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posted: 8/16/2014 12:01 AM

Association board is legally obligated to enforce rules

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Q. Our single-family homeowners association receives complaints from homeowners about rules violations by their neighbors. Is the board required to act on these complaints and is the board required to reveal the name of the complainant to the violator? Sometimes complaining neighbors wish to be anonymous to avoid confrontations.

A. The board has a fiduciary duty to investigate alleged rules violations, and to enforce the rules when there is credible evidence of a violation. Rules are typically enforced by levying of a fine. The board must issue a notice of a violation, and provide the alleged violator with an opportunity for a hearing, before it can levy a fine.

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Minimum due process would require that the alleged violator be permitted to face his accuser at the hearing. Therefore, the complaining owner needs to appear at the hearing. Owners who make complaints cannot be assured of anonymity, and need to participate in the violation hearing.

Of course, a board can, in its discretion, seek to obtain compliance of the rules through more informal means than issuing a notice of violation and pursuing fines. This could involve a warning letter, or a friendly "one-on-one" discussion with the owner and a board member. However, a violation can't simply be ignored.

Q. The board of our association entered into a contract with a small roofing company that I will refer to as "XYZ Maintenance." Things went badly very quickly, and the contractor has not responded to our demand letter that he return to the property to correct deficiencies in the work. A unit owner did some investigating, and determined XYZ Maintenance had been dissolved before the contract was signed and is still dissolved. What does this mean for the association?

A. Initially, before an association enters into a contract with a corporation, it should confirm that the entity is incorporated and in good standing with the Illinois Secretary of State's office. The corporation in your situation was dissolved for failure to file an annual report with the secretary of state. Since the business was still operating, this may have been an oversight by the business.

In any event, since the corporation was not, and is not, in good standing, the "owner" of the business could be personally liable for any claims the association has against the business. That would mean the business owner's personal assets could be at risk if the association files suit, naming the owner personally, and obtains a judgment.

This could give the association significant leverage in getting this contractor to correct deficiencies in the work. The board should definitely speak with an attorney about how to proceed here.

Q. Can a board deviate from the repair and replacement schedules set forth in its professional reserve study?

A. A reserve study is a planning tool based, in part, on educated assumptions. A significant assumption concerns the remaining useful life of a component of the property. If a component fails before the anticipated remaining useful life stated in the reserve study, the board is going to have to arrange for appropriate maintenance, repair or replacement sooner than may have been anticipated.

Similarly, if a component is in functioning condition past the anticipated remaining useful life, the board can consider holding off on its replacement for the time, and continue to closely monitor its condition.

There may be a situation where deferred maintenance for repair or replacement is not contemplated in the reserve study. Unless the association's declaration requires that the reserve account be allocated for specific projects, the reserve fund could generally be used for unanticipated maintenance or replacement projects.

It would also be prudent for the association to have the reserves study updated periodically.

• 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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