When is an annual audit required?
Q. Do condominium associations need to have an annual audit of their financial statements by a certified public accountant?
A. Section 18.10 of the Illinois Condominium Property Act provides that an association consisting of 100 or more units shall use generally accepted accounting principles in fulfilling any accounting obligations under the Act. Note that such language is also found in the Illinois Common Interest Community Association Act. Associations subject to these statutes need to speak with their accountant to determine what generally accepted accounting principles obligations are created thereunder.
Q. How much can the board of a condominium increase the budget without approval of membership? The 2019 budget for our association is 20 percent more than last year. Is this allowed?
A. In general, the board can increase the budget year over year in any amount without prior owner approval, pursuant to Section 18(a) (8) of the Illinois Condominium Property Act.
However, under certain circumstances, unit owners have an opportunity to call a meeting of the association members and vote to reject a special assessment after it is adopted by the board. In a "nutshell" the board can adopt regular and special assessments in the current year, the combined total of which exceeds regular and special assessments adopted in the prior year by up to 15 percent, without being subject to the owners' right to call a meeting and vote to reject a special assessment.
If any separate assessment adopted by the board would result in the sum of all regular and separate assessments payable in the current year exceeding 115 percent of the sum of all regular and separate assessments payable during the preceding year, the owners with 20 percent of the votes of the association have a right to file a petition with the board within 21 days of the board's adoption of the special assessment.
If the board receives such a petition, the board must call a meeting of the unit owners within 30 days of the date of delivery of the petition so that owners can vote on the separate assessment. Unless a majority of the total votes of all unit owners in the association are cast at the meeting to reject the separate assessment, it is ratified.
Q. We live in a self-managed association. A previous board had adopted a policy giving the board president significant day-to-day responsibilities without obtaining board approval. Because the board is reconstituted yearly after each annual election, should the new board be required to ratify this policy or be given an opportunity to change the policy?
A. If the policy adopted by the board generically delegated authority to the president of the association, the policy and that delegation would continue unless and until rescinded or amended by the board. However, if the policy adopted by the board delegated authority to a specifically identified member of the board by their name, a new policy would have to be adopted for a successor board member. Further, a board can decide whether to continue the policy, or to rescind or amend it, periodically.
• 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.