Association owns assessment contributions
Q. When I purchased my condominium, I had to make a contribution to the reserve fund equal to two months of assessments. I am now selling my unit. Should I get a refund from the association for any unused portion of my original contribution to the reserve account?
A. No. The initial reserve contribution you made, together with any contributions to the reserve fund you made as part of your assessments during your ownership of the unit, are assets of the association. Owners are not entitled to a refund from the association of any reserve contributions at the time of the sale of their unit. A healthy reserve fund can contribute to the success of the marketability and sale of units.
Q. I know this is an issue you have addressed before. If the board of my association claims an owner has violated a rule, the board issues a violation notice that states a fine has been levied against the owner. The notice goes on to state that if the owner wants to appeal the fine, they need to request a hearing. I though there had to be a hearing before a fine can be levied. What is correct here?
A. The statutes that govern condominiums and common interest community associations describe the due process that must be afforded before a fine can be levied by the board. This statutory due process is described in Section 18.4(l) of Condominium Property Act and Section 1-30(g) of the Common Interest Community Association Act.
Both statutes grant the board of an association the power to levy reasonable fines for violation of the declaration, bylaws, and rules and regulations of the association, after notice and an opportunity to be heard,
Before the board levies a fine, the board must issue written notice of the violation and provide the owner with an opportunity for a hearing. After the hearing, or if the owner fails or refuses to avail themselves of the opportunity for a hearing, the board may levy a fine. That is, the board may not issue a notice of violation that indicates that a fine has been levied, and then give an owner the opportunity for a hearing or an "appeal" of he fine.
Note, too, that the fine must be levied by the board at a board meeting; a board member can't simply decide a fine should be given.
Q. Can you provide some pros and cons of leasing restrictions in associations.
A. Here is a short list of "pros" and "cons" of a lease restriction (they are by no means exclusive):
The "pros" of a lease restriction include:
• Increases the pool of lenders that will provide unit financing. If a condominium does not meet the owner-occupancy ratios, an owner/purchaser will have to look to a local lender that does not bundle and sell units into the secondary mortgage market, and usually at a higher interest rate.
• Contributes to qualification for FHA certification (if an association is not FHA certified, purchasers will not be able to obtain FHA-backed loans), and maintains ability of owners/purchasers to qualify for traditional (FHA/FNMA-backed) mortgage financing.
• Reduces transient population in association; thereby maintaining a greater sense of community.
The "cons" of a lease restriction include:
• Potentially limits pool of potential buyers to people who will occupy units.
• Could limit the ability of current owners who occupy a unit to lease their unit, if their personal circumstances change.
Whether or not to restrict leasing in an association can be a very controversial topic. A board considering an amendment to the declaration/by-laws to restrict leasing should be prepared to provide owners with its reasons, which can differ from association to association.
• 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.