Contracts for common element repairs must be approved by board majority

Q. I am on the board for our small condominium association. One of the board officers continuously directs the manager to sign agreements with contractors to perform repairs to the common elements without either prior notification to the other board members or a formal board approval. The other board members are concerned that he is not following the correct legal process and may be exposing the whole board and the association to potential legal liability. What are your thoughts?

A. Pursuant to the Illinois Condominium Property Act and relevant Illinois law, association contracts and expenditures for common element repairs must be approved by a board majority in an open board meeting. In order for a board officer to legally instruct management to sign a contract for the association and proceed with a repair project, the board officer must obtain approval of a board majority at an open board meeting. Legally, if the repair project is an emergency or extremely urgent, a majority of the board can agree and direct management to proceed without a prior open board meeting. But the repair project and the authority to direct management must be put in writing, acknowledging that the entire board has been notified, a majority has approved the instructions to management and later ratify it at the next open board meeting. But those situations are rare. This legal process is necessary to protect the board officer from potential personal liability and the association's management company in the event that there are legal problems that arise from the repair project in the future.

Q. I was looking at the Illinois Secretary of State’s website, and it indicates that our homeowner association, a not-for profit corporation, was involuntarily dissolved. What does this mean, and can it be corrected?

A. Each incorporated not-for-profit association must file a one-page annual report and pay a fee to the Illinois Secretary of State. The annual report identifies the board members. The Secretary of State mails an annual report form to each association’s registered agent about 60 days before it is due to be filed. If the association fails to file an annual report when due, it will first be deemed to be “not in good standing.” The association can still file the annual report; however, it will have to pay a modest penalty in addition to the filing fee.

If the association does not file an annual report within 90 days after the date its annual report is due, the association will be involuntarily dissolved by the Secretary of State. The association can have its corporate status reinstated by preparing an application for reinstatement, and filing it with the Secretary of State along with the annual report(s) that weren’t filed and making payment of filing fees and penalties.

A common reason that an association does not file an annual report (and then gets involuntarily dissolved) is that the person identified as the registered agent is no longer involved with the association, and “forgets” to forward it on to the board. This might be a former board member or managing agent. I find that it is useful to have the association’s attorney serve as the registered agent.

Q. We are a self-managed association, and are considering amending our governing documents to permit board members to be compensated. Would paid board members have to be licensed under the Community Association Manager Licensing and Disciplinary Act?

A. The requirements of the Community Association Manager Licensing and Disciplinary Act do not apply to a director, officer, or member of a community association who is serving without compensation. However, a compensated board member providing any services of a community association manager to the association would have to be licensed as a community association manager.

• Matthew Moodhe 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.