I've encountered several clients recently who seemed to be conducting meetings where board members were making decisions but unit owners were not notified of the meeting and were not invited to attend.

It's important to understand that ANY meeting of the board where decisions will be made and action taken must be open to all unit owners.  While owners do not vote on the matters at hand during a regular board meeting, they do have a right to observe the proceedings.

Board members can share information and discuss the issues that will be voted on at the meeting prior to the actual meeting, but whenever a decision is made that vote must be officially recorded in an open board meeting.  (The only exception would be where emergency action must be taken in order to address damage to the units or common elements or potential injury to the owners.)  

The IL Condo Act requires at least 48 hours' notice of a board meeting.  Your By-Laws may show a different requirement.  More about meeting notices here.

Certain topics should not be discussed in an open portion of a meeting.  See a previous post on this.

Board meeting basics

Guide to Conducting a Board Meeting

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.

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