The obligation of boards to provide owners with financial documents

 

In this post I'm going to provide some guidance to owners who can't get documents out of the board. I'll quote the pertinent sections of the Illinois Condominium Act (ILCA) .  The ILCA addresses these requests and the requirements of the board to provide financials, owner lists and so on to owners who request them. I quote pertinent sections of the ILCA later in this post.

The board is responsible for any delays.  Some boards hide behind management. The board makes decisions and then when confronted, will blame management.  Bullies are cowards.

I went through hoops with the board of 2019-2020 to get access to the 2018 balance sheet, and other financial statements. My initial request was rebuffed and delayed for 20 months by the board.  Even a threat of legal action was rebuffed. 

I suggest that owners be aware of their rights under the ILCA (Note 1-3).

In March, 2019 I requested, in writing,  a copy of the 2018 financial documents.  That's the balance sheet, income and expense statements, etc.  Management responded that my request was being passed to the board, ostensibly for discussion during the next HOA meeting. I received no response via email by any board member. 

I later received a reply from management acting on behalf of the board. That board decided to  delay release of those documents, stating that they did not want to issue unaudited statements.  

In fact, there is no reason that management be required to wait for board approval to release specific documents, but some boards may make such a stipulation to management. 

Here's what the ILCA says about delaying information to owners:

"Failure of an association's board of managers to make available all records so requested within 10 business days of receipt of the member's written request shall be deemed a denial."

How does a responsible board handle such requests by owners?

How does a responsible and responsive board handle this ILCA requirement? 1) Provide a blanket directive to management or 2) Failing that, the president has the power to issue a directive to management and then have it ratified by the entire board at the next association meeting. 

The BLMH board chose a different path, preferring to obfuscate, delay and hamstring management. 

Regarding my request, it is reasonable to assume that the board did discuss it during normal HOA monthly business. The board decided to delay furnishing the documents I requested. The board is completely responsible for the 20 months of delays to my request. (Note 4)

I suggest that owners know their rights, provide no latitude to the board and express those rights.  Or, you can be understanding as I was, and expect the board to act as fiduciaries.  Reality does no meet expectations.

What to do, if an owner's request is delayed by the board

At this point, an owner can pursue legal remedy via an attorney. I decided to do so, and I told management via email that I would get an attorney if necessary. In an email response I was told by management that if I persisted that I would be cut off from correspondence. Why would management respond that way? Entirely because of direction by the president at the time, or of the entire board.  Considering the animosity exhibited by that board member while I was president of the board, I can assure the reader that the buck stops there. 

I did finally get the documents and when I did, I discovered that the board had been sitting on the audited documents for more than 6 months.

Why did the board delay this? If a board or the president takes the position that management is to "Follow my (our)  directives or we will fire you." what occurred in this situation is to be expected. 

I'm sure that board blamed management for not getting those documents to me. After all, tracking owner requests and assuring that they will be issued, is the argument such a board will use. They'll say it is not the board's responsibility; after all, they are amateurs, and part-timers. I suggest that's what a non-responsive, irresponsible board would say. The ultimate defense is "We are incompetent and mere volunteers".

In fact, the board makes all decisions and is responsible for all decisions made by them or contractors.  Boards that argue otherwise are not to be trusted.

Oh, and during the many months of the stonewalling of my request a board member had difficulty understanding my anger about things like this.  She even had the gall to accost my spouse after an association meeting and asked G "Why is Norm so mean?"  Yep, some board members expect owners  to be nice to boards who screw the owners.  That's what happens when the wokes run an association.

I include the stipulations about information to be provided to owners, about open meetings, and the recourse available to owners. Why? Because from 2019-2020 the board consistently avoided discussing financial topics in front of owners who were present for open meetings, and even went so far during the annual meeting in September 2021 to tell an owner that they didn't have fundamental financial information available and couldn't answer simple questions about the association finances. That exasperated owner said "I'll send you an email."  LOL.

1. Illinois Condominium Act pertaining to providing owners with financial documents beyond the annual budget and making these available to owners.

 (765 ILCS 605/9) (from Ch. 30, par. 309)

 (Text of Section after amendment by P.A. 102-162)
    Sec. 18. Contents of bylaws. The bylaws shall provide for at least the following................

