From CAI...

Leasing restrictions have been one area of the FHA condominium guidelines that has caused problems for associations seeking to get FHA approvals. CAI has brought this issue to FHA’s attention and has petitioned FHA to review these criteria. On March 18, 2011, FHA issued a waiver that will provide greater flexibility on leasing restrictions under the FHA condominium insurance program. This means that many condominium associations whose FHA approval was rejected due to rental restrictions may now qualify under the FHA waiver.

One of the most important exhibits to every association's Declaration is the statement of ownership percentages.  This document details the portion of the common elements owned by each unit.  Ownership percentages are determined by the developer when the condominium is created and are based on a number of marketing criteria at the developer's discretion.  A smaller unit on an upper floor might have a greater ownership percentage assigned than a larger unit on a lower floor, if city or lake views make the unit more desirable, for example.

All owners pay assessments based on their ownership percentages as a portion of the total annual operating budget. Special assessments also must be paid based on ownership percentages.  A unit with 10% ownership does not pay the same amount toward a new roof as a unit with 20% ownership.  Boards should be sure to calculate all assessments correctly to ensure enforceability if collection action is needed.

A little known (and controversial) city of Chicago ordinance requires that association records be provided to unit owners within 3 days of a written request.

The exact wording of the ordinance is as follows:

13-72-080 Examination of records by unit owners.
No person shall fail to allow unit owners to inspect the financial books and records of the condominium association within three business days of the time written request for examination of the records is received. (Prior code 100.2-8)

Because the ordinance is not in alignment with the IL Condo Act (which sets a 30-day deadline),  there have been court cases disputing the validity of the ordinance.  However, courts have found in favor of owners seeking documents under the Chicago ordinance.

The IL Condo Act specifies the documents that can be examined.  Note that the association must allow for the inspection of the documents, but is not required to provide copies at the association's expense.

Theft happens.  Both board members and property management companies have been found guilty of stealing condominium association funds.  There are several ways to ensure the safety of your funds:

  1. Financial activity should be transparent between the management company and the board (and preferably all owners).  Management should never have exclusive access to association funds.
  2. Board members should be reviewing financial activity on a regular basis and addressing any red flags immediately.  Ultimately, it is the board that is responsible for the association's funds.
  3. Obtain proper "employee dishonesty" coverage and add your management company (if you have one) as an additional insured.  Your basic policy might include a limited amount of coverage.  Add additional coverage if your total funds (amounts held in all bank accounts ) exceed the covered amount.  The premiums are generally quite low for this added coverage.
  4. Keep your bank account access up to date.  When new board members are elected, the old board members should remove themselves as signers from the account and make sure that the new members are added.  

Easy access and little oversight make condo association funds particularly vulnerable to theft.  Taking these steps can minimize potential losses.

HausFS often encounters smaller associations who, rather than rely on their elected board, make most of their decisions by an owner vote.  While this would seem the neighborly and democratic way to run a small building, it can create liability problems for board members.

The elected board owes a "fiduciary duty" to the association.  This means that they must put the interests of the entire association above their own personal interests.  Holding off on repairing a roof might save everyone money, but it would not be in the best interests of the association to delay required maintenance.  It's the board's responsibility to make difficult decisions that, while they may not be popular with the owners, must be made to preserve the integrity of everyone's investment.

Individual owners do not owe a fiduciary duty to the association.  Therefore, they are free to vote in a way that protects their own self-interest rather than the interest of the association on the whole. Owners generally outnumber board members.  However, it is ultimately the board that is responsible for the decisions made and any legal consequences (not to mention most of the effort that is required to follow through on a vote) .  It is in the board's best interests to handle the decision making and reserve all owner votes for the limited number of issues that legally require a vote of all owners.

Search Articles...

Membership Plans

Subscribe to the Chicago Condo Resource to access our Members Only Content.

Subscribe to Newsletter

Seminars & Events

Fri Jan 24 @ 9:00AM - 05:00PM
M-100 The Essentials of Community Association Management
Sat Jan 25 @ 9:00AM - 05:00PM
M-100 The Essentials of Community Association Management
Thu Jan 30 @11:00AM - 01:00PM
Hot Topics in the City of Chicago
Thu Jan 30 @ 7:00PM - 08:30PM
How To Plan and Manage a Major Project for Your Association
January 2020
S M T W T F S
1 2 3 4
5 6 7 8 9 10 11
12 13 14 15 16 17 18
19 20 21 22 23 24 25
26 27 28 29 30 31