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When must a developer give the association control?

Q: Is there a deadline by which time the developer of our common interest community association must relinquish control of the governance of the association to the owners?

A: This issue is governed by Section 1-50 of the Illinois Common Interest Community Association Act. The election of the initial board of directors must be held not later than 60 days after the conveyance by the developer of 75% of the units, or three years after the recording of the declaration, whichever is earlier.

The developer is required to give at least 21 days notice of the meeting to elect the initial board of directors. Notably, upon request by an owner, the developer must provide to any member, within three working days of the request, the names, addresses and weighted vote of each member entitled to vote at the meeting to elect the initial members of the board.

Q: The developer of our common interest community association has failed or refused to turn over books and records to the board. Does the board have an effective remedy?

A: This issue is also addressed in Section 1-50 of the Illinois Common Interest Community Association Act. Within 60 days following the election of the initial board by members of the association, the developer is required to turn over a variety of described books and records to the association.

If the developer fails to fully comply with its obligation within the 60-day period, the association needs to send a 10-day demand to comply, mailed by registered or certified mail, to the developer's last known address. If the developer fails to fully comply within the 10 days after written demand, the board may bring a lawsuit to compel the developer's compliance. If the court finds any of the required deliveries were not made within the required period, the board is entitled to recover its reasonable attorney's fees and costs incurred from and after the date of expiration of the 10-day demand.

Q: The initial board of our association was recently elected, and we are investigating various possible claims against our developer. These include financial claims, as well as construction defects claims, that may have arisen long before the initial board was elected. Is this an issue?

A: Both the Illinois Condominium Property Act and the Illinois Common Interest Community Association Act address this issue. Both statutes provide substantial protections for associations. Those laws provide that the statute of limitations for any actions in law or equity that the board may bring does not begin to run until the members of the association have elected a majority of the members of the board. In other words, the statute of limitations for actions the association can bring against the developer does not begin to run until the election of the initial board of directors by unit owners.

Q: Does our common interest community association need to obtain fidelity insurance?

A: This issue is governed by Section 1-55 of the Illinois Common Interest Community Association Act. An association with 30 or more units must obtain and maintain fidelity insurance covering people who control or disburse funds of the association for the maximum amount of coverage that is commercially available or reasonably required to protect funds in the custody or control of the association.

Note, too, that all management companies that are responsible for money held or administered by the association must maintain and furnish to the association a fidelity bond for the maximum amount of coverage that is commercially available or reasonably required to protect funds in the custody of the management company at any time. The association bears the cost of the fidelity insurance and fidelity bond, unless otherwise provided by contract between the association and the management company.

• 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.

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