Majority of owners can reject special assessment
Q. I live in a townhouse association. We are about to start a roof replacement project. The board considered several financing options including utilizing reserve funds or approving a special assessment to pay for a bank loan. But when the board decided on a special assessment, some owners filed a petition with the board requesting a special owners’ meeting to vote on the special assessment and other issues. Since we are not a condominium, are there other legal requirements we must follow.
A. As a townhouse association with an annual budget of greater than $100,000, the association is subject to the Common Interest Community Association Act (CICAA). CICAA contains very similar language to the Condominium Property Act in this situation. Pursuant to Section 1-45 of CICAA: If an adopted budget or any special assessment results in the sum of all regular and special assessments payable in the current fiscal year exceeding 115% of the sum of all regular and special assessments payable during the preceding fiscal year, then upon written petition by members with 20% of the votes of the association delivered to the board within 14 days of the board vote, shall call a meeting of the members within 30 days of the date of delivery of the petition to consider the regular or special assessment; unless a majority of the total votes of the members are cast at the meeting to reject the budget or separate assessment, it shall be deemed ratified.
So, if the owners’ petition was timely filed and proper, the board must schedule an owner meeting to vote on rejecting the special assessment within 30 days of the petition. The key factor is that a majority of ALL the owners (not just a majority of those voting at the meeting, but ALL the owners) must vote to reject the special assessment to nullify it. If less than a majority of the owners reject the assessment, it is automatically ratified. If owners agree with the special assessment, they don’t need to do anything, or they can simply submit a ballot in favor of the special assessment. If the owners raise issues other than the special assessment in their petition, those do not need to be included in any owner vote. It is up to the board whether the board wants to address those other issues separately.
In similar situations, some boards have convened a separate informational meeting for the owners before the actual vote as an opportunity to explain the reasoning behind the special assessment and answer any questions. This type of informational meeting is not required by law. But some boards have found it effective in educating their owners.
Q: We are a common interest community association. The declaration of covenants permits the association to charge back attorney fees in collection cases. However, it does not cover charging back attorney fees when an owner is in violation of the declaration or rules. Does the Common Interest Community Association Act permit us to charge back such attorney fees?
A: It is unusual for a common interest community declaration not to contain language authorizing charge-back of attorney fees related to violations of the governing documents. You may want to have the association’s counsel review the governing documents carefully. If not, the association can amend the declaration.
However, unlike the Condominium Property Act, CICAA does not include a specific provision authorizing the association to charge back attorney fees incurred when an owner is in violation of the declaration or rules (other than account delinquency). If the association files a collection lawsuit to recover fines for violations, then attorney fees may be recoverable.
• 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.