Q&A: When an HOA Threatens to Seize a Unit

Q. My HOA has threatened to confiscate my unit because I withheld/escrowed my June assessment soon after I learned the board refused to communicate or cooperate with my insurance company who was to cover other losses. This isn’t in the bylaws. They’ve been very secretive and lack integrity. They perform like a ‘just us’ club.

The board recently extended their terms to two years. Owners have not been allowed to review contracts, insurance claims, payments, etc. My units suffered terrible water damage roughly five months ago due to their neglect and lack of integrity. Contractors said my restoration should have been done in 3-5 days.

I’ve asked several times about this, but the president’s words are not consistent. The claim was filed, and funds received shortly afterward. Several months later, my unit was still in despair. I suspected and suggested fraud. The reprisal was the threat to diminish my credibility. Do I have the right to put my assessment in escrow because of their poor judgment and lack of responsibility?

                                —Harassed Tenant

A. “There are four main issues to address in this particular question,” says attorney Nicholas P. Bartzen of the Chicago-based firm of Levenfeld Pearlstein, LLC, “so I’ll address each one by one.”

“First, let’s deal with the topic of withholding/escrowing assessments in response to dissatisfaction and the board’s alleged poor judgment and lack of responsibility.  The simple answer is that you absolutely do not have the right to withhold payment of assessments. The Illinois Condominium Property Act (“Act”), Section 18(o), states that the association ‘shall have no authority to forebear the payment of assessments by any unit owner.’ Simply put, this means that the board does not have the right to allow a unit owner to withhold payment of assessments and, as fiduciaries of the association, must take action to collect from any unit owner who refuses to pay.

“Generally, when unit owners find out that they may not withhold assessments, they wonder what recourse they have if they’re dissatisfied with the board’s decisions. You do have recourse in the form of a private cause of action against a board. Bear in mind, however, that should you decide to go after the board in court, you are still required to continue paying monthly assessments during the pendency of the lawsuit.  

“The second issue are the allegations that the board lacks integrity, acts in a secretive manner, and excludes unit owners from its decisions. Illinois law requires that the board make decisions in open session at properly-called board meetings—but the board is permitted to refrain from actively discussing certain matters with association members pursuant to Section 18(a)(9), including:

(1) Discussion of litigation that is either pending, or that the board finds to be probable or imminent;

(2) Discussion of the appointment, employment, engagement or dismissal of an employee, independent contractor, agent or other provider of goods and services;

(3) Interviewing a potential employee, independent contractor, agent or other provider of goods and services;

(4) Discussion of violations of the association’s rules and regulations;

(5) Discussion of an owner’s unpaid assessments; and

(6) Consultations with the association’s attorney

“As long as your board’s ‘secret’ discussions involve the aforesaid issues, the board is compliant with Illinois law.

“The third issue you raised is that the association members have been ‘not allowed to review contracts, insurance claims, payments, etc.’ Section 19 of the Act requires the association to provide unit owners with certain documents for examination upon request, including ‘all contracts, leases and other agreements then in effect to which the association is a party or under which the association or the unit owners have obligations or liabilities.’  You have the right to inspect, examine or make copies of the records described above in person, or by agent, at any reasonable time at the association’s principal office —but only for a proper purpose.  As far as what qualifies as a ‘proper purpose’ under the Act, to use your issue regarding insurance claims, wanting to examine records to ensure the board is properly responding to insurance claim issues could reasonably be interpreted as a ‘proper purpose.’ 

“The final issue involves insurance coverage and the board’s communication and level of cooperation (or apparent lack thereof) with your insurance company regarding claims.  The Act requires the association and its board to obtain proper and adequate insurance coverage.  However, the scope of what must be covered with regard to claims and water damage issues emanating from certain units is limited for the association (i.e., the association insurance need not cover personal liability of all unit owners who may cause water damage).  To the extent that the board has refused to cooperate or communicate your insurance company, note that the board is only required to provide the documents detailed under Section 19 of the Act. While it would certainly benefit the board politically to go beyond its duties under Section 19 of the Act and to communicate more fully to ensure that all unit owners’ damage is restored after a water issue, legally speaking, there is no legal requirement to do so.”

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