2015 Illinois Legislative Update A Battle over Foreclosures, Expenses & Fees

Like a python that has swallowed a deer and now needs to rest while digesting it, the Illinois General Assembly emerged from a 2014 session full of important common-interest community association legislation, and paused in 2015 to digest what it had passed.

Pay Up

In the first weeks of the 2015 session, only one major common-interest housing bill had been filed in Springfield—the Condo Assessment-Nonpayment-Lien Bill, HB 486, sponsored by Rep. Kelly M. Cassidy (D-14th District).

HB 486 is the latest round in a battle that began in 2014 with proposed legislation to change a condominium association’s right to collect unpaid common expenses on foreclosed units. “The current law is that when a foreclosed unit comes up for sale, the buyer is responsible for six months of all assessments and fees,” explained Gael Mennecke, executive director of the Association of Condominium, Townhouse & Homeowners Associations (ACTHA).

The 2014 bill would have extended the buyer’s responsibility from six to nine months, but limited it to regular assessments—not special assessments, late fees, chargebacks, attorney fees, costs of repairing damage to a unit, or other common expenses. Realtors backed this bill. “They want to decrease barriers to condo sales,” said Beth Wanless, national senior manager of government affairs for the Institute of Real Estate Management (IREM). In Illinois, IREM is affiliated with the Illinois Association of Realtors.

Community associations viewed the bill as “a further limitation on what the association could recover after a foreclosure,” said Patrick T. Costello, a shareholder attorney with the law firm of Keay & Costello, P.C., in Wheaton and Batavia. He is co-chair of the Illinois Legislative Action Committee (ILAC) of the Community Associations Institute’s Illinois Chapter. “Condo associations would have been strapped with the financial burden of foreclosed properties owing special assessments, which could be a lot of money,” Wanless added.

The bill passed in May 2014 and went to Gov. Patrick Quinn, who issued an amendatory veto. Under Illinois law, the governor can rewrite a bill and send it back to the legislature, where it needs a three-fifths vote of both chambers to become law. The House vote fell short and the Senate didn’t act, so the 2014 bill died in November.

Former Gov. Quinn’s rewrite and Rep. Cassidy’s 2015 bill both required the mortgage-holder to make up the difference between the nine months of regular assessments paid by the buyer and the total owed to the association. “This would make the associations whole by making sure they don’t lose any funds, and shift the burden to the mortgage-holder,” Mennecke said. She expected financial institutions to oppose the bill, currently in committee.

The Senate companion bill to HB 486 is SB 1368 by Sen. Heather A. Steans (D-7th District).

Rep. Cassidy’s Other Bills

Rep. Cassidy represents a lakefront district on Chicago’s north side that extends from Foster Avenue north almost to Evanston, and west to Ashland and North Ridge avenues—a dense agglomeration of common-interest housing that includes both high-rise condos and older, smaller low-rise apartment buildings. Sen. Steans’ district overlaps that of Rep. Cassidy.

“Through the years,” her website says, “Cassidy has worked both as an advocate and as a professional on issues such as choice, equality, social justice, access to quality health care and child care.”

In addition to HB 486, she sponsored seven other less-controversial 2015 bills relevant to common-interest communities:

HB 2640 allows condo directors to participate in board meetings by electronic means, and changes notice of meeting requirements. This bill follows on the heels of legislation that passed in 2014 allowing the use of email and other acceptable electronic technologies to notify owners of meetings as long as they agree in writing to receive them electronically.

“Boards that choose to move in this direction put their management companies in a position of having proper technology to manage that process and maintain the database of owners receiving this information. Boards look at this as a cost-saving measure, but there are still costs associated with managing an electronic process, and boards need to be aware of that,” commented Annette Byrd, CMCA, PCAM, vice president of Associa Chicagoland, the president-elect of CAI’s Illinois Chapter, and an ILAC member.

HB 2641 empowers condo boards to act in emergency situations.

HB 2642 deletes language from the Common Interest Community Association Act (CICA) that says the board of directors of a community other than a condo must revise the declaration, bylaws, and other community instruments severed by CICA independent of the membership.

HB 2643 allows for a condo’s governing documents that are inconsistent with law to be amended by a two-thirds vote of the board instead of by a membership vote.

HB 2644 restricts the ability of a condo board to take actions concerning common elements. It deletes language providing that a provision in a declaration which could be void may be enforced if at least 75 percent of the owners approve it.

HB 2645 provides that condo board members may get together to discuss community matters without such a gathering being considered a board meeting.

HB 2646 requires a condo association’s bylaws to contain language allowing the board to ratify actions taken without a meeting.

