Prospective buyers are advised to read condo rules

Q. I recently purchased a condominium in Lake County. I want to rent out the unit while I travel for six months. However, I have been advised that leasing is prohibited under the covenants unless and until I have owned and occupied the unit for at least one year. I would also like to purchase another unit in my association in order to lease it out; however, this covenant seems to be an impediment. How can I go about leasing my property in light of all of this?

A. This appears to be another situation where a prospective purchaser did not review the covenants before they acquired the property. Most people who purchase a condominium only inspect the real estate, when they should also be inspecting the covenants and rules to determine if they impose any restrictions that are inconsistent with their anticipated use of their unit.

Here, it would appear, you would have been made aware of the restrictions had you performed some basic due diligence. Unless there is some hardship provision in the leasing restriction you can invoke, you would only be able to lease units in compliance with the covenants that require you to both own and occupy a unit for a year before being able to lease it.

Q. Your recent article regarding 22.1 disclosures in condominiums hit home. The board of our association is in possession of an engineering study that identifies the immediate need for millions of dollars of common element replacement work. The board refuses to include these capital expenditures in the 22.1 disclosure, stating that the board has not approved proceeding with any of the work. Why is this so important?

A. Section 22.1(a)(3) of the Illinois Condominium Property Act requires the resale disclosure provided to prospective purchasers by the association to include "a statement of any capital expenditures anticipated by the unit owner's association within the current or succeeding two fiscal years." Including only those capital expenditures that have been "approved" by the board does not meet the broader requirement to disclose "anticipated" capital expenditures.

Failing or refusing to provide accurate information in the 22.1 disclosure can be a breach of the board's fiduciary duty, exposing it to liability. It may also provide an opportunity for a prospective purchaser to avoid assessments levied to pay for a capital expenditure that should have been identified in the 22.1 disclosure.

Sweeping information under the rug from engineering reports about the need for capital expenditures does not seem to be a prudent business decision of the board.

All of this underscores the need for associations to properly fund reserve accounts, based, in part, on a reserve study. In my view, a 22.1 disclosure that identifies anticipated capital expenditures, and that can indicate that the expenditures would be funded from the reserve account, should show prospective purchasers the strength of the association's financial position, planning and leadership.

On the other hand, a sophisticated prospective purchaser might be wary of a sparse 22.1 disclosure.

Q. An issue keeps coming up at our board meetings, and we don't seem to get a consistent answer. Can a unit owner videotape a board meeting?

A. "Yes," owners can videotape board meetings of a condominium association or master association. The Illinois Condominium Property Act provides that any unit owner may record the proceedings at board meetings, or portions thereof required to be open to owners, by tape, film or other means. However, the board may prescribe reasonable rules and regulations to govern such recordings.

The taping of meetings can be disruptive, intimidating and create safety issues. A board should address these issues by establishing rules that will ensure the least amount of disruption to the board and owners without impairing unit owner rights to tape the meetings.

There is no language in the Illinois Common Interest Community Association Act regarding taping of board meetings by owners. Therefore, owners in those types of associations would not have a right to tape board meetings,

• 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.