No exemption to condominium law for small associations

By David M. Bendoff

Q: We are a small, self-managed condominium association. Complying with the provisions of the Illinois Condominium Property Act is extremely burdensome for us. Does the Illinois Condominium Property Act apply to all condominium associations, or is there some minimum number of units that is required to make the condominium association subject to that law?

A: The Illinois Condominium Property Act applies to all condominium associations in Illinois. There is no minimum unit number threshold, or exemption for small associations. That said, there are a few provisions that only apply to an association with more than a certain number of units (e.g., owner meeting quorum; fidelity insurance).

Do note that, with respect to common interest community associations, the Illinois Common Interest Community Association Act is not applicable to all common interest community associations. A common interest community association organized under the General Not for Profit Corporation Act of 1986 and having either 10 units or less or annual budgeted assessments of $100,000 or less is exempt from the Illinois Common Interest Community Association Act. However, the association can affirmatively elect to be covered by the Illinois Common Interest Community Association Act by a majority of its directors or members.

Q: The issue of unclaimed property (in the form of credit balances on a former unit owner's account) has come up in our association. What is an association's obligation regarding these surplus funds?

A: This issue typically arises when an association has been holding surplus assessment funds from a former owner. This can happen if an association obtains possession of a unit in a collection action, and a surplus is created through leasing the unit, and the unit is sold for unpaid taxes or in a foreclosure sale; although there are other scenarios that can result in a surplus.

The Illinois Revised Uniform Disposition of Unclaimed Property requires a business (whether or not for profit) to report property unclaimed for three years to the Illinois State Treasurer. This would include a condominium, master or common interest community association.

If the funds have been unclaimed for three years, the association is required to complete the paperwork to transfer those funds to the state of Illinois. The process to submit unclaimed funds to the state is fairly simple and remittance can be done by check or ACH Credit. Here is the website address for more information and an address as to where funds can be submitted:icash.illinoistreasurer.gov/app/reporting-guidelines.

Also, if unclaimed property is worth more than $50, the holder of the property must send out a due diligence letter to the owner of the unclaimed property by first class mail 60 to 365 days before reporting the unclaimed property to the state of Illinois. A due diligence email will also be required if the property owner agreed to receive emails. The due diligence materials must state the name, address, position and phone number of a person who is the holder of the unclaimed property, whom the property owner can contact; how the property owner can reclaim the property from the property holder or have the property holder maintain it (probably not what associations want to do); and that the property may be reclaimed indefinitely once it has been turned over to the state of Illinois by filing a claim with the state Treasurer's office.

Some limited effort should be undertaken to track down the former owner. A "skip trace" would typically be sufficient.

To put a fine point on all of this, contrary to the belief of many associations, these surplus funds do not become the property of the association, or of the purchaser 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.