How to transfer a parking spot between units
Q: I live in a condominium association and our condo unit has a limited common element parking space legally assigned to it. Some of the owners in the building received two limited common element parking spaces when they originally purchased their units from the developer. One of these owners is willing to transfer one of his limited common element parking spaces to me so that I can add it to the title to my unit. Is that possible and can you give me an idea of what the process looks like?
A: Yes. Illinois has a specific statutory procedure for transferring the exclusive use of Limited Common Element (LCE), including a parking space, from one condominium unit owner to another.
The key provision is Section 26 of the Illinois Condominium Property Act. In general, the process starts with reviewing the declaration, plat and bylaws to first determine how the parking space is legally identified and whether it is an LCE assigned to a particular unit and if the condominium instruments impose additional restrictions on transfers. Section 26 of the Condominium Act also expressly says the transfer must comply with both the Condominium Property Act and the condominium instruments. As a result, an Amendment to the Declaration is required for a proper transfer of the parking space. This is an important point because a simple parking space assignment agreement, bill of sale, or Board resolution is not sufficient. Section 26 specifically requires the transfer to be accomplished “by an amendment to the declaration.”
The amendment must be executed by the owners of the units involved in the transfer. Typically, that means the two parking spaces owners. The amendment must contain a statement from the parties concerning any changes in their proportionate percentage of ownership in the common elements. If the transfer doesn’t alter the units’ percentage of ownership interests in the common elements, the amendment can say so. If a reapportionment is necessary and the parties cannot agree, the Board of Directors decides the reapportionment. The amendment must contain a certificate showing that a copy of the amendment has been delivered to the board. Section 26 requires the parties to record the amendment. This is critical. The transfer is not effective until the amendment is recorded. Proper recording of the amendment is also essential for future owners and/or lenders of the units involved in the transaction.
Q: Our condominium board is working on our 2027 budget. We are aware of the recent changes to Fannie Mae guidelines concerning a condominium association’s annual contributions to their reserve fund. Does the 15% recommended contributions apply toward the combined amount of the operating budgets including the budgeted reserve contributions, or would calculating the 15% of the annual budget without the anticipated annual reserve fund contribution be in compliance?
A: Generally, under Fannie Mae’s annual reserve funding formula, an association cannot “back out” the annual reserve contribution and then take 15% of the remaining operating budget. In determining the correct amount, Fannie Mae’s denominator is the annual budgeted assessment income, not the association’s total expense budget. Since the annual budgeted assessment income is determined by all the common expenses (including annual reserve contribution requirement), then a board cannot simply reduce the FNMA recommended reserve requirement by backing-out the actual reserve contribution number.
Practically speaking, the only items they can be “backed-out” or reduce the denominator and/or underlying number is if an association receives non-assessment income (like laundry rooms or other non-assessment ancillary income).
• 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.