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posted: 4/26/2014 12:01 AM

Condo owners not allowed to build on common areas

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Q. Our townhouse-style condominiums include a rear patio that is a limited common element of the unit. Several owners have taken the liberty to increase the size of their patio. As a result, the patio extends several feet into the general common element open space. In other instances, the board has granted owners permission to do this. Is this permitted?

A. Owners do not have a right to extend their patio onto the general common elements. Likewise, the board of an association will generally not have the authority to grant an owner permission to do so.

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To extend the limited common element patio into the general common elements would constitute the allocation of a portion of the common elements for the exclusive use of a unit owner. This is beyond the scope of the board's authority.

Case law in Illinois provides that an owner cannot use a portion of the general common elements for his exclusive use without the approval of all of the owners in the association. This is because the common elements are owned in common by all unit owners.

Q. Amendments to our association's declaration must be signed by two-thirds of the owners and acknowledged. Please explain what is meant by "acknowledged."

A. A signature is "acknowledged" before a notary public. The unit owner need not sign the amendment in the notary's presence. However, the owner must personally appear before the notary and state that the signature on the document is his or hers, and that the document was executed for the purposes stated therein. The notary public then signs and dates a statement on the signature page, signifying the signature was acknowledged before them by the signer. The notary public will also stamp the acknowledgment form with his or her notary seal.

Some associations gather signed signature pages, and then present them to the notary to sign and stamp, without ever having been acknowledged before the notary by the owner. That is not a proper notarial act, and not a proper acknowledgment.

Q. Our association's reserve fund is in a checking account that does not yield any interest. Can an association invest reserve funds and, if so, are there any restrictions on the type of investments the board can select?

A. An association can, and should, invest its reserve funds. Return on investment is one of the criteria to determine how much an association should budget for reserves each year. With savings accounts currently yielding an interest rate of less than 1 percent, many associations are looking for alternatives to the traditional savings account. As fiduciaries, board members are guided by the "prudent investor rule." The board's investment strategy should consider both the reasonable production of income and the safety of principal. That is, the principal should not be at risk. If a board invests reserve funds where principal is at risk, the board has to be concerned it may be exceeding the parameters of the prudent investment rule and the protection of the business judgment rule. FDIC-insured savings accounts and certificates of deposit, and U.S. government treasuries and bonds, are examples of potential reserve fund investments that a board of directors of an associations should discuss with its investment adviser.

Legal landscape: On a personal note, the Illinois Chapter of Community Associations Institute will hold its fifth annual Legal Forum on Thursday, May 1, at the Hyatt Regency Chicago. My partner, Kerry Bartell, and I will be speaking at a morning session on "Concealed Carry & Medical Marijuana: Guns & Dope, Can You Just Say No?" Registration information is available at www.cai-illinois.org.

• 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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