Chicagoland Legislative Update What's New and Notable in the Halls of Governance

Chicagoland Legislative Update

 As housing sales in the Chicagoland area remain stagnant, legislation both  nationally and locally relating to property ownership and management continue  to remain active. The majority of the legislation introduced recently has  sought to protect homeowners as well as provide more resources for struggling  condo and homeowner's associations.  

 Some of the more noteworthy pieces of legislation and lobbying initiatives  include the move to create the Illinois Office of the Condominium Ombudsperson;  state mandated training for board members with income tax credits to offset the  cost of training; changes to board election procedures regarding proxies;  Institute of Real Estate Management (IREM) lobbying the U.S. Congress in  support of U.S. House Resolution 940, known as the U.S. Covered Bond Act; and the Community Associations Institute (CAI) teaming up with other housing  allies to lobby congressional representatives and the federal government for  greater transparency and more public input regrading development of Federal  Housing Administration (FHA) lending rules for condominiums.  

 In the Works

 The following legislative initiatives are in the works on the state or federal  level.  

 HB1608 & HB1428 – The Office of the Condominium Ombudsperson.

 State Representative Elaine Nekritz, (D-57th District, Northbrook) along with  chief-co-sponsor Sara Feigenholtz, (D-12th District, Chicago) have introduced  House Bills 1608 and 1428 which would alternatively create the Office of the  Condominium Ombudsperson. In HB1608, the advocate would act as a department  under the jurisdiction of the Office of the State's Attorney General of  Illinois; while under version HB1428, the ombudsperson would be under the  jurisdiction of the Department of Professional and Financial Regulation.  

 The Office of the Condominium Ombudsperson would offer training, educational  materials and courses to condominium unit owners, condo associations, condo  boards and managers regarding the operation and management of condominium  property and the rights and duties of a unit owner or a unit owner's  association. If passed the Office of the Condominium Ombudsperson would be required to maintain a statewide toll-free  telephone number and a website providing detailed information, as well as  assistance in matters relating to condominium properties. Furthermore, the  ombudsperson would be required to report annually to the Illinois General  Assembly.  

 In order to pay for the new Office of the Condominium Ombudsperson, the law, if  passed, would require that every condominium unit owners association pay an  annual fee to the Ombudsperson's office to cover the administration of the act.  Additionally, this law would create the Condominium Ombudsperson Fund to be  used exclusively for the proper administration of the act.  

 At present, movers and shakers in the condo community, homeowner's associations  and property management companies have yet to express their opinion regarding the  creation of this new office. So far, the only organization that has voiced an  opinion of support is the Association of Condominium, Townhouse, and Homeowners  Associations (ACTHA), but only if the office were to be created under the  jurisdiction of the state's Attorney General’s Office.  

 According to ACTHA's website, the organization does support the idea of creating  the Office of the Condominium Ombudsperson but is opposing the legislation as  it exists (HB1428) because it places potential jurisdiction under the  Department of Professional and Financial Regulation. But ACTHA would offer  support if jurisdiction were under the Illinois State Attorney General’s Office. In fact, ACTHA has formed a subcommittee to delve into how the Office of the Condominium  Ombudsperson might function. ACTHA is presently seeking members of their  organization who might be interested in serving on this committee.  

 Representative Nekritz told The Chicagoland Cooperator in response to ACTHA's  position that, “Creating the department is a necessity and the choice for having the Condominium  Ombudsperson under the jurisdiction of the Attorney General’s office is also a necessity and it would appear that the Attorney General’s office is a natural fit.”  

 Nekritz continued by saying that many voices have yet to be heard regarding this  legislation. At present both HB1428 and HB1608 have been re-referred to the  General Assembly’s House Rules Committee. “We're anticipating hearings regarding this bill to take place later this year.  I'm sure that at that time, more people will express their feelings regarding  this,” said Nekritz.  

 Tax Credit for Condo Board Training

 Any condo or homeowners association board member will tell you that education is  key to be effective as a board member.  

 HB172 Condo Training Credit.

 This legislation would amend the Illinois Income Tax Act and the Condominium  Property Act to provide that a condominium unit owners' association that is  created on or after the effective date of the bill require all members of its  board of managers to complete a management training seminar.  

