Q. From time to time the board of our association assembles to walk the property with a proposed contractor to discuss details of work to be performed, or with an existing contractor to inspect work actually performed under the terms of a contract. One of our owners claims these gatherings, when a quorum of the board is present, are board meetings. He believes notice of these gatherings must be given and owners permitted to attend. Is that correct?
A. Under the Illinois Condominium Property Act, a board may gather outside of a board meeting to discuss the appointment, employment, engagement or dismissal of an independent contractor, agent or other provider of goods and services, or to interview a potential independent contractor, agent or other provider of goods and services. Owners are not required to be permitted to attend these gatherings. A property walk through with a prospective contractor would seemingly fall within these exceptions to the "open meetings" language of the Condominium Property Act.
Further, if the property walk-through is pursuant to a contract previously approved by the board at a board meeting, to gather information to determine a contractor's compliance with the contract, I would suggest these gatherings are not the type that require notice and for which owners must be permitted to attend. We may have to wait for an appellate court decision to know for sure, but it seems to be an extreme view to suggest that these are board meetings. Nonetheless, depending on its nature, the discussion regarding the information gathered may have to be conducted at an open board meeting (unless some exception applies) and any votes of the board with respect to the information must be made at an open board meeting.
Q. One of the board members in our association wants to invest a portion of the association's reserve fund in a stock market mutual fund and in corporate bonds. This sounds very risky to me. Are such investments permitted by an association?
A. The "prudent investor rule" has been adopted as an Illinois statute. It governs trusts and fiduciaries, and is, at a minimum, applicable to association boards by analogy as they have a fiduciary responsibility.
The statute provides that no specific investment or course of action is, taken alone, prudent or imprudent. The trustee may invest in every kind of property and type of investment, subject to this statute. However, that statute requires that an investment strategy must consider both the reasonable production of income and safety of capital. In my view, that is critical when investing reserve funds.
Accordingly, a decision to invest the association's reserve funds in a vehicle that may result in the loss of capital would certainly be subject to criticism and, in the event a unit owner decides to institute litigation, would, at a minimum, guarantee the case would not be dismissed prior to a full trial.
Accordingly, it is suggested that an investment in stocks and/or corporate bonds may raise concerns under the safety of capital prong described above.
Q. Your June 24 column indicates that approval of all owners in a condominium would be required to permit an owner to expand the size of his or her deck, and that the board alone could not grant this approval. However, you close your response with "there may be circumstances where the board can permit an owner to use the common elements for a limited duration." When would that apply?
A. The most common examples are where a declaration of condominium authorizes the board to grant leases or licenses to common elements, like storage lockers or parking spaces. These are privileges granted for a limited duration, often month to month, and do not transfer with the sale of the unit.
• 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.