Q. I am on the board of directors of a mid-rise condominium association. For at least the last 20 years, the association has not had a reserve study. The current board is split as to whether to commission a reserve study with some board members fearing that commissioning a reserve study ultimately increases liability exposure for directors. Would you please address this topic?
A. Reserve studies are the most common tool used by condominium boards to understand the estimated remaining useful life of common element components, which information is then used by the board for appropriate annual budgeting of the reserve fund. In fact, Section 9(c) of the Condominium Act expressly states that to determine the amount of reasonable reserves appropriate for a condominium association, the board shall take into consideration an independent professional reserve study among other enumerated factors.
There is no inherent increase in liability exposure for condominium board members because they commission a reserve study to become an informed board of directors about the physical condition of its common elements. However, depending on the total facts present, if a board of directors chooses to not procure a reserve study and that lack of knowledge leads to the regular underfunding of reasonable reserves and/or no reserve planning whatsoever, those facts could give rise to a breach of fiduciary duty claim against the board members.
Q. I am a unit owner in a small condominium association. The unit owners physically share responsibilities for maintenance of the building and share in costs as needed, but the condominium association has not been operating as an entity — such as no acting board of directors, no annual elections, no budget, no reserves, etc. — for a number of years. I am now trying to sell my unit and the sale fell through because we could not provide necessary association disclosure documents to a prospective buyer. What can be done to remedy the situation?
A. All condominium associations in the state of Illinois must comply with the Condominium Act and the association’s condominium declaration and by-laws. Corporate formalities must be followed, including, but not limited to, conducting an annual meeting to elect directors, holding at least four board meetings per year, adopting an annual budget with the reasonable reserves and issuing required 22.1 disclosures for resales of condominiums.
To remedy this situation an annual meeting with at least 10 to 30 days of advance notice should be called, and a petition signed by 20% of the unit owners to elect a board of directors should be properly delivered to all unit owners. At the annual meeting, unit owners will elect directors and officers to administer the association. Once directors are elected, the board will hold properly noticed board meetings to adopt a budget and comply with all other corporate formalities required by law and the governing documents, including issuing the required 22.1 disclosures related to sale of units as needed.
Q. I am a unit owner in a small condominium association. I have seen mice droppings in my condominium recently. My next-door neighbor has also noticed some mice droppings in his unit. We reported this issue to association management and the board president, but we were told the association will not call and pay for a pest control company because this is a unit owner issue. Does the association have the responsibility to call and pay for a pest control company in this situation?
A. Pursuant to Section 18.4(a) of the Condominium Act, the association administers and maintains, repairs and replaces the common elements. A mice infestation across multiple units means the rodents are likely crossing and/or living in the common elements walls. Therefore, abatement of the rodent infestation is the responsibility of the board to control and eliminate further infestation in the association building. If the pest control company can definitively determine that the source of the infestation originated from a single unit, the board may assess pest control abatement costs to that unit.
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