2015 Senate Bills

SB 1344 by Sen. William R. Haine (D-56th District) from Alton amends CICA to make incorporating a community as a municipality easier. It would reduce the number of community members who must agree to incorporation from two-thirds to 51 percent.

SB 1374 by Sen. Michael E. Hastings (D-19th District) from south suburban Matteson, and SB 1555 by Sen Kwame Raoul (D-13th District) from Chicago’s south side, both amend CICA to extend its coverage to limited-liability entities. “That would include developers,” Mennecke noted. “A builder would be covered by the Act until he turns a community over to the association.”

SB 1521 by Sen. Michael Noland (D-22nd District) from Elgin changes CICA in a variety of ways, including making the minutes of board meetings more readily available to association members. Another provision exempts associations with 10 units or less from CICA (instead of 10 units or less, or annual budgeted assessments of $100,000 or less).

Mennecke said ACTHA asked for the latter change because the either/or provision “is goofy. Many homeowners associations are huge but still may have a budget under $100,000, or they could come up with a budget that is deliberately $99,000, or they could have $99,000 one year and $102,000 the next and go in and out of being under the law. A board could come up with a budget theoretically not subject to the law when its income and revenues are far beyond that.”

Prior Years' Leftovers

While the legislators pondered 2015 bills, association boards and their lobbying organizations kept a wary eye on pending deadlines created by previous legislation, and on the transition within agencies administering those laws as a new governor took office. Democrat Patrick Quinn, a career politician, was defeated in his November 2014 bid for a second full term by Republican Bruce Rauner, a businessman with no previous experience heading a government bureaucracy. Gov. Rauner, a fiscal conservative, is not fond of unions and favors right-to-work legislation. The Democrats control both legislative chambers and have strong ties to organized labor.

What’s more, Illinois is broke. According to the Fiscal Futures Project (FFP) of the Institute for Government and Public Affairs at the University of Illinois, the state won’t be able to pay about 12 percent ($9 billion) of the $74 billion it expects to spend in fiscal year 2016, while IOUs issued to pay for past deficits total $159 billion, more than twice the annual inflow of revenue. The FFP describes the problem as “pay-later budgeting,” which includes bonds, unpaid bills, and unfunded liabilities for pensions and retiree health care. Paying later with interest further limits the funds available for current and new programs.

Given that situation, “I don’t see where the state is going to come up with money to put the Ombudsperson Law in place,” Mennecke said. Passed in 2014, this law creates an Office of Condominium and Common Interest Community Ombudsperson in the Illinois Department of Financial and Professional Regulation (IDFPR) to mediate disputes between owners and their associations.

The law takes effect January 1, 2016. In 2017, each association must pass an internal dispute-resolution policy and create forms, procedures, and a timetable for resolving complaints. The law calls for the ombudsperson to launch an educational program in 2018, begin helping owners resolve disputes with their associations in 2019, and begin in 2020 to submit an annual report to the General Assembly about the disputes in which the newly created office has been involved. The law also requires each association to register with the Office of Ombudsperson and to renew its registration at two-year intervals.

“The reasoning behind it,” explains Charles Perry, CMCA, AMS, director of business development at Lieberman Management Services in Chicago and Elk Grove, and co-chair of ILAC, “is that when a homeowner has a dispute with the board and association, very often the response is: ‘If you don’t like it, sue us.’ Individual owners don’t have the time, money, and energy to hire attorneys and argue over a $100 fine for putting the trash out too early. They need some resource other than going to court.”

Perry said the aggrieved owner and the board both must agree to the mediation. It doesn’t involve the management company or vendors.

Licensing Limbo

Also in limbo are amendments to the Illinois Community Association Manager Licensing and Disciplinary Act. The amendments passed in 2013, but new rules to implement them have been delayed.

“They include new categories—supervising managers, and licensing for community-association management firms—and rules on who can be licensed, how you get licensed, creating forms, who will organize the licensing,” Costello explained. “They were proposed last summer and withdrawn in December. Now we’re awaiting new rules from the IDFPR.”

The amendments require 12 hours of continuing education for managers over a two-year period. Managers are supposed to demonstrate that they met the requirements by August 2015, but the state still hasn’t put the requirements in place.

“Although people are being grandfathered in initially, anyone new coming in needs to meet the requirements,” said Brian Lozell, CPM, director of condominium management at Seneca Real Estate Advisors in Chicago, and president-elect of IREM.    

George Leposky is a freelance writer and a frequent contributor to The Chicagoland Cooperator.

 

Comments

  • Where to find the funds to support the office of Il Ombudsman? The condo owners. As condo owner in Il I would be more than happy to see a portion of my assessments go to support that office. As it is now it cost a lot of money to litigate and the only who benefit are the attorney's, an annual fee assessed to condo owners would be a good alternative.