Condo buyers must be given association's financial documents
Q. My husband and I signed a contract a few weeks ago to sell our condo. Everything seemed to be going along fine until a couple days ago when our attorney received a letter from the buyer's attorney canceling the contract.
The reason they stated was the buyers were wary of the information received from the condo association regarding the development. More specifically, they did not approve of the financial condition outlined in documents forwarded by the association.
We have no control over the association's finances. Is this a legal basis for our buyers to cancel the contract? Our attorney seems to believe it's not worth fighting over and that we should simply relist the property. It took eight months to find a buyer the first time and we really need to get this place sold and move on. Any thoughts would be appreciated.
A. When selling a condominium, the provisions of the Illinois Condominium Property Act impact the transaction. Section 22.1 of this law dictates that certain financial documents shall be furnished by seller to the buyer, including, but not limited to, a copy of the association's declaration, bylaws, rules and regulations, anticipated capital expenditures and financial and budget statements. The financials include the amount of reserves the association has on hand for future repairs and/or improvements.
Most real estate contracts specifically require seller compliance with the Act. Buyers are generally given a certain period of time to terminate the transaction based on the disapproval of documentation furnished per the Act, and have their earnest money deposit returned.
When I review the financial documents of an association, I look for a few things. One, I want to make sure there are adequate reserves in relation to the size of the association. I like to see that income from association dues is significantly greater than anticipated expenses. And, in the event the association indicates forthcoming capital expenditures (new roofs, new windows, new carpeting in common areas, etc.), I want to know where the money is coming from to pay for these expenditures. Are they coming from reserves, in which case are there adequate reserves to cover these costs? Will they come from a special assessment charged to the building's condo owners?
It would appear your buyers or their attorney saw something they did not like. As long as they timely served notice of their disapproval of the condominium documents, there would likely be no basis to contest their withdrawal from the transaction. Your attorney's advice to relist sounds appropriate.
Q. What is a TODI?
A. TODI stands for Transfer on Death Instrument. It was statutorily created to allow property owners to transfer residential (four units or less) real estate without a will or trust agreement.
Agriculture property consisting of a single tract of 40 acres or less that is improved with a single-family residence may also be transferred by this method. The document is signed by the property owner and provides for the transfer of a specific property to specific party upon the death of the property owner.
The document must be recorded prior to the death of the of the property owner. Once recorded, it may be revoked by either a subsequent, inconsistent TODI or a recorded instrument of revocation expressly revoking the original TODI.
In the event you are considering using a TODI to transfer real estate, it is strongly suggested you contact a real estate attorney familiar with these transactions. There are specific rules that must be complied with, otherwise, the TODI may be deemed legally insufficient and the desired transfer may be compromised.
• Send your questions to attorney Tom Resnick, 910 E. Oak St., Lake in the Hills, IL 60156, by email to firstname.lastname@example.org or call (847) 359-8983.