Tag: real estate

Proposed Amendments to the Condominium Property Act

Earlier this month, legislation was proposed in the Illinois General Assembly that would expand condominium owners’ rights when challenging their homeowners associations. Rep. Scott Drury of the 58th District introduced HB4489, HB4490, HB4491 as proposed amendments to the Condominium Property Act. These bills aim to level the playing field for unit owners when faced with an unresponsive or downright neglectful association. Most notably, the proposed legislation would allow a unit owner to bring an action against a homeowners association to enforce either individual or common interest community rights without being required to sue other homeowners. In addition, the legislation would make any bylaw provision, rule or regulation that “attempts to limit a unit owner’s right to commence litigation against an association . . . or to limit the liability of an association . . . for a breach of duty [as] void as against public policy” and it would not be given any effect. Additionally, the proposed amendment provides that “a unit owner’s compliance with an association’s demand does not waive the unit owner’s right or ability to challenge the demand in a later commenced legal action.”

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HB4489 would also have a direct effect on the attorneys involved in these actions. First, the proposed law would authorize the award of attorney’s fees to the prevailing party under certain circumstances. But even beyond the bill’s fee shifting capabilities, the association could “not be represented in litigation by counsel who also represents the association’s board of managers either individually or collectively.” Thus, associations may be faced with the task of finding independent counsel if the association retains an attorney or firm that also represents the board of managers in some capacity.

Under HB4491, if an association attempts to sue a unit owner to retake possession of the property for unpaid condominium expenses, then the unit owner would be able to raise new defenses, such as a “material breach of any duty set forth in the Condominium Property Act, the governing condominium instruments . . . or any applicable statute or ordinance applicable to the unit owner’s possession of the condominium unit.” A unit owner could also raise the defense that the association had an improper motive for bringing the action.

While the benefits to condominium owners are immediately apparent, opponents of the bills foresee the onerous burdens that the legislation would put on homeowners associations. The chief concern being that these bills would overwhelm homeowners associations with frivolous litigation, taxing their already limited resources. Opponents also fear that proposed legislation would become a catalyst for increased litigation, thereby piling up a caseload on an already backed up court system.

Regardless of which side you fall on this issue, it will be some time before the goals of HB4489, HB4490, and HB4491 can become a reality. Until then, it will be business as usual for unit owners and homeowners associations alike. Each bill is still in its infant stages and all three are set for debate in early March, 2016.

Bonding Under the Revised Illinois Mechanics Lien Act

The New Year brought with it the enactment of 770 ILCS 60/38.1 of the Illinois Mechanics’ Lien Act, (the “Act”). This new addition to the Act allows the substitution of a bond in place of a mechanics’ lien. This article highlights some important features of this new law.

The Process

In order to “bond over” a mechanic’s lien, a proper applicant must file a verified petition with the clerk of the circuit clerk in the county where the property is located. The applicant is essentially any individual or entity that has an interest in the subject property, including the property owner, the lien claimant, an owners association, or anyone else liable for payment of the lien claim. This petition may be filed at any time after a lien claim is perfected and prior to the commencement of litigation. Alternatively, after a complaint or counterclaim is filed the applicant only has 5 months to file its petition. Section 38.1(c) clearly lays out the specific details that must be included in the verified petition.
Section 38.1 also sets forth specific requirements for an “eligible surety bond.” For example, the bond must be in an amount equal to 175% of the claim for lien. Furthermore, the surety company providing the bond must be “A rated” and meet other financial-strength requirements. The local circuit court is also authorized to provide a list of approved sureties by order or local rule.

The Effect of Substitution

Once a petition is filed, any interested party may file an objection within 30 days after receiving notice, or 33 days after the notice is mailed, whichever is earlier. Failure to do so will be considered a waiver. If the petition meets all statutory requirements, then the court must enter an order (1) substituting the surety bond for the property securing the lien claim and (2) substituting the lien claimant’s right to recover on the bond for certain claims under the Act. As a result, the principal and surety become parties to any lawsuit in the future, or if there is litigation pending, they substitute in while all other parties can be dismissed. It is important to note that Section 38.1 does not permit a bond to release or discharge the underlying lien.

One of the most notable features under this amendment is the prevailing party’s ability to recover attorney fees. If the lien claimant is successful and is awarded a judgment of at least 75% of the lien claim, then it may be entitled to attorney’s fees capped at 50% of the amount of the lien claim. Alternatively, the principal of the bond can be deemed the “prevailing party” if a judgment is awarded for 25% or less of the claim for lien, and would be eligible to collect attorney’s fees.

The advantages of Section 38.1 are immediately apparent. Lien claimants are afforded an easier path to actually recovering a favorable judgment with the added bonus of possibly collecting up to half of their attorney’s fees. Conversely, property owners now have a mechanism that could potentially avoid foreclosure of the lien. As Section 38.1 is utilized, it will be interesting to see whether this helps simplify mechanics’ litigation, and whether the added potential for attorney’s fees encourages “bonding over” a lien. But before weighing the pros and cons of substituting a bond, one must still ensure full compliance with the rest of the Illinois Mechanics’ Lien Act.