A quote often attributed to the Prussian statesman Otto von Bismarck in the mid-1800s says something to the effect that laws are like sausages—it's better not to see either of them being made. It's a clever quip, and it's not entirely inaccurate, but the truth is that if you serve on the board of your condo, co-op, or homeowners association, or if you manage any kind of multifamily community, you should have at least some awareness of the laws and legislation affecting you, your neighbors, and the residents you serve. This awareness not only enables you to do your job better but it can help save your community money by planning in advance, avoiding fines, and keeping compliant with emerging regulations.
In Chicago itself and around the state, lawmakers are nearly always debating at least one major housing and condo-related bill at any given time. To help board members and owners alike in keeping track of the developments that could impact their homes and investments, here's a quick overview of some of the laws and legislation making its way through the halls of state and local government.
One of the hot-button topics is an attempt to ban smoking in condos. State Rep. Sara Feigenholtz (D-12, Chicago) has been trying to give Illinois condo associations the right to restrict smoking in multi-unit buildings and proposed legislation (HB 4134) in 2011-12 to do so. Smoking in public spaces and businesses has been banned in Illinois since 2006 under the Smoke-free Illinois Act, but private residences—even those in multi-unit buildings such as condos, were exempt from the ban. This act included private residences, so that residents would have to leave their condo (even if they owned it) and go outside to have a cigarette.
“I sponsored the bill because I had constituents who were wanting these kinds of policies in place in their buildings,” Feigenholtz says. “They were living in condos and they suffered from asthma and couldn’t bear the chain-smoking neighbor. They were really suffering, and were looking for help from their condo boards. This set in place an opportunity for a condo association to self-govern, and it would empower other people to get organized, which is what would have to happen to make changes.”
While Feigenholtz’s bill did not pass, one building that took advantage of the issue was at 2626 N. Lakeview Avenue in Chicago, where residents in the 491-unit tower enacted a smoking ban, which officially took effect January 31. Condo owners there voted by a 76 percent supermajority to amend their association bylaws, following the third fire that the building had.
At least two of those fires were believed to be smoking-related, says Lawrence Hyman, the building's board president. “People were at that point looking to say, ‘If that’s what these causes were, and they’re the risk, we’d like to ban it if we can,’” he says.
A group of residents at 2626 formed a committee, did the research and learned that in New York, there were larger buildings that had already gone smoke-free. After that, banning the butts in their own building didn’t seem so daunting. The group contacted all the unit owners in the building so that they could hear everyone’s opinions, and learned that almost everyone was supportive.
“One of the residents was a doctor, and she sent us a letter saying that banning smoking could decrease the cleaning costs for the building, as well as decrease insurance costs, and would attract health-conscious residents,” Hyman says. With that in mind—and with the support of the community, they voted to ban smoking for the entire building.
“It’s a fascinating example of what a group of people can do to affect change,” Feigenholtz says.
Organizing & Ordinances
While Feigenholtz worked as a state legislator on behalf of her constituents to pass significant legislation, other organizations—like the Illinois chapter of the Community Associations Institute (CAI), the Institute of Real Estate Management (IREM) and other housing and real estate lobbyist groups work collectively to foster change.
Brian Lozell, CPM, director of condominium management at Seneca Real Estate Advisors, went to Washington on behalf of IREM Chicago, where he is the treasurer and the chairman of the group's Legislative Oversight Committee. IREM is politically active on the national level, and they hold an annual legislative and leadership summit in the spring in Washington, where IREM members from every state lobbies its members of congress on issues affecting all property types.
In the past year, there have been several state initiatives that the Chicago chapter used as a call to arms, Lozell says. A mandated sprinkler ordinance was introduced last summer that would have required sprinkler installation.
“While IREM did not take a formal position either for or against, we provided our members with information necessary to prepare their own correspondence and direction on how to contact their legislators as well as the committee members that were deciding the proposed ordinance,” Lozell says.
Two Kinds of Lead
Another huge issue currently on deck is the Illinois Firearm Concealed Carry Act, which affects all residents throughout the entire state. This act, which was passed in July 2013, allows Illinois citizens to carry concealed firearms. But in response to the act, anti-gun stickers have been popping up in many public buildings (libraries, government buildings and park districts) to let people know that guns are not allowed inside, even if they are concealed.
“The Chicago chapter of IREM recently hosted a panel to discuss the Illinois Concealed Carry Act,” Lozell says. “We provided information for property managers and owners of all property types on the framework of the law and how it would impact them and their residents and tenants.”
When the Chicago chapter of IREM was in Springfield last spring, they also met with legislators to discuss lead paint. The Environmental Protection Agency (EPA) has begun promulgating a rule to regulate remodeling and renovation projects in public and in commercial buildings, and they are now requesting public input into lead paint hazards in these buildings, Lozell reports. But the EPA has not completed a finding of any hazards in these types of properties, and they haven’t demonstrated a regulatory need for the new rules. The EPA’s Lead-based Paint Renovation, Repair and Painting Program rules for homes, day care centers, schools, hospitals, and government buildings, has been in effect for about three years. The rule requires workers to be certified and trained in the use of lead-safe work practices, and requires renovation, repair, and painting firms to be EPA-certified.
Studies done for residential housing can’t apply to commercial and public buildings because residential housing has different tenancies and cycles of property improvements and they have children and elderly living there, he says. So IREM is requesting that the senator and representatives sign onto a letter expressing concern with the EPA’s data collection and process.
The other major issue they discussed in Washington involved the issue of carried interest. Real estate accounts for nearly half of the 2 ½ million partnerships throughout the country; simply put, a carried interest is supposed to act as an incentive for a general partner to maintain the value of the property so that the operation of the property is a value-added proposition.
