Board members, not property managers, must file under transparency act
Q. I have a few questions concerning the federal Corporate Transparency Act.
What if the property manager for our association does not register (with the federal government) as required by law, and the board continues the property manager contract. Is that appropriate? Does the management company need to register each association that they have a contract with or is one filing enough to cover all the association business of the management company? If no owners will run for the board because of the registration requirement, who runs the association? Does the property manager run the association?
A. Let me start by saying that you may not have an accurate understanding of the Corporate Transparency Act (“CTA”). Individual board members must register under the CTA. A management company does not automatically have the responsibility to file the necessary information required by CTA for the board members. For a variety of legitimate reasons, some management companies will handle the filing for their clients; others will not. That would be a matter for each association to discuss with their property manager. Unless the management contract specifically requires the management company to perform the registration, the refusal of the management company to perform the filing would not be a breach of the management contract.
Moreover, there is no “blanket” filing that covers all of the associations managed by a management company. Each individual board member must register under the CTA.
If owners refuse to run for the board because of the CTA filing requirements (or for any other reason), the current members of the board would continue in office. However, if there are no board members, no one would run the association. The property manager would not have the authority to run the association. This would be an extraordinarily bad situation, so owners need to step up.
As a reminder, board members must register under CTA by Jan. 1, 2025. There are civil penalties, and potential criminal penalties, for failing to timely register. An association should speak with its attorney with questions about the filing requirements and to assist with the filing. However, make sure that the law firm has a secure means for board members to transmit information, and to protect data it receives from board members.
Q. There is a newer owner in our association with numerous outstanding violations of the association’s rules. A current violation concerns leasing a unit in violation of a lease restriction in our bylaws, and lying about it. He wants to run for the board, but the board does not find him to be trustworthy. It is my understanding that a potential condominium board member must be an owner in good standing. Is that correct?
A. In Illinois, there is no “good standing” requirement to be eligible to run for or serve on the condominium board. In Illinois, the only qualification to be a board member is being a unit owner.
The issues that you raise do go to the qualifications of a candidate to serve on the board. These are issues that can be raised with owners about a candidate. However, the board is prohibited from expressing any preference about the candidates. So any statement from a member of the board about any candidate would need to be clear that it is made in the board member’s capacity as an owner, and not as a board member.
In those non-condominium association declarations that include a “good standing” requirement to serve on the board, it must include a clear definition of “good standing.” Otherwise, there will certainly be a controversy as to what constitutes “good standing.” Some definitions refer to being current with all financial obligations to the association. Other definitions are broader and refer to being in current compliance with all the obligations of an owner.
• 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.