need to be replaced, and this is a homeowner expense. The association board members approved a different and updated style of light for one unit. After the fixture was installed, the board decided that it did not like the look. The board has prohibited other owners from installing a light fixture different from the original lights. So while the board did approve a different fixture for one homeowner, it refuses to do so for other homeowners. Is this legal? And is there recourse for other homeowners who also wish to install a light fixture style of their choosing

A. It sounds like the board recognized that it made a mistake in judgment when it approved the alternative to the original light fixture. The board could correct that mistake, and re-establish the original specification for exterior light fixtures.

Recourse is through the political process. If the owners don’t approve of the decisions of the board, the most efficient solution would be to vote for candidates who have similar views on issues. However, I would hope that candidates are elected to the board based on all of their qualifications, and not solely because they share an opinion on a limited issue.

Q. I am confused about the law that governs what amounts a condominium association is entitled to recover from a new owner after a foreclosure sale of a unit. Can you clarify?

A. The law now provides that the person who buys the unit from the lender, if the lender was the successful purchaser at the foreclosure sale, or the purchaser of a unit at the foreclosure sale other than the lender, will be responsible for up to six months of common expenses that were due from the foreclosed owner at the time the association initiated a collection action against the foreclosed owner.

The key then is that the association must have initiated a collection action against the foreclosed owner while they were an owner. Many trial courts are now stating that the filing of a suit is when the collection action is deemed initiated, and not when the 30-day statutory demand letter is issued. Therefore, filing of a suit against the delinquent owner before the foreclosure sale is the prudent approach, rather than only issuing the 30-day statutory demand letter.

Some associations, relying on the “ignorance” of the buyer, request more than what they are legally entitled to even if no collection action was initiated against the foreclosed owner. However, buyers (and their lawyers) are becoming more sophisticated in this regard.

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.