Changes coming in law for condo associations
2016 was another fertile year for Illinois legislation affecting condominium and common interest community associations. This is the first of two columns that provides a summary of the amendments to the Common Interest Community Association Act and to the Condominium Property Act that will be effective Jan. 1.
Closed board meetings/executive session
Section 1-40(b)(5) of the Common Interest Community Association Act and Section 18(a)(9)(A) of the Condominium Property Act are amended to provide that the board may close any portion of a meeting for which notice was given or meet separately from a board meeting: (I) to discuss probable or pending litigation; (ii) to discuss third party contracts or information regarding appointment, employment, engagement or dismissal of an employee, independent contractor, agent or other provider of goods and services; (iii) to interview a potential employee, independent contractor, agent or other provider of goods and services; (iv) to discuss violations of the rules and regulations of the association; (v) to discuss a member's or unit owner's unpaid share of common expenses; or (vi) to consult with the association's legal counsel.
This change permits limited use of workshops, held without notice to owners and without owners in attendance, to discuss issues that can also be discussed in "executive session" of a board meeting. This is a limited legislative response to the Palm decision.
The legislation also provides that in addition to discussion of employment matters in the closed portion of a meeting (also known as executive session), the board may also discuss the engagement of any independent contractor, agent or other provider of goods and services and interview a potential employee, independent contractor, agent or other provider of goods and services. This codifies and expands on case law.
Finally, the legislation provides that the board may consult with the association's legal counsel during the closed portion of a noticed meeting, or a meeting separate from a noticed meeting (workshop). This is really nothing more than codification of existing law.
Ability of the board to pledge association assets
Section 18.4(m) of the Condominium Property Act is amended by removing language that gave the board of manager's power, subject to owner approval if required by the declaration, to assign the right of the association to future income from common expenses or other sources -- and to mortgage or pledge substantially all of the remaining assets of the association. Thus, the assignment of the right of the association to future income from common expenses and to pledge all or substantially all of the remaining assets of the association can be approved by the board alone, even if the declaration requires owner approval.
This makes this section of the Condominium Property Act consistent with section 18(b)(13)(ii) regardless of whether the declaration requires owner approval. This will make it easier for condominiums to obtain loans.
Amendments to declaration in case of error, omission or inconsistency
Section 1-60 of the Common Interest Community Association Act is amended to provide that if a provision of the community instruments does not conform to the Act or to another applicable law because of an error, omission or inconsistency in the community instruments of the association, the association may correct the error, omission or inconsistency to conform the community instruments to the Act or to another applicable law by an amendment adopted by vote of two-thirds of the board of directors, without a membership vote.
The law also provides that a provision in the community instruments requiring members of record to vote to approve an amendment to the community instruments, or for the members of record to be given notice of an amendment to the community instruments, does not apply to an amendment that corrects an omission, error or inconsistency to conform the community instruments to the Act or to another applicable law.
Finally, the law deletes language providing that corrections of errors or omissions in the community instruments may be adopted by a majority vote of the members at a meeting called for that purpose unless other procedural requirements apply.
Essentially, only the board can amend the governing documents in the event of an error, omission or inconsistency with the Act.
Next week's column will summarize additional changes in the laws affecting associations that will be effective Jan. 1.
• 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.