As Condominium and HOA attorneys, we often receive questions from our clients dealing with all the issues that can get in the way of conducting a successful annual meeting. Most often, it is the issue of not being able to achieve a quorum of owners in attendance—which stymies the Association’s ability to hold Board member elections, approve the budget, and take other important actions to further the HOA’s business for the coming year.  So what happens if an Association’s Bylaws calls for annual board elections, but the Association does not hold elections for a number of years?  Is there a Board? Does the Board have any authority? A recent case addressed these issues, and the court’s findings might surprise you.
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The Board of Directors always has the power to make and amend Rules and Regulations on its own, without owner approval…right? Wrong.  The Board’s rule-making power and authority completely depends upon what authority is given by the Declaration and Bylaws, and as we know, all associations’ Declarations and Bylaws are different!  This is true in Wisconsin and in many other States.  Knowing what is in your governing documents will keep you out of troubling lawsuits.
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Facts

When you are headed down the wrong path – TURN BACK.  This applies to owners and associations when they act on their belief of what their documents say, but then learn that their understanding may be wrong.  Often parties who make a mistake, or learn that they might have made a mistake, refuse to reevaluate their situation and at least allow turning back to be an option.  Such appears to have been what happened in the recent case of Fritz v. Lake Carroll Property Owners Association, Inc., (2019 unreported case out of Illinois) where the association passed a rule that required inspection and pumping of the owners privately owned septic system every four years and that if an owner failed to follow the rule they would be fined $250 and $25 per day. 
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IMPRESSION: The ruling in Great Am. Ins. Co. v. State Parkway Condo. Ass’n, No. 17-cv-3083 (N.D. Ill. Sept. 11, 2018), should serve as a cautionary tale to Condo and HOA boards.

DETAILS: In Chicago, a unit owner of a condominium located at 1445 North State Street filed an Illinois state discrimination claim in 2007 against the State Parkway Condominium Association (“SPCA”) for failure to accommodate his hearing disability during SPCA Board meetings.  The SPCA defended the claim under its 2006-2007 Non-Profit Management and Organization Liability Insurance Policy (“policy) issued by Travelers Casualty and Surety Company of America (“Travelers”).

A settlement between parties was reached in September 2007; but six months later, the SPCA sued the same unit owner in an entirely unrelated matter.
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Issue:  If your association was destroyed by fire or some other hazard, and it did not make sense to rebuild, how would the funds be divided?

Problem.  Odds are that you don’t know the answer.  The fact that you don’t know should scare you.  Is every unit in your association worth the same amount?   I doubt it.  Do you each pay the same amount in assessments?  Does that control?  What does your declaration say about the distribution of insurance proceeds if the unit owners elect not to rebuild?  Do you understand what it says? Does it even make sense?
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Time and time again we hear that one of the biggest challenges in conducting annual Association meetings is simply achieving a quorum (in other words, getting enough butts in the seats). Without a quorum, business cannot be conducted, votes cannot be taken, and the Association’s operations are virtually stymied. The Association is forced to adjourn the meeting, and start the painful process of going door-to-door and begging for proxies all over again.
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It has been said that insurance is the only product that both the seller and buyer hope is never used. That certainly rings true when it comes to community Associations’ insurance policies, but it does not diminish the need for Associations to protect themselves and their unit owners from an ever-widening array of damages they could suffer. Wis. Stat. § 703.17 requires Condominium Associations to obtain insurance against potential hazards, but only discusses scope by saying that the Association must acquire insurance “for not less than full replacement value of the property insured against.”
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