Owners have means to keep boards accountable

Q. Our association is not a condominium. Is it true that if a townhouse association has ten units or less it is not subject to the provisions of the Illinois common interest association statutes? If they are not subject to any Illinois statute that governs homeowners associations, who or what holds the board accountable to the homeowners for violations of the covenants?

A. A common interest community association organized under the General Not for Profit Corporation Act of 1986 and having either 1), ten units or less, or 2), annual budgeted assessments of $100,000 or less, is exempt from the Common Interest Community Association Act. That said, an exempt association can affirmatively elect to be covered by the act by a majority of its directors or members.

Unit owners, in any type of association, are primarily responsible for making sure the board is adhering to the covenants. A variety of remedies are available to owners if the board is not adhering to the covenants. For example, the unit owners can remove members of the board through the process set forth in the governing documents and the General Not for Profit Corporation Act, if applicable; or the owners can elect better board members at the next annual meeting; or the owners, as a last resort, can file suit against the board members who are essentially breaching their fiduciary duty.

While the political process of removing board members and (hopefully) election of better board members is more efficient, we have seen a growing numbers of owners institute litigation against board members for breach of their fiduciary duties.

Q. What can you tell me about HR 3700, the Housing Opportunity through Modernization Act?

A. This bill, moving through the U.S. legislature, is intended to address problems in the FHA's condominium program. The bill would help condominiums qualify for and maintain FHA approval. This would be accomplished by simplifying the project certification requirements and streamlining the recertification process, with respect to mortgage insurance on condominium projects. The recertification process would be substantially less burdensome than certifications. The bill would allow HUD to reduce the minimum owner occupancy requirement from 50 percent to 35 percent. The bill has passed the House and has been referred to the Senate.

Many otherwise creditworthy prospective condominium unit buyers can be frustrated to learn that many condominiums are not FHA certified, and that the condominium could not qualify even if the association applied for certification. HR 3700 is pretty much a bipartisan bill, so it shouldn't get caught up in the Washington gridlock.

Q. I understand that the Condominium Property Act will permit a board to ratify an "emergency" decision, and that the term "emergency" is defined. However, by what procedure would the board actually make a decision in an emergency?

A. Section 18(a) of the Condominium Property Act will, effective June 1 of this year, permit the board of a condominium association to ratify "emergency" decisions. That section does not describe how the actual decision is made in an emergency. Presumably, the decision in an emergency could be made by the board at a meeting called on less than 48 hours' notice or without notice, or by email between the board members, or by telephone polling of board members. The board would then have to follow the ratification procedure I described in a prior column.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. 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.