Q&A: Are Financial Reports Mandatory?

Q Is a condominium association in Illinois required to produce an annual financial report? If they don’t, what is the recourse? What parts of a financial report do the owners have access to? If the management doesn’t allow me to see the report, what action can I take?

—Shut out in Springfield

A “Section 18(a)(7) of the Illinois Condominium Property Act (ICPA) requires the board of directors to supply the unit owners with an annual itemized accounting of the income and expenditures for the prior budget year, together with an indication of which portions were for reserves, capital expenditures or repairs or payment of real estate taxes, and showing the net excess or deficit of income over expenditures plus reserves,” explains attorney Michael C. Kim of the Chicago-based law firm Michael C. Kim & Associates. “In addition, ICPA Section 19(a)(9) provides that the board of directors is to maintain and make available to unit owners the books and records of account for the association’s current and 10 immediately preceding fiscal years, including but not limited to itemized and detailed records of all receipts and expenditures.

“In order to inspect or copy such records under Section 19(a)(9), the unit owner must make a written request stating with particularity, the records sought to be examined and a proper purpose for that request; thereupon, the board has 30 “business days” from receipt of the request to make the requested records available. If the board fails to make the records available within that 30 day period, that failure will be deemed a denial of the request. If the request for financial records is denied, the unit owner can file a lawsuit to compel examination of the financial records and the burden of proof is on the unit owner to establish his/her request is based on a proper purpose. Note that “proper purpose” has been somewhat broadly defined by the Illinois courts to include a good faith concern (or fear) as to the proper management (or conversely, mismanagement) of the association; however, that proper purpose does not extend to a “fishing expedition” or mere speculation. If the unit owner is successful in the enforcement action to compel examination of records, then the unit owner would be entitled to recover reasonable attorney’s fees and costs from the association but only if the court finds that the board of directors acted in bad faith in denying the unit owner’s request. The association is entitled to charge the unit owner for the actual cost to the association of retrieving and making the requested records available for inspection under Section 19, as well as the actual costs to the association of making copies of the requested records.”

“The ICPA does not itemize the types of financial reports (for example, balance sheet, income statement, and the like), but instead simply describes them in general terms (such as “an itemized accounting” and “books and records of account.”) Generally, whatever financial books and records are kept by the association in the normal course of its operations should be made available to the unit owners. If the management agent doesn’t make financial books and records available, the unit owner should address his/her request to the board of directors; typically, the management agent will act at the direction of the board of directors in such manners.”

 

3 Comments

  • Our hoa director owns 21 units out of the 30 units and feels he does not have to be be "audited" by other owners requesting financial documents. We just want to make sure he is paying for his units assessments but to date refuses to disclose accounting.
  • I have a similar situation as Reyna & Denya. A family group has purchased 9 of the eleven units and have not given me any information (minutes, financial information, etc.) I even had a lawyer send a letter to the board costing me $150.00 and they have totally ignored my request. I am in the process of trying to get a legal help to go to court. All I get are the demands for cost.
  • I am having trouble with my condo board president. We have a small building consisting of 6 units and I have requested a report for the last year and he just ignores my requests. The other owners in the building are either absent most of t he time or dont care, which I really cant believe. This guy is a total bully. I have tried to find a good lawyer that represents condo owners, but it seems like everyone only represents large condo boards or associations, probably because that is where the money is. If anyone can refer me to a good lawyer that will represent a condo owner, please let me know. Thank you and good luck to all of you!