Capital gains treatment for general partners involved in real estate partnerships is an appropriate incentive for risk taking, and the proposed tax increase on carried interests would increase a significant amount of real estate activity in an already volatile real estate economy, according to Lozell. IREM Chicago requested that the senator and the congressman oppose an increase to the tax treatment of carried interest for real estate partnerships.
One major issue that continues to be a source of problems for associations is that of foreclosures. House Bill 4761, introduced by state Representative Kelly Burke, (D-36, Oaklawn) would amend the Mortgage Foreclosure Article of the Code of Civil Procedures. In essence, the bill, if it becomes law would provide that the grantee named in a deed issued in connection with a judicial foreclosure shall cause the deed to be recorded with the county recorder in which the real estate is located within 60 days of the delivery of the deed. This bill would make it easier for an association to know when a property has been foreclosed upon and make it easier for association to begin proceedings to ensure that maintenance fees are paid by the lending institution. Both the Chicago chapter of the Institute of Real Estate Management (IREM-Chicago) and the Association of Condominium, Townhouse and Homeowners Associations (ACTHA) support this bill.
Additionally, House Bill 4782 introduced by Representatives Emanuel Chris Welch (D-7, Westchester), Kelly M. Cassidy (D–14, Chicago), and State Senator Heather A. Steans (D-7, Chicago), would amend the Condominium Property Act and provide that after the entry of a judgment in favor of a condo board for possession of a unit under specified provisions, the board of managers may lease the unit to a tenant for a term at any time within 8 months after the expiration date of the stay of judgment occurs. This may not exceed 13 months. Again, this bill is receiving full support from IREM Chicago and ACTHA.
One major bill opposed by both CAI-Illinois and ACTHA concerns SB 2664 proposed by The Illinois State Bar Association. The ISBA has proposed a bill that amends only the Illinois Condominium Property Act by expanding condominium association’s right to collect unpaid regular assessments on foreclosed units from 6 months to 9 months. This expansion would only apply to regular assessments and not to any other unpaid common expense. Further, while attorney fees and costs of collection can be charged to the third-party buyer, in no event can the total balance collected exceed an amount equal to 9 months of regular assessments. The bill amends Section 2 of the Act to include definition of “regular monthly assessments.” The bill would remove the “initiation of an action” prerequisite to collecting these amounts. Finally, the bill amends Section 22.1 of the Illinois Condominium Property Act and reduces the days an association (or its management company) has to respond to a request from a purchaser for information from 30 days to 14 days, if the association is managed. If the association is self-managed it has 21 days. Currently the law requires the information to be made available within 30 days. On April 8, 2014 this bill passed the entire Senate and was sent to the House. The House Judiciary Committee subsequently passed the bill on May 7 and it still awaits further action.
Affordable housing is also always a big issue in any major urban center, and of course, Chicago is no exception. In February, the Chicago City Council approved the city’s new five-year housing plan, which provided an important roadmap for housing-related public investments through 2018. The plan identified issues and presented solutions to Chicago’s housing initiatives. In summary, the city committed to invest more than $1.3 billion toward the construction, rehab and preservation of more than 40,000 housing units throughout the Chicago area.
Foreclosure Relief and Tax Incentives
One big piece of legislation aimed at helping people snatch up all the foreclosed properties that litter Illinois is the City of Chicago’s Neighborhood Stabilization Program.
This is a new homeownership incentive that offers homebuyers up to $75,000 in forgivable loans to help them lower the purchase price and make repairs on vacant and foreclosed homes, as long as they first qualify for financing from a mortgage lender.
The incentive was established via the U.S. Department of Housing and Urban Development (HUD), which provided $169 million to the City of Chicago to stabilize neighborhoods impacted by foreclosure, and it’s active in parts of Auburn-Gresham, Belmont Cragin, Chatham, East Garfield Park, North Lawndale and West Pullman.
Since the foreclosure crisis hit Chicago so hard, the Illinois General Assembly also approved a bill sponsored by State Sen. Jacqueline Collins, (D-Chicago) to protect foreclosure-impacted tenants. Under the law, when an owner buys a property in a foreclosure proceeding, they can evict only at the end of an existing tenant’s lease. If there isn’t a lease, they have to give the tenant 90 days’ notice. If the new owner plans to make the home into his or her primary residence, they can terminate the lease but again, must give any current tenants 90 days’ notice.
Chicago is also trying to help first time homebuyers with their housing purchases via a TaxSmart Mortgage Program. The financial proposal approved by the City Council would make first-time homebuyers eligible for a new round of mortgage-based tax breaks.
The measure authorized $80 million in bond funding for the mortgage program, which gives those eligible federal income tax credits that are applicable over the term of their mortgages. The first funding round would assist about 600 first time buyers over the next three years.
“As Chicago’s housing market continues to build momentum, this measure will help to ensure that income-qualified households throughout the city will participate in its recovery,” Chicago Mayor Rahm Emanuel said in a statement.
Twenty percent of a buyer’s mortgage interest is eligible for a dollar-for-dollar reduction in federal income tax liability under the TaxSmart program, and to qualify, buyers must be purchasing a new or existing 1-4 unit property that would serve as their primary residence. Since it began, the program has benefited more than 400 Chicago homebuyers.
While the intricacies of proposing, sponsoring, debating, and (maybe) passing legislation may not be the prettiest process to watch, it's part and parcel of running a co-op, condo, or HOA—and as such, boards and managers alike owe it to themselves and their communities to stay on top of the most pertinent developments.
Danielle Braff is a freelance writer and a frequent contributor to The Chicagoland Cooperator. Associate Editor Liam P. Cusack contributed to this article.