Former treasurer blocks bank sign-off

Q. The former treasurer of our condominium association was a signer on the association's bank accounts. In order for the bank to change the signer to the current treasurer, the bank requires the former treasurer to sign off. We cannot get the former treasurer to cooperate. What can the board do here?

A. In order to change the signers on bank accounts, some banks merely require a resolution from the board identifying the new signer. Other banks require the former signer to sign off on the change. So as an initial matter, the board should contact its banks to determine what they require.

Board members do owe a fiduciary duty to the association. This duty does not end with the end of an owner's service on the board. A strongly worded reminder should be issued to the former board member of this fiduciary duty, and that they are exposed to liability for any breach of that duty.

In this situation, the inability to access association funds by the board can result in late fees for late payments owed to third parties or termination of contracts by vendors and a claim for damages by the vendor for lack of payment.

Most condominium declarations provide that board members have a fiduciary duty. If the former board member is not compelled to action after the friendly reminder, the board could consider levying a fine for violation of the declaration that includes this language.

In the rare instance that the former board member is not compelled to act, the association could certainly consider filing a suit against them to compel their compliance with this responsibility as a former board member.

Q. What are a couple of the biggest misunderstandings you see among the board of condominium associations?

A. Hands down, the biggest misunderstanding concerns the association's property insurance and when it is triggered. There is an often misunderstood distinction between the association's and the owner's responsibility to generally maintain, repair or replace a particular part of the property, and as to what party has the responsibility to insure the same part of the property against a casualty loss.

This insurance issue is governed by Section 12 of the Illinois Condominium Property Act and not by the association's declaration of condominium.

So, while the association may not be responsible for the cause (like a leak from one unit to another unit) that gives rise to a loss, or for maintaining a part of a unit that is damaged, the casualty loss may trigger coverage under the association's master property insurance policy. It is important to note that each owner is an insured (not just an additional insured) party under the association's master property insurance policy.

Further, the failure of a common element, like a common element water pipe or roof that results in a water leak into a unit, does not necessarily mean the association is responsible for all the damage to the unit or to the owner's personal property.

Another significant misunderstanding concerns the levying of fines. Many associations will issue a letter to an owner indicating that a fine has been levied against the owner for violation of its rules, while offering the owner an opportunity to "appeal" the fine. The Condominium Property Act does permit the board to levy a fine for a violation of the declaration and its rules. However, a fine can only be levied after the board has provided notice of violation and after the board has provided an opportunity for hearing.

So while the notice of violation can indicate what fine can be levied, it cannot indicate that a fine has already been levied.

• 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.