Board members must put owners' financial interests above their own
Q: We keep reading that board members of our condominium association have a fiduciary duty to the unit owners. What does that mean?
A: Section 18.4 of the Illinois Condominium Property Act provides that "(i)n the performance of their duties, the officers and members of the board … shall exercise the care required of a fiduciary of the unit owners."
Fiduciary duty has been described in a number of Illinois appellate court cases concerning associations. In a recent opinion in Katie Kai, et al. v Spring Hill Building 1 Condominium Association Inc. et al., the appellate court discussed fiduciary duty. The court stated "association board members had strict duties to treat unit owners with the utmost candor, rectitude, care, loyalty and good faith - in fact to treat (them) as well as (they) would treat (themselves)." The opinion goes on to state that fiduciary duty requires board members to "exercise the highest degree of honesty and good faith in (their) dealings …, thereby prohibiting enhancement of (their) personal interests at the expense of the interests of the enterprise or other unit owners."
In a "nutshell," being a fiduciary means that the interests of the owners are paramount to the interests of board members. That can be a bitter pill to swallow for those people who view being a board member as being able to better secure their own interests in the association.
Q: I am on the board of my condominium association. Board members receive communications from our property manager regarding issues and contracts the board will be addressing at a board meeting. Occasionally, this involves a back-and-forth dialogue. My wife and I share an email address that I use for these communications. Is that an issue?
A: Initially, per the Palm II appellate court decision, and subsequent amendments to the Illinois Condominium Property Act, the use of email between management and board members and between board members is restricted. That said, board members should establish an email address to be used solely in their capacity as a board member.
A board member should not use their personal email address, or their work email address, or an email address that is shared with any other person (such as a spouse), for handling board matters. Using such emails for board business risks having such email subject to discovery in litigation or review by third parties.
Q: Our condominium board adopted rules that unit owners may not vote by proxy in board elections, but may only vote in person or by mail-in ballot. This has not stopped an owner from making copies of the ballot, soliciting owner votes on these ballots, and bringing these ballots to the annual meeting. Is this permitted?
A: This practice should not be permitted. Under the Illinois Condominium Property Act, the board can adopt rules that provide that unit owners may not vote by proxy in board elections, but may vote only (i) by submitting an association-issued ballot in person at the election meeting or (ii) by submitting an association-issued ballot to the association or its designated agent by mail or other means of delivery specified in the declaration, bylaws or rules.
None of this authorizes an owner to collect ballots for other owners and bring them to the annual meeting. Further, the rules could be "tweaked" to impose security measures to reduce the likelihood of improprieties in the mail-in ballot process, and to clarify that only the original ballot of the association can be used and must be returned directly by the owner (and not by another person) to the association.
• 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.