(7) that the board of managers shall annually supply      to all unit owners an itemized accounting of the common expenses for the preceding year actually incurred or paid, together with an indication of which portions were for reserves, capital expenditures or repairs or payment of real estate taxes and with a tabulation of the amounts collected pursuant to the budget or assessment, and showing the net excess or deficit of income over expenditures plus reserves;

(765 ILCS 605/19) (from Ch. 30, par. 319)
    Sec. 19. Records of the association; availability for examination.
    (a) The board of managers of every association shall keep and maintain the following records, or true and complete copies of these records, at the association's principal office:
        (1) the association's declaration, bylaws, and plats

of survey, and all amendments of these;

        (2) the rules and regulations of the association, if

any;

        (3) if the association is incorporated as a

corporation, the articles of incorporation of the association and all amendments to the articles of incorporation;

        (4) minutes of all meetings of the association and

its board of managers for the immediately preceding 7 years;

        (5) all current policies of insurance of the

association;

        (6) all contracts, leases, and other agreements then

in effect to which the association is a party or under which the association or the unit owners have obligations or liabilities;

        (7) a current listing of the names, addresses, email

addresses, telephone numbers, and weighted vote of all members entitled to vote;

        (8) ballots and proxies related to ballots for all

matters voted on by the members of the association during the immediately preceding 12 months, including, but not limited to, the election of members of the board of managers; and

        (9) the books and records for the association's

current and 10 immediately preceding fiscal years, including, but not limited to, itemized and detailed records of all receipts, expenditures, and accounts.

    (b) Any member of an association shall have the right to inspect, examine, and make copies of the records described in subdivisions (1), (2), (3), (4), (5), (6), and (9) of subsection (a) of this Section, in person or by agent, at any reasonable time or times, at the association's principal office. In order to exercise this right, a member must submit a written request to the association's board of managers or its authorized agent, stating with particularity the records sought to be examined. Failure of an association's board of managers to make available all records so requested within 10 business days of receipt of the member's written request shall be deemed a denial.
    Any member who prevails in an enforcement action to compel examination of records described in subdivisions (1), (2), (3), (4), (5), (6), and (9) of subsection (a) of this Section shall be entitled to recover reasonable attorney's fees and costs from the association.
    (c) (Blank).
    (d) (Blank).
    (d-5) As used in this Section, "commercial purpose" means the use of any part of a record or records described in subdivisions (7) and (8) of subsection (a) of this Section, or information derived from such records, in any form for sale, resale, or solicitation or advertisement for sales or services.
    (e) Except as otherwise provided in subsection (g) of this Section, any member of an association shall have the right to inspect, examine, and make copies of the records described in subdivisions (7) and (8) of subsection (a) of this Section, in person or by agent, at any reasonable time or times but only for a purpose that relates to the association, at the association's principal office. In order to exercise this right, a member must submit a written request, to the association's board of managers or its authorized agent, stating with particularity the records sought to be examined. As a condition for exercising this right, the board of managers or authorized agent of the association may require the member to certify in writing that the information contained in the records obtained by the member will not be used by the member for any commercial purpose or for any purpose that does not relate to the association. The board of managers of the association may impose a fine in accordance with item (l) of Section 18.4 upon any person who makes a false certification. Subject to the provisions of subsection (g) of this Section, failure of an association's board of managers to make available all records so requested within 10 business days of receipt of the member's written request shall be deemed a denial; provided, however, that the board of managers of an association that has adopted a secret ballot election process as provided in Section 18 of this Act shall not be deemed to have denied a member's request for records described in subdivision (8) of subsection (a) of this Section if voting ballots, without identifying unit numbers, are made available to the requesting member within 10 business days of receipt of the member's written request.
    Any member who prevails in an enforcement action to compel examination of records described in subdivision (7) or (8) of subsection (a) of this Section shall be entitled to recover reasonable attorney's fees and costs from the association only if the court finds that the board of directors acted in bad faith in denying the member's request.
    (f) The actual cost to the association of retrieving and making requested records available for inspection and examination under this Section may be charged by the association to the requesting member. If a member requests copies of records requested under this Section, the actual costs to the association of reproducing the records may also be charged by the association to the requesting member.
    (g) Notwithstanding the provisions of subsection (e) of this Section, unless otherwise directed by court order, an association need not make the following records available for inspection, examination, or copying by its members:
        (1) documents relating to appointment, employment,

discipline, or dismissal of association employees;

        (2) documents relating to actions pending against or

on behalf of the association or its board of managers in a court or administrative tribunal;

        (3) documents relating to actions threatened against,

or likely to be asserted on behalf of, the association or its board of managers in a court or administrative tribunal;

        (4) documents relating to common expenses or other

charges owed by a member other than the requesting member; and

        (5) documents provided to an association in

connection with the lease, sale, or other transfer of a unit by a member other than the requesting member.