 State Representative Andre M. Thadpei (D-32nd District, Chicago) has introduced  this bill to require that board members are properly trained. If passed, the  legislation would also entitle board members to a credit against their Illinois  Income Tax Liability in an equal amount up to 50 percent of the cost of  training.  

 Andrea M. Sorgani, president of the Illinois Chapter of the Community  Associations Institute (CAI-IL) said education is an important part of  community association living. “CAI’s position on educating homeowners, board members and those providing management  services to community associations is our primary goal,” Sorgani said. “We advocate education which opens the eyes and ears of community association  owners with anticipation that the better educated homeowners, the better  maintained property.”  

 While organizations such as CAI-Illinois and ACTHA support this bill, the  Illinois Office of Management and Budget (OMB) has recommended that it not be  passed because in their opinion it would cause a negative fiscal impact on  state coffers. It should be noted though that OMB has been unable to determine  the exact negative impact other than the fact that it would reduce state income  tax revenue.  

 Other state departments and Assembly committees have weighed in as well. The  Government Forecasting and Accountability committee has decided HB172’s impact would be nominal and not affect the level of state indebtedness.  Additionally, the Illinois State Department of Commerce and Economic  Opportunity has concluded the bill does not create any state mandates nor pre-empt home rule  authority. HB172 has been referred to the House Rules Committee.  

 Voting by Proxy

 HB3337—Condo Proxy Mail Ballot.

 In a proposed amendment to the Illinois Condominium Property Act, Nekritz is  proposing HB3337. This would allow the bylaws of an association to let a unit  owner that cannot vote by proxy in a board election, vote instead by mail. At  present this bill is awaiting hearings before the House Rules Committee.  

 Other Bills

 HB1382—Proposed “Statute of Limitations” in Suing Developers for Negligence  

 House Bill 1382 has been introduced to the Illinois House of Representatives by  Representative Kenneth Dunkin (D-5th District, Chicago). This bill, if it is  passed, would amend the Illinois Condominium Property Act by setting a time  limit in the filing of lawsuits against a developer for a negligent act or omission in the  construction, design, planning, supervision, observation or management of the  construction of a condominium, condominium unit, or the common elements of a  condominium. This would limit the amount of time a unit owner or association  would have to file a lawsuit. The law would stipulate that a unit owner or  condominium association must file a lawsuit within four years from the time  that the unit owner or condominium association discovered the negligence, or  should reasonably have known of the negligence.  

 The amendment would still allow a unit owner or homeowners association to bring  legal action against the developer after the four year time period only if the  unit owner otherwise couldn't do so because of a legal disability. In that  case, the time limitation would then begin once the disability is removed or is  no longer an impediment.  

 There are exceptions though. The addition of this time limitation would not  apply to any legal action stemming from fraudulent misrepresentation by the  developer or if a developer fraudulently conceals the negligence which would be  the basis of any cause of action. These new time limitations, if passed, would  not be retroactive since provisions apply to any legal action that commenced or  is pending on or after the date this pending legislation would become law.  

 This legislation appears to have broad support. ACTHA is among the strongest of  supporters of the proposal. “We support legislation that enhances the lives of those residing in condo,  townhouse and homeowner associations,” according to ACTHA's website.  

 Presently this legislation has been assigned to the House Judiciary Committee  and has also been re-referred to the House Rules Committee. Hearings regarding  this pending legislation will probably not take place until after the summer  legislative recess.  

 Smoking Ban Redux?

 In the immediate past legislative session, the 96th Illinois General Assembly,  legislation was introduced which would have provided that an association's  bylaws restricting the use of the units may include prohibitions on smoking  tobacco products. In spite of support, namely from the CAI-Illinois Legislative  Action Committee (CAI-IL), the measure failed to pass, having never even come  to a vote before the end of the Assembly session.  

 As tobacco smoking continues to be a hot-button issue nationally, a fact  recently played out in New York City where a ban was imposed on cigarette  smoking in the city's public parks; and where one high-rise condominium on the  city’s Upper West Side voted to change the bylaws effectively banning cigarette  smoking not only in all common areas but also in individual apartments and  imposing a fine—it seems to be only a matter of time before this bill is re-introduced. So far  in the current legislative session, the 97th Illinois General Assembly, this  legislation has yet to be introduced, but we understand that a new version of  this bill will be introduced shortly. The Chicagoland Cooperator will continue  to follow this story.  

