Associations should be careful when moving funds

Q. Our townhouse association is a common interest community association governed by the Illinois Common Interest Community Association Act. Can funds be moved back and forth between operational and reserve accounts? For example, if money is moved to the reserve account because that account is paying the best interest, can funds be moved back to operational if unexpected expenses come up that are not designated capital improvement projects? I could not find anything in the Association's Declaration that would prohibit moving money back and forth for the situation I described.

A. The Palm Illinois appellate court decision held that the association’s reserve fund and operating account are not fungible, and can’t be comingled. So, no, money cannot be transferred back and forth between the operating account and the reserve account for the purpose of obtaining the better rate of interest in the reserve account on what are actually operating funds.

Q. I am pretty sure you have covered this before, but can you resolve an argument that two board members have about proxies? Owners in our association can vote in person at the annual meeting, or by proxy. Proxies are mailed to the association by owners who can’t attend in person. In the past, the board counts the votes from the ballots and from the proxies. I have said that is incorrect, and that the proxy holder needs to be given a ballot and cast the votes on a ballot. Another board member claims that the proxy can be treated like the ballot. Who is correct?

A. This is an issue that comes up quite often. A ballot is a ballot, and a proxy is a proxy and a proxy is not a mail-in ballot. A proxy creates an agency between the owner issuing the proxy and the person who is named as the proxy holder in the proxy that describes the authority given to the proxy holder. Votes are not tabulated based on the proxy alone. Rather, the proxy holder must complete a ballot in order to fulfill their responsibility under the proxy.

As a variant of what the board of your association has done, I have attended annual meetings where a blank ballot is just stapled to a proxy and the votes tabulated off the proxy. That is also improper.

Q. An amendment to the declaration for our condominium that combined two units was recorded in Cook County in early 2021. However, a new permanent index number has not been issued yet for the combined unit. Any insight on this.

A. If the appropriate number of copies were delivered to the county when the original amendment was recorded in early 2021, the recording should have triggered the internal process in Cook County to create a new permanent index number for the combined unit. That is, a permanent index number should have been created in 2022 for taxes payable in 2023.

When the amendment was recorded, a copy should have been sent internally at the county to the Assessor’s Divisions Department. If that was not done, the new permanent index number will not be issued. That is, if the Assessor was not provided a copy of the recorded amendment, the issuance of the permanent index number will be delayed until the Assessor actually receives a copy.

We have noticed an increase in such errors since the Cook County Clerk’s Office took over the Cook County Recorder of Deed’s Office in 2020.

Whoever recorded the amendment should be called upon to show that they submitted the correct number of copies, and the affected owner should follow up with the Assessor.

• 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.