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posted: 3/15/2014 12:01 AM

Why associations limit the number of rental units

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Q. Your column has discussed unit lease restrictions in associations. Why do associations impose leasing restrictions?

A. Associations consider placing restrictions on leasing of units for a variety of reasons. However, there are two reasons most commonly given.

First, many associations perceive that transient tenants treat the property with less respect than owners; thereby increasing maintenance expenses and rules enforcement activity.

Secondly, if the number of tenants remains unchecked, the percentage of owner-occupied units may eventually dip below a level that is acceptable to lenders, and particularly those in the secondary mortgage market to whom most mortgages are sold. That is, the level of rentals may adversely affect the availability of mortgage money or the decision of banks and mortgage companies to write mortgages for the property. While a mortgage may still be obtained under such circumstances, it would typically be at a higher rate of interest.

This may all have an impact on property values. Accordingly, many associations feel it is in the best interests of the association and the owners when limits are placed on the leasing of units.

Q. What are the new categories of licenses under the Community Association and Disciplinary Act?

A. Two new categories of licenses were created as of Jan. 1. The person who manages and supervises a community association management firm is required to be licensed as a "supervising community association manager." That license requires 10 hours of classroom work focusing on community association administration, management and supervision. This is in addition to the 20 classroom hours required to obtain a community association manager license. Further, a "community association management firm," not merely the community association managers that work for the firm, must be licensed.

Q. What amounts can a condominium association recover from a new owner after a foreclosure sale of a unit?

A. The law 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 six month-period in question is the six months before the date the association initiated a collection action. Common Expenses means the proposed or actual expenses affecting the property, including reserves, if any, lawfully assessed by the board of managers of the association.

The key then is that the association must have initiated a collection action against the foreclosed owner while they were still an owner. Many trial courts now state 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.

Q. A water pipe on the outside of our condominium building is leaking and needs to be repaired. The association is trying to determine if it is an association expense or an expense of the municipality. How do we determine this responsibility?

A. The municipal ordinance for your community should be reviewed for an answer. In general though, the municipality will be is responsible for the pipe from the municipality's water main to the buffalo box. The association is generally responsible for pipes from the buffalo box to the building. The association's declaration should also be reviewed as there may be language there to address this issue.

• 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.

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