As a condo board president, I find Mark Pearlstein's question and answer column invaluable. Here's this week's Q and A reprinted from the Chicago Tribune below:
Calculations come up short on assessments, Board should not be dividing charges equally
By Mark Pearlstein, Special to the Tribune Published October 8, 2006Q.
I am the president of an association that is part of a complex in the suburbs. Previous boards never had a correct budget or reserve fund. They increased assessments by charging owners when needed to pay the bills, with each owner paying the same amount. Last year, a task force and I developed a budget for the building based on current assessments. I explained to board members that we had to charge assessments for the budget by percentage of ownership, not arbitrary dollar amounts. Our declaration has a percentage of ownership assigned to each residential unit, as well as percentages for garage units. Unfortunately, some board members are arguing about the percentage of ownership. They saysome units, which are the same size but on different floors, have different percentages of ownership. The management company we hired to develop the budget for the 2006-07 fiscal year recalculated the budget using the percentages of ownership. Some owners will be paying less than they had before, and some more. I know this is not going to go over well with some residents. Certain members argue that the percentages are wrong and that they should not have to pay the increase. There are no records kept from the builder or developer when the building was constructed 20 years ago to tell us how the percentages were calculated. What is our fiduciary responsibility? How do I substantiate my case for holding to the percentages in the declaration?
A. Your case is based upon the fact that payment of assessments by percentage of ownership is required by law. Section 4(e) of the Condominium Act explains that the percentages were computed by taking the value of each unit in relation to the property as a whole. This statement means that the original percentages were set by the developer based on the the original sales prices. The percentage for your unit, for example, is based on the ratio between the original sales price and the total of sales prices for all units offered by the developer. Section 9(a) of the Condominium Act is clear in requiring payment by percentages. This section states that it is the duty of each owner to pay his proportionate share of the common expenses, and "the proportionate share shall be in the same ratio as his percentage of ownership in the common elements set forth in the declaration."The only means to change the percentages of ownership is by unanimous consent of the members as required by Section 4(e), unless the board or the owners can establish that the percentages were not accurately calculated in the first place. Given the age of your building, it is not likely you can establish that the original percentage calculations were incorrect. Your association has been charging assessments in violation of the law, and now is the time to conform to the requirements.
Q. I am the secretary of our association, which has five board members. Our president has been doing some tasks or duties around the development and has asked for compensation in the form of a free parking space valued at $15,000. The rest of my fellow directors believe that it is not appropriate for any board member to be overly burdened with such tasks, but we also do not believe that any director can receive compensation. We have asked the president to provide us with information on the tasks he has performed, but he will not. How do we handle this?
A. The president is not entitled to compensation, because I suspect that your declaration and bylaws state that directors and officers serve without compensation. The board governs the association and should delegate tasks among the directors according to the authority in the bylaws. The board should hire a managing agent and obtain the necessary professional assistance. As far as the president is concerned, replace him. He will stay on the board but should not serve as the chief executive if he ignores a basic provision of your documents.
Q. Can a condo or townhouse association require residents to carry condominium or renter's insurance? Can the associations also require owners who rent out their units to have insurance to cover themselves?A By state law, a condo board may adopt a rule requiring owners to maintain personal liability coverage. The declaration and bylaws of a town home association will determine coverage required for an owner. Neither a condo nor town home association can require special insurance from an investor who leases his or her unit. All owners should have the obligation to maintain the same forms of coverage.
Forum for members, owners
The University of Chicago Graham School of General Studies will hold its annual condominium board members and owners forum from 9 a.m. to 4 p.m. Oct. 21 at the Gleacher Center in downtown Chicago. Experts will speak on condo law, insurance, financial management and property maintenance. Call 800-997-9689 or visit http://grahamschool.uchicago.edu.