Q&A: Legal or Illegal

Q A friend of mine is the president of a condo in Wicker Park. She had been working for the superintendent as a secretary when the super started his own business, which is on the condo premises. Although it's just office work, my friend plans to quit working for the super because she feels like it is a conflict of interest—particularly because the business doesn't pay any rent to the condo association. Is this really a conflict of interest or is it legal?

—Conflicted in Chicago

A “Section 18(a)(16) of the Illinois Condominium Property Act (ICPA) requires an association to follow certain procedure when entering into a contract with a board member business or family business of the member where the member has 25% or more interest,” says Sima Kirsch of the Law Office of Sima Kirsch, PC in Chicago. “The section does not refer to the situation where a board member works for a service provider although an association's operating documents might contain covenants and restrictions on the topic.

“Without knowing whether the president works for the super in his other business or managing the condo, it is difficult to give a clear answer. A board member's fiduciary duty charges them to maintain their independent judgment and avoid appearances of impropriety which would be almost impossible if working for him with the management of the condo. If she works with him in his other business it only matters because he isn't paying rent and/or he is operating the business in the first place. In any situation she should not vote on any issue involving the 'super' and be diligent to enforce the rules against him if he is violating the rules.

“From what you relayed the board is not enforcing its rules and covenants, either by not collecting rent, if the business is in a physical space and it is a permissible business, or if not in a physical space, by permitting it at all. The operating documents will control what is permitted and should be reviewed for direction. If it is an issue of rent, the board must address this sooner than later as they have a responsibility to the members to collect. If the business is being run out of the premises, the board should stop it. It is this type of situation that can precipitate owner suits, unsafe conditions for the owners and risk to the building and association and cause an increase in insurance. It might also be the situation, as it is clearly a known fact, that a court would find the board personally responsible and the insurance company could then deny coverage. On several levels this is an issue that should be addressed.”

Related Articles

Q&A: Real Estate Agent...and Board Member?

Q&A: Real Estate Agent...and Board Member?

Q&A: Real Estate Agent...and Board Member?

Q&A: Double Dipping?

Q&A: Double Dipping?

Q&A: Double Dipping?

Jigsaw puzzle piece with red businessperson facing the opposite direction from crowd.

Conflicts of Interest

Recognize Them Now to Avoid Problems Later

Bulk Sales in Chicago

Bulk Sales in Chicago

A Case Study

Q&A: Rules That Favor a Board Member

Q&A: Rules That Favor a Board Member

Q&A: Rules That Favor a Board Member

Board Optics

Board Optics

The Perception of Performance