Association boards need at least three members for nonprofit status
Q. In one of your recent articles you mention that in order to maintain the association's status as a nonprofit corporation with the Secretary of State in Illinois, it must have three board members. We are a small community of 19 townhouses with a lot of elderly residents who do not want to participate in any of the association's doings. What happens if you cannot get residents to volunteer to be one of the three board members?
A. I don't know the number of directors you are supposed to have under your governing documents. However, a board must have a minimum of three directors to maintain its corporate status with the Illinois Secretary of State. That said, a board in most instances could technically operate with as little as one sitting board member. But that is not prudent as all the decisions affecting the community should not be made by a single person. Owners need to step up and serve on the board!
Q. I am president of a community association. The board recently requested the association's managing agent to consult with the association's attorney on a specific issue. However, the managing agent contacted, and the board received a response from, a completely different law firm. The manager cited to some language in its management contract permitting the property manager to expend a certain amount of money without the prior approval of the board. Did the managing agent have the authority to change the association's law firm without the authority of the board?
A. The claimed authority in the management agreement alone would not be a sufficient delegation to the managing agent under the holding of the Illinois appellate court decision in Palm v. 2800 Lake Shore Drive Condominium. Rather, the board of the association would have to adopt a resolution granting the managing agent the specific authority identified in the management agreement. Many association boards are adopting resolutions to expressly authorize management to do that which is described in its management contract. This is generally a good idea to protect both the board and the managing agent.
Q. I live in a common interest community association of townhouses. At the last board meeting, the board adopted a detailed resolution giving sole authority to the president regarding collection matters. This permits the president to turn owners over to an attorney for collection, and each individual collection matter will not be discussed or approved by the board or documented in the meeting minutes before we take legal action. Is this legal? I was under the assumption that all board actions must be discussed and approved by a board majority.
A. Whether to proceed with litigation is association business that must be voted on by the board at a meeting open to owners. This poses a particular problem in authorizing litigation for "routine" matters such as assessment collection litigation. From a practical standpoint, this issue can be addressed rather easily.
The board could adopt a resolution at a board meeting delegating to a board member and/or the manager the authority to proceed with collection litigation against delinquent unit owners. The resolution would provide that the decision of the board member to turn a matter over to an attorney must be based on and in accordance with the terms of a detailed collection policy. This would then avoid having to approve each collection case individually at a board meeting. It sounds like the board got it right here. The board member to whom this responsibility is assigned should also be required, at each board meeting, to report on actions taken under the resolution.
• 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.