New law affects how associations run
This is part 1 of a 3-part series on a new law affecting associations.
On Aug. 24, Gov. Bruce Rauner signed HB0189, and it is now known as Public Act 100-0292. The law amends both the Illinois Common Interest Community Association Act and the Illinois Condominium Property Act. The changes will become effective Jan. 1, 2018.
This is the first of three columns that will summarize the changes. This week, we will focus on changes to the Common Interest Community Association Act, and begin the discussion of the much more numerous changes to the Condominium Property Act.
The Common Interest Community Association Act creates New Section 1-20(e), which provides that if the community instruments require the approval or consent of any mortgagee or lienholder of record to an amendment to the community instruments, the mortgagee or lienholder of record is deemed to have approved or consented to the request unless a negative response is delivered within 60 days of mailing a request for approval by certified mail by the association. This will make it much easier for associations to amend their governing documents, if they include language requiring mortgagee approval/consent.
It also creates New Section 1-45(h)(I). This section states that an association subject to the Common Interest Community Association Act and consisting of 100 or more units shall use generally accepted accounting principles; generally referred to as "GAAP." Associations should speak with their accountant to discuss how this impacts their operations and as to what they need to do to comply.
The Illinois Condominium Property Act creates New Section 9(c)(5). This new section states that at the end of the association's fiscal year, and after the association has approved any year end fiscal audit, if applicable, if the fiscal year ended with a surplus of funds over actual expenses, including budget reserve fund contributions, then, to the extent that there are not any contrary provisions in the association's declaration and bylaws, the board has the authority to dispose of the surplus in one of the following ways:
• Contribute the surplus to the reserve fund.
• Return the surplus to unit owners as a credit against remaining monthly assessments for the current fiscal year.
• Return surplus to unit owners in the form of a direct payment to unit owners.
• Maintain the funds in the operating account, in which case funds shall be applied as a credit when calculating the following year's annual budget.
If the fiscal year ends in a deficit, then to the extent there are no contrary provisions in the declaration and bylaws, the board has the discretion to address the deficit by incorporating it into the budget for the following year.
Unit owners may object to the board's decision as follows: If 20 percent of the unit owners object within 30 days after notice to the unit owners of the action, the board shall call a meeting of the unit owners within 30 days of the date of delivery of the petition. At the meeting, unit owners may vote to select a different option than that chosen by the board. Unless a majority of total votes of the unit owners are cast at the meeting to reject the board's selection and choose a different option, the board's decision is ratified.
This is a legislative response to a portion of the appellate court ruling in Palm v 2800 Lake Shore Drive Condominium Association.
Associations should speak with their legal counsel to determine the impact of these changes in the law on their daily operations and/or to assist in amending their governing documents to conform to these changes.
Over the next couple of weeks we will summarize the rest of the changes to the Illinois Condominium Property Act.
• 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.