Condominium associations are often the unfortunate targets of fraud. Assocation bank accounts often hold enticingly large sums of money, and without proper oversight that money can be suddenly or slowly drained by individuals with access.
At Haus Financial Services, we know that a lack of transparency can be a major red flag, indicating possible fraud. Our services are designed with the goal of high transparency between our company and the board, and the board and the owners.
To learn about other red flags that may indicate a risk of fraud and ways to protect your association, see this article from Kovitz Shifrin Nesbit.
Condominiums associations are considered corporations in the eyes of the IRS. As such, they are required to file an annual tax return (either an 1120 or 1120-H).
Condo associations showing taxable income on their federal returns are also required to file an IL-1120 with the state of Illinois.
Tax returns must be postmarked by April 18th this year. If your association has not filed a return in the past, now is the year to begin!
Most associations allow for the use of a "proxy" for owner votes. A proxy is a document that assigns voting rights to another individual or to the board and may be used for elections, votes on amendments or other matters subject to owner votes. Generally, a proxy extends the power to vote on behalf of the owner for a specific matter and period of time. Proxies cannot be granted for voting on matters that are restricted to the board, however.
Prospective candidates have been known to solicit proxies from owners in order to gain the right to vote on their behalf. This practice is often controversial. Would your condominium association board be allowed to adopt an "anti-harassment" rule that prohibits an owner from contacting other owners to solicit proxies for the board election?
Find out here.
The Illinois chapter of CAI (Community Association Institute) is offering a virtual Board Development Workshop geared toward educating board members so they can confidently serve their communities.
The course takes place on Tuesday, March 7th and Tuesday, March 14th from 5:30-8:30 p.m.
We have found that few board members are truly prepared for their roles, particularly in small condominium associations. Education such as the DCAL (Dedicated Community Association Leader) course series, available through CAI, can help board members to perform their responsibilitites more effectively and successfully support their communities. Condominium association budgets should include a line item for the cost of board member education.
For more information and to register, visit the CAI Illinois website.
If your condo association has Rules & Regulations in place, fines may also exist for violations of those Rules & Regulations.
The IL Condo Act requires that the owner be granted the right to a hearing before any fines can be charged. Here are the basic steps for properly applying a Fine for a violation:
- The board receives written notice of a violation of the association's Rules & Regulations.
- The board informs the owner that they have received notice of a violation and if there is a possible fine, provides the owner with the opportunity to request a hearing.
- The board conducts the hearing to gather information about the alleged violation in a closed meeting. This meeting cannot be recorded by the board or the owner.
- After the meeting, the board votes on the fine at an open board meeting.
- If the owner does not request a hearing or if a hearing is held and the owner does not appear, the board may apply a fine if they decide it is appropriate.
- The board sends notice to the owner of the fine determination.
Each occurence that is reported to the board requires a separate opportunity for a hearing. In the case of a violation that is ongoing (such as failing to remove personal belongings from a common area), then a hearing is not required for each day the violation occurs. The board should ensure, however, that any notice of a fine determination clearly states that additonal fines will accrue until the problem is remedied.
Learn how to create Rules & Regulations and the process for enforcing them with our Educational Videos. (Become a member to access this resource).