Can condo board include operating deficits in special assessment for repair project?

Q: I am on our condominium association board. We have a large exterior building repair project and we are considering a special assessment. Meanwhile, we discovered operational expense deficiencies. We are wondering whether we can implement a special assessment for operating deficits in conjunction with a special assessment for exterior construction.

A: Typically, a condominium association can include current operating deficits into a special assessment originally anticipated for exterior construction. However, in some instances, the provisions of your particular declaration and bylaws may impact the process for doing so. Additionally, your board should consider the following points.

If the operating deficits were the result of unanticipated operational expenses that randomly occurred this year (and will not occur again next year), then including them in the special assessment makes sense.

If the operational deficits were the result of an underestimate of known, recurring operational expenses, then the board should consider adopting an amended budget and increase the regular assessments for the balance of this year while at the same time adopting a special assessment for the exterior repair or replacement project.

The board can do both (adopt an amended budget and a special assessment) at the same time. However, under the Illinois Condominium Property Act and depending year upon the amount of the regular or special assessments, it may trigger the owners’ right to petition for a special vote on the increased assessments. Section 18(a)(8) if an adopted budget or any special assessment adopted by the board would result in the sum of all regular and separate assessments payable in the current fiscal exceeding 115% of the sum of all regular and separate assessments payable during the preceding fiscal year, the board of managers, upon written petition by unit owners with 20% of the votes of the association delivered to the board within 21 days of the board action, shall call a meeting of the unit owners within 30 days of the date of delivery of the petition to consider the budget or separate assessment; unless a majority of the total votes of the unit owners are cast at the meeting to reject the budget or separate assessment, it is ratified.

Q: An owner experienced dry-wall damage in their utility room (behind their HVAC system) as a result of a roof leak. The drywall repair requires the HVAC system to be removed and replaced in order to access the damaged drywall. Who pays for removing and replacing the HVAC system?

A: That depends on the precise language in your declaration. Assuming that a portion of her utility closet is on the perimeter or boundary wall of the unit, then (as you said) the association would be responsible for drywall replacement up to primer coat.

Typically, an HVAC unit located within the unit is unit owner’s responsibility. But, here, the system could be treated as an obstruction to the damaged area that needs to be fixed.

If the declaration is silent as to the responsibility for accessing repair areas, there is no black-and-white legal answer.

Where the declaration is silent as to who pays in this situation, most courts will hold that whoever is responsible for the repair (association) is also responsible for the reasonable cost to access the damaged area. To this end, the owner would argue that the HVAC removal and reinstall is created by the association’s repair responsibility for the perimeter wall drywall.

On the other hand, the association can take the position that the unit owner is responsible for the HVAC and it is an obstruction to the damaged area, and the HVAC removal and reinstall is an owner responsibility.

In an effort to resolve these situations amicably, many associations try to pursue a compromise scenario and negotiate a cost-sharing with the owner. For example, 50/50 on the HVAC. However, if the owner upgrades any parts of the HVAC system during the reinstall, they are responsible for those costs.

• 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.