When commercial and condos are in the same building
Q. We just bought a condominium in a multistory building. The condominium declaration allocates percentages of ownership for the units above the first floor of the building. However, the unit located on the ground floor of the building, owned by the developer and used as commercial property, does not have any percentage of ownership, and does not pay assessments to the association. The developer uses the ground floor of the building without payment to the condominium association. How can this be possible?
A. Based on the information you have provided, I would venture an educated guess that the ground floor of the building is not part of the condominium regime and is not subject to the condominium declaration. That is, this is likely a multiuse building, a portion of which is condominium, and a portion of which is non-condominium. It is not uncommon for a developer to develop a property in such fashion. In these situations, the ground floor is often developed as commercial property, and the rest of the building above the ground floor is a residential condominium.
Developers do this to avoid having the commercial component of the building being governed by the condominium, and for financing reasons.
The relationship between the condominium property and the non-condominium commercial property in these situations is typically governed by something in the nature of a reciprocal easement agreement (REA). An REA is a document recorded with the county. The REA would govern numerous issues. Importantly, the REA would describe who is responsible for maintenance of what portions of the building, and how contribution to the cost of such maintenance is allocated between the condominium property and the non-condominium property.
So while the owner of the non-condominium portion of the building would not pay "assessments" to the association, it would nonetheless have some responsibility to maintain, or to contribute to the cost to maintain, the building.
Whether or not the ground floor of the building is excluded from the condominium can be ascertained by reviewing the legal description/plat of survey for the condominium. Further, a recorded copy of the REA document could be obtained through the recorder of deeds office. The relationships between the condominium property and the non-condominium property, of a multiuse building, and the governing documents, are potentially complicated, and the situation should be reviewed by counsel.
Q. The board of our condominium has discussed appealing the real estate taxes for the individual units, and to charge the legal fees to the unit owners. Can the board do this?
A. Section 10(c) of the Illinois Condominium Property Act addresses this issue. The board, upon authorization by a two-thirds vote of the members of the board of managers, acting on behalf of all unit owners, has the power to seek relief from or in connection with the assessment or levy of any such taxes, special assessments or charges. That section also permits the board to charge and collect all expenses (e.g., attorney's fees) incurred in connection with an appeal as common expenses.
Attorneys typically handle these real estate tax matters on a contingent fee basis, charging a percentage of the real estate tax savings as their fee. Therefore, the association/owners only incur attorney's fees if the real estate tax appeal is successful.
Sometimes owners complain about having to pay attorneys fees for a service they did not request. However, these owners need to understand that for each dollar they pay in attorney's fees to obtain a reduction in the assessor's valuation of their unit, they may be saving two dollars in real estate taxes. That's a pretty nice return!
• 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.