Condo budget is more difficult in inflationary times
Q: In establishing the 2023 annual budget, the board of our association raised our monthly assessment using the federal Cost of Living Adjustment (COLA) increase amount as a guide. Only three of the categories of COLA expense should affect association expenses. The association's reserve funds are low, but raising them under the guise of COLA is not right. What are your thoughts?
A: Establishing an association's annual budget in an inflationary period can be extremely difficult, to say the least. A common way to address expense increases for inflation, and therefore assessments, is to use the consumer price index rate.
With respect to the reserve fund, the association should utilize a reserve study to establish a budget line item for reserve funding. It is appropriate to update the reserve study from time to time, and particularly in inflationary times.
Q: The board of our association distributed the proposed 2023 annual budget to owners. Is there supposed to be a meeting of the owners to review the proposed budget?
A: The board of directors is required to provide owners with a copy of the proposed annual budget in advance of its adoption at a board meeting, and to give owners notice of that meeting where the annual budget will be adopted. However, there is no requirement that the association hold a meeting of the owners to discuss the proposed annual budget. This all applies to both Illinois condominiums and common interest community associations.
Q: The electrician we use for our condominium association has recommended the board prohibit electric vehicle stations due to the draw they create. What do you think about that?
A: The installation of an electric vehicle charging station by an owner typically requires some sort of alteration of the common elements. Language in most condominium declarations requires board approval to make such alterations. The board can prohibit the installation, based on such language.
However, the electrician's recommendation ignores the reality of electric vehicles. Electric vehicles are not a novelty, their numbers increase every day and, at some time in the not too distant future, electric vehicles will replace combustion engines. This is being done legislatively, and many vehicle manufactures have pledged to move to electric vehicle manufacturing only.
The technology involving electric vehicle charging stations is evolving, and I can't speak to what it will require from an infrastructure standpoint. However, it would be prudent for associations to consult with an electrical engineer to develop a plan to accommodate electric vehicle charging stations and the associated infrastructure. Otherwise, I assume the legislature will step in on this point at some time.
An issue will also be whether associations will provide charging stations in the common elements for all residents to use (on some sort of first-come first-served basis), or provide for electric vehicle charging stations in garage units/limited common element parking spaces.
Q: The accountant for our common interest community association asked the association's attorney for an opinion on a law, effective Jan. 1, 2018, that deals with how an operating surplus is to be handled. I thought this only applied to condominiums. Please advise.
A: The law in question, among other things, established Section 9(c)(5) of the Illinois Condominium Property Act. That section addresses how, in the absence of language in an association's governing documents, an operating surplus or deficit is to be handled. However, that law did not establish similar language in the Illinois Common Interest Community Association Act, and there is no similar language in the Illinois Common Interest Community Association Act.
• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit. Send questions for the column to 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.