Disclosers for prospective purchasers

I have been receiving a lot of inquiries about the disclosures required to be provided to prospective purchasers under Section 22.1(a) of the Illinois Condominium Property Act. Section 22.1 describes the information that the unit owner must obtain from the board for inspection by a prospective purchaser, upon demand, in the event of any resale of a condominium unit by a unit owner other than the developer.

There is similar language in Section 1-35(D) of the Common Interest Community Association Act.

I'll address some of the inquiries here today.

Q. I am the person who prepares the 22.1 disclosure in connection with resales of condominium units in the association. We have several workers' compensation claims pending, and these involve the employee's lawyers. Are these claims, that involve lawyers, litigation that I need to include in the disclosure.

A. The 22.1 resale disclosure, required by the Illinois Condominium Property Act, must include, among other items, "a statement of the status of any pending suits or judgments in which the unit owner's association is a party. Unless and until a lawsuit is filed, a claim is not litigation. Litigation refers to the process of resolving disputes by filing or answering a complaint through the court system. That would not include a workers' compensation claim, unless a suit is filed.

Q. Our condominium association is of an age where we have to perform significant maintenance, repair, and replacement projects over the next several years. The form of 22.1 resale disclosure that has been handed down to the current board members only identifies projects that have been "approved" by the board. Is this sufficient?

A. Section 22.1(a) (3) of the Illinois Condominium Property Act requires the resale disclosure to include, among other items, "a statement of any capital expenditures anticipated by the unit owner's association within the current or succeeding two fiscal years."

The common meaning of "anticipated" is that something is "probable" or "expected." To me, that means something is more likely than not to occur. Only including those capital expenditures that have been "approved" by the board does not meet the broader requirement to disclose "anticipated" capital expenditures.

There are significant potential consequences of providing an incomplete disclosure. For example, a purchaser might be able to avoid a special assessment later levied to pay for a capital expenditure, if the expenditure was not included in the 22.1 resale disclosure provided to the prospective purchaser. Frankly, when in doubt, I would suggest erring on the side of including a project in the 22.1 resale disclosure.

Note that Section 22.1 does not require the disclosure to include the source of funding for the capital expenditures. That said, that can be useful information to include, if known., and many association do include this.

Q. The economy is improving, and units in our condominium association are selling at a brisk pace. Our board has received three forms of 22.1 disclosure to complete from three different buyer's attorney's. Each form asks for different information. Aren't the issues to be addressed in a 22.1 disclosure uniform?

A. Section 22.1 of the Illinois Condominium Property Act provides nine very specific items of information to be included in the disclosure.

Each association, whether self-managed or professionally managed, should have and use its own form of 22.1 disclosure, following the statutory outline.

It would describe each of the required categories of disclosure, followed by a response for each. The association should update the information set forth in its form as information changes.

I do not suggest using a form provided by a third party, as I have seen the issue you have raised. That is, some of these forms provided by third parties include items not set forth in Section 22.1.

If a prospective purchaser wants information not set forth in Section 22.1, they can nonetheless request it. The association can then decide whether or not to respond to the request for the additional information.

However, the additional information should not be requested on a form indicating the information is required by Section 22.1 of the Condominium Property Act, as so many do. That is not accurate and is misleading.

• 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.