Insurance issues arise when classes use association property

Q. The board of our association wants to permit a fitness instructor to use association facilities in order to hold exercise classes for residents. The instructor would be paid by participants in the classes, and participants would sign up directly with the instructor, although the classes would be promoted in the association's newsletter. A concern has been raised about the association's liability if a person is injured in one of these classes. Should the board permit these classes?

A. This is an issue that comes up for all kinds of third-party instructors, like fitness instructors, yoga instructors, tennis instructors, swim instructors and dance instructors, to name a few. Whether or not to permit these activities to take place in association facilities is a business decision of the board.

The activity does potentially expose the association to at least a lawsuit if someone is injured while participating in these types of classes. However, the risk of a loss can be managed by the board.

The instructor should be required to execute an indemnification agreement with the association. The agreement would require the instructor to indemnify and defend the association in the event a claim is made against the association by a participant in the class. But the indemnification agreement by itself may not be enough if the instructor lacks the financial resources. Therefore, the agreement should also require the instructor to maintain (and provide proof of) appropriate types and amounts of insurance that would apply if the indemnification agreement is triggered. The board should also consider having participants in the class execute a hold harmless agreement. These agreements can be very short in length. The association should also speak with its own insurance agent to determine if the activity affects the association's insurance or premiums.

The bottom line here is that these types of activities can bring great value to the residents of the association; however, the board needs to manage the risk of potential loss.

Q. Our association is comprised of multiple townhouse buildings. However, only one unit in each building has an outdoor water spigot, and water consumption is metered to that unit and billed by the city to the owner of that particular unit. I own one of the units with the outdoor water spigot.

This spigot is used by various association contractors, most recently to power wash several of the buildings, and by the association's landscaper and a concrete company. One of the contractors actually damaged my hose reel. Am I required to provide and pay for water used by the association?

A. Initially, you should review the governing documents for the association to see if and how this issue is addressed. But in the absence of language in the governing documents, you should generally not be required to supply and pay for water used by the association.

It would not be unreasonable for you (and the owners in the other buildings with the same issue) and the association to enter into a written agreement. The agreement could provide that the owners of these particular units would be reimbursed for the association's use of the water here, and for damage caused by such use. The developer really should have provided for a water source that would be metered and billed to the association.

Q. Our long existing association is now considered a common interest community under the Illinois common interest community association act. The declaration of covenants for our association is recorded with the recorder of deeds. However, the bylaws are not. Do the bylaws have to be recorded?

A. The Illinois common interest community association act provides that the administration of every property is to be governed by the declaration and bylaws, and that a true copy of the bylaws must be appended to and recorded with the declaration. So, the board is going to have to have the bylaws recorded with the county recorder of deeds in order to comply with the act. The board should also take the opportunity to have the bylaws updated to conform to the act. This amendment can be adopted by the board, without owner approval, but drafted by counsel.

• 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.