How to compensate board members

Q. The members of the board of our condominium spend a tremendous amount of their time on association matters. Can the board set a salary to be paid to board members?

A. The Illinois Condominium Property Act states that the bylaws shall provide for the compensation, if any, of the members of the board. The declaration for your association, as is common, provides that board members serve without compensation, unless compensation is approved by two-thirds of the owners in the association. The issue of compensating board members needs to be submitted to the ownership for approval at a meeting of the owners.

That said, board members can be reimbursed for their actual out of pocket expenses, if any, incurred as a board member, without owner approval. Examples of some of these expenses might be office supplies, or printer ink or paper for a computer used to print association related documents.

Q. The annual meeting for our condominium is coming up in at the end of the year. Can voting for board members be by "secret" ballot?

A. Section 18(b)(10) of the Condominium Property Act governs the secret ballot rule issue. It provides that the association may, upon adoption of the appropriate rules by the board, conduct elections by secret ballot. If such a rule is adopted, the voting ballot would be marked only with the percentage interest for the unit and the vote itself. The board would also have to adopt rules to verify the status of the unit owner issuing a proxy or casting a ballot. Therefore, in order to permit "secret" ballot voting at the annual election, the board needs to properly adopt these rules in advance of the annual meeting. Without such rules, "a secret" ballot would not be permitted, and the ballot would have to identify the unit number/owner.

Q. Do candidates for the board run for a specific officer position on the board (like president) or do candidates run for a general seat on the board?

A. Candidates to the board do not run for a particular officer position; they run for the board. Owners vote for board members, and not the officers of the board. Once the board is elected, the board members will vote among themselves to decide who will be the president, secretary and treasurer, or other officer provided for in the association's governing documents. The board's election of its officers must take place at a board meeting open to the owners. Note, too, unless the association's governing documents expressly permit it, no one board member can hold two officer positions.

Q. How specific does our association's annual budget have to be?

A. The board must prepare a detailed proposed annual budget. The budget must set forth with particularity all anticipated common expenses by category, as well as all anticipated assessments and other income. The budget also needs to state each unit owner's proposed common expense assessment. In a condominium and a common interest community association, the budget must indicate which portions are intended for reserves, capital expenditures or repairs or payment of real estate taxes. These requirements are narrow enough to provide guidance, and general enough to provide flexibility, to associations as to the details of their budget.

That said, let me comment on the "reserve" component of the annual budget. If the association's declaration requires the reserve for contingencies and replacements to be "segregated and allocated for specific purposes," the budget must be itemized by component for each component of the property subject to reserve. That could be pretty burdensome. However, if the declaration does not require the reserve funds to be "segregated and allocated for specific purposes," the budget could include a "lump sum" amount for the reserve contribution.

• 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.