Impending contracts and COVID-19
Q: Our homeowner's association has a contract with a pool company to provide various services prior to and during the swimming pool season. These services include filling the pool, cleaning the pool and providing lifeguards. The pool is scheduled to open June 1. Can the association get out of the pool contract if the pool is not permitted to open due to the COVID-19 pandemic?
A: Some contracts include language that permits performance under a contract to be excused or delayed under certain specifically described circumstances. Even in the absence of such language, the association may nonetheless have a way to avoid obligations under a contract based on the common law.
There is a common law doctrine that is generally referred to as "impossibility of performance." This doctrine would excuse performance of a contract by an association if performance would be impossible by operation of law, or a violation of law.
There may be work under an association's pool services contract that can be delayed at this time or even excused entirely under Gov. Pritzker's "stay-at-home" executive order. That is something that should be reviewed with the association's counsel.
Note that while the governor's executive order, as of this writing, expires at the end of May, it is not known whether it may be extended once again.
Q: I have heard conflicting information. Do condominium and homeowner associations qualify for the Payroll Protection Program under the CARES Act?
A: The Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted to provide economic stimulus in response to the COVID-19 pandemic.
I agree that there has been conflicting information circulating about the applicability of the CARES Act to condominium and homeowner's associations. This is partially due to some confusing language in the CARES Act, and a little bit of hopeful thinking. As of the date I am writing this, the Payroll Protection Program of the CARES Act does not provide relief for condominium or homeowners associations. More importantly, the program is out of money. That said, associations should speak with their banker from time to time to see if additional funds are allocated for this program and to see if the Cares Act gets tweaked to include such associations.
Q: Because of the COVID-19 situation, our condominium association wants to explore electronic voting for the annual meeting that is supposed to occur in June. What does the board need to do to put that in place?
A: In order to use the electronic voting procedure for board elections, the board must adopt an appropriate rule. This is set out in Section 18(b)(9)(B-5) of the Illinois Condominium Property Act.
Notably, this particular rule must be adopted at least 120 days before a board election. The rule must provide that unit owners may not vote by proxy in board elections, but may vote only (1) by submitting an association-issued ballot in person at the election meeting; or (2) by any acceptable technological means. Acceptable technological means includes, without limitation, electronic transmission over the internet or other network, whether by direct connection, intranet, telecopier, email and any generally available technology that, by rule of the association, is deemed to provide reasonable security, reliability, identification and verifiability.
Moreover, unlike other rules, the owners have an opportunity to file a petition after the board's approval of this particular rule to ask for a meeting. If the board receives such a petition, it must call a meeting of the unit owners to vote on the rule. Unless a majority of the total votes of the unit owners are cast at the meeting to reject the rule, the rule is ratified.
The timeline required to adopt the rule here may not work out for your June annual meeting; however, it's certainly appropriate to adopt such a rule as soon as possible to have available next year.
• 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.