 Action by IREM

 The Institute of Real Estate Management (IREM) has been sending letters to  members of Congress in an effort to promote legislation that would extend terms  for commercial mortgages. According to Chuck Achilles, vice president of  legislation and research for IREM, this would benefit small businesses and  property managers who have been hit hard by the recent economic downturn.  

 “We’re encouraging Congress, the Fed and the Treasury to approve legislation that  would enable bank regulators to extend mortgages if they're current,” Achilles said.  

 IREM has also voiced its support for U.S. House Resolution 940 (H.R. 940), which  has gotten political support from both sides of the aisle and was jointly  sponsored by U.S. Representatives Scott Garret (R- NJ) and Carolyn Maloney  (D-NY).  

 H.R. 940, the United States Covered Bond Act of 2011, would create oversight  regulation for covered bonds as well as establish standards for covered bond  programs. The bill is currently in the hands of the House Financial Services, Subcommittee on Capital Markets and Government  Sponsored Enterprises and the resolution is also being reviewed by the powerful House Ways and Means committee.  

 Covered bonds, which have existed in Europe for many years, would allow  financial institutions to float bonds to finance commercial real estate,  providing an alternative source of refinancing property administrated by property managers, Achilles said.  

 Another piece of legislation that IREM has its eye on is Senate Bill 509 (S.  509) or the Small Business Lending Enhancement Act of 2011, which would extend  the ability of credit unions to lend money for properties. It would also raise  the cap to allow credit unions to loan up to 25.5 percent of their total  assets. Presently, legislation only allows credit unions to lend a maximum of  12.25 percent of its assets for real estate usage (as dictated under the  Federal Credit Union Act). This bill is currently being discussed by the Senate  committee for Senate Banking, Housing and Urban Affairs.  

 CAI Aligns to Push FHA on Condo Rules

 Last month, CAI, IREM, the National Association of Home Builders (NAHB) and the National  Association of Realtors (NAR) united in calling for greater transparency and  opportunity for public input into the development of FHA lending rules for  condominiums. In addition to calling for greater public input, the group united  in specific recommendations on key elements of the FHA Condominium Insurance  Program.  

 Specifically, CAI and its allies believe that FHA’s process of developing guidance for the condominium approval process lacks  adequate public input and as a result has adopted criteria that are not always  the best measure of a condominium association’s financial health. Additionally, since issuing the initial changes to the  condominium approval process, the FHA has made no less than eight policy  changes. Most recently FHA waived the ban on rental restrictions. While such  changes are welcome, the ever evolving standards have been the cause of  confusion for associations and lenders as well as FHA staff reviewing  applications.  

 In addition to process issues, CAI and its allies have called on the FHA to  revise six criteria that they consider problematic. These are owner-occupancy  requirements, FHA loan concentration requirements, pre-sale requirements,  investor ownership percentages and assessment delinquency criteria. It is hoped  that FHA will take the recommendations on process and criteria under  consideration as it moves to issue major revisions of the condominium  guidelines at the end of June.  

 “Decisions that Congress and federal agencies are making today will determine the  marketability of homes and availability of financing for years to come,” says Andrew Fortin, CAI’s vice president of government and public affairs. “To some, these issues may seem like bureaucratic, inside-the-beltway details,  but these very issues will affect the viability of tens of thousands of  homeowner and condominium associations and the value of millions of homes  within them.”   

 Rosie Powers is a freelance writer and reporter living in Chicago and a frequent  contributor to The Chicagoland Cooperator. Associate Editor Liam P. Cusack  contributed to this article.  

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  • New legislation regarding condominiums needs to make management companies fiduciaries. The law now makes boards of directors fiduciaries and not the management companies who generally direct the boards..It is absurd to require that level of obligation from a group of volunteers perhaps with limited expertise and who for the most part dependant on the direction of management companies, while management companies only have to adhere to their contracts for service. Management companies must be made fiduciaries.