Q&A: Breaking Bad Board

Q&A: Breaking Bad Board

Q. I was a member of our three-person association condo board for approximately one year. I resigned after I realized the other two people were having secret meetings and making decisions without my input, and bringing their 2-to-1 vote to the full board meetings.

Fast forward to this year. They recruited another person to the board (without telling any members) who apparently also colludes with them to do things without member approval. The main things they do are:

• Contract and complete capital repairs exceeding $10,000 without member approval

• Sold an association-owned unit without member approval

• Allow a dangerous breed of dog to live on the premises against our rules, even after the same dog attacked a resident two weeks after moving in

They refuse to hold quarterly or annual meetings, refuse to share a budget, and refuse to respond to requests to hold a meeting. The two or three of us (out of 16 owners) who actually care don’t constitute a quorum to call a special meeting (need four owners). The last time they held an election, nobody nominated anyone different, so the board remained. Nobody wants to hold the board accountable, yet nobody wants to serve on the board.

Are we just stuck?

                                   —Frustrated Owner

A. “Based on your explanation,” says Ari D. Meza, attorney at law firm Costello Sury & Rooney in Oakbrook Terrace, “it seems that the board members are likely in breach of their fiduciary duties as well as your association’s governing instruments and Illinois statutory law. While the quickest and easiest method of resolving the issue would be to use the association’s internal political mechanism to remove and replace the board with new members, it sounds like this will not be feasible. If open and fair elections are being held, but no one is willing to serve on the board, your only option to resolve this issue would be to file suit.

“Board members owe fiduciary duties to the association, including the duty to comply with the law and the association’s governing instruments. Illinois courts have held that violating the law or governing instruments of an association constitutes a per se breach of fiduciary duties. Furthermore, breaches of statutory obligations may also give rise to a cause of action by the affected association members. Some of the actions that you describe the board taking seem to be direct violations of Illinois law and are likely direct violations of your association’s governing instruments. Accordingly, there is a good chance that you have a cause of action.

“A lawsuit against the board members or the association could seek a finding that there has been a breach of fiduciary duties or obligations imposed by the governing instruments or statute, as well as seeking a court order prohibiting any such breaches in the future. The suit could also seek monetary damages, though it is probable that many of the breaches you cited did not result in any significant or readily apparent damages. If you have substantial concerns that the association will not be able to function properly moving forward, you could also seek the imposition of a receivership, in which the court would select an impartial third-party receiver to manage the association until it is able to properly manage itself. However, it may be difficult to convince a court to take this step, and a receivership could be an expensive process for the association.

“With that in mind, I would advise that you begin by fully exhausting all options available to replace the board members via the removal provisions of your association’s bylaws or via the normal election process. If you continue to be unsuccessful in gathering sufficient votes to call a meeting to remove the board members or to elect a new board, only then should you consider filing suit. It is possible that the threat of a lawsuit would be sufficient to motivate the board to comply with the Act and the association’s bylaws, so you may consider starting with a letter threatening suit if the board continues to violate their duties. However, you should be prepared for the possibility that the board disregards the letter and you will need to take formal steps to initiate litigation. If the political process proves insufficient to address your concerns and you wish to litigate, you should consult with an attorney about how best to approach your specific situation.”

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