    (h) The provisions of this Section are applicable to all condominium instruments recorded under this Act. Any portion of a condominium instrument that contains provisions contrary to these provisions shall be void as against public policy and ineffective. Any condominium instrument that fails to contain the provisions required by this Section shall be deemed to incorporate the provisions by operation of law.
(Source: P.A. 100-292, eff. 1-1-18; 100-863, eff. 8-14-18.)




2.  The Illinois Condominium Act pertaining to a board's failure to provided documents when asked:

  (b) Any member of an association shall have the right to inspect, examine, and make copies of the records described in subdivisions (1), (2), (3), (4), (5), (6), and (9) of subsection (a) of this Section, in person or by agent, at any reasonable time or times, at the association's principal office. In order to exercise this right, a member must submit a written request to the association's board of managers or its authorized agent, stating with particularity the records sought to be examined. Failure of an association's board of managers to make available all records so requested within 10 business days of receipt of the member's written request shall be deemed a denial.
    Any member who prevails in an enforcement action to compel examination of records described in subdivisions (1), (2), (3), (4), (5), (6), and (9) of subsection (a) of this Section shall be entitled to recover reasonable attorney's fees and costs from the association.

2. Illinois Condominium Act pertaining to open meeting requirements:

(Text of Section after amendment by P.A. 102-162)
    Sec. 18. Contents of bylaws. The bylaws shall provide for at least the following:

(9)(A) that every meeting of the board of managers

shall be open to any unit owner, except that the board may close any portion of a noticed meeting or meet separately from a noticed meeting to: (i) discuss litigation when an action against or on behalf of the particular association has been filed and is pending in a court or administrative tribunal, or when the board of managers finds that such an action is probable or imminent, (ii) discuss the appointment, employment, engagement, or dismissal of an employee, independent contractor, agent, or other provider of goods and services, (iii) interview a potential employee, independent contractor, agent, or other provider of goods and services, (iv) discuss violations of rules and regulations of the association, (v) discuss a unit owner's unpaid share of common expenses, or (vi) consult with the association's legal counsel; that any vote on these matters shall take place at a meeting of the board of managers or portion thereof open to any unit owner;

4. What happened: In March, 2019 I requested, in writing,  a copy of the 2018 financial documents.  That's the balance sheet, income and expense statements, etc.  Management responded that my request was being passed to the board, ostensibly for discussion during the next HOA meeting. I received no response via email by any board member. 

I later received a reply from management acting on behalf of the board. That board decided to  delay release of those documents, stating that they did not want to issue unaudited statements.  

In fact, there is no such stipulation in the Illinois Condominium Act that owners can only be provided with audited statements. I was aware of the stipulations of the ILCA, but I was "nice" and responded "I understand the board's hesitation and I'll wait a reasonable time".  

There was no valid reason for the board to delay instructing management to issue these documents. Nor should the board have interfered in any way with the normal issuance of such documents to an owner.  Yet the board did.  There is no requirement that the board approve the transference of such information to an owner under the ILCA. 

Keep in mind that during the many months that I waited, the association, as a matter of routine, probably issued the very documents I was requesting to any potential buyer of units. In other words, the request of potential purchasers were more important to the board than the requests of owners. This is why I concluded, and have stated here that under certain boards we, the owners, are treated as chattel.  It should not be this way, but then, owners do get the boards that they elect, and the consequences.

(This awareness on my part is one of the reasons, in 2008, that I sought a position on the board. It is also one of the reasons I left the board in September 2018) 

Even Legal threats are rebuffed

Several emails and 20 months later, I was still waiting. On October 8, 2020 I sent an email to management and threatened to use an attorney to get the documents I had asked for more than 18 months previous and re-requested. Management's responses were consistently that "I'll pass your request to the board." As a board member I worked with this manager and I am sure that he did so. 

Here's one of the secrets of why boards may be unresponsive.  Some board members fail to read and study the monthly packets.  I can say this after being on the board for 8 years.

Can an owner directly communicate with the board?  No, they cannot because the board has refused to provide contact information beyond address to owners. The boards at the time of my request wouldn't provide email addresses, etc. and so they couldn't be directly contacted. 

It is reprehensible that boards hide behind management, and yet some do. That's an indicator of how they operate as "fiduciaries" or not.  Boards are elected by the owners, who pay the bills. It is even more reprehensible that when a board is confronted by their actions, some boards blame management.  

I do know the political games that some board members play, which is why I document everything including keeping email copies.  Of course, an owner shouldn't have to do this with fiduciaries. But. when fiduciaries don't represent the owners "equally and impartially" the owners have no other choice.