Have you sold a condominium in the last few years? Are you currently living in one and plan to sell it in the foreseeable future? If you sold one, purchased one, or plan on selling one, and the unit is located in Illinois, you have had or will have to deal with the Illinois Condominium Property Act, 765 ILCS 605 (“Act”), and specifically Section 22.1 of the Act. Under Section 22.1, sellers of a condominium unit are required to make available to prospective purchasers – nine categories of documents and information specifically enumerated and described in the statute. They include Declarations, by-laws, statements of any liens, anticipated expenditures, status of reserves, financial condition, and insurance coverages. While the documents and information are to be obtained from the board of managers of the condominium unit owners’ association, that requirement is frequently delegated by the association and is handled by its agent, a property management company. The property management company then charges a fee, often hundreds of dollars, to provide those documents and information to the seller. Under Section 22.1, they can charge a “reasonable fee covering the direct out-of-pocket cost of providing such information and copying….” Unfortunately, some management companies have used the requirements of Section 22.1 as a profit center, to handcuff sellers and charge excessive fees to provide these standard documents. Sellers pay the excessive costs because they have no choice – they need the documents to give to the purchaser and the closing sale of their unit is contingent upon providing those documents. Failure to provide the documents to the purchaser may be reason to cancel the sale.
The reality is that the documents and information described by Section 22.1 are kept by the management companies as a matter of course. Their production should not be onerous or expensive and is frequently done with a push of a button on a keyboard and conveyed electronically. Charging sellers several hundred dollars is not reasonable. Until recently it was thought Section 22.1 existed only to protect purchasers with the disclosures helping them make informed decisions. Now, it is clear that Section 22.1 also protects sellers. On December 7, 2021, in the case Harry and Dawn Channon v. Westward Management, 2021 IL App (1st) 210176, the Illinois Appellate Court issued an opinion specifying that what may be charged for providing the information required under Section 22.1, that section is not only “for the benefit or protection of potential purchasers” but also “protects unit owners wishing to sell (as well as owners’ associations and their board of managers)”. In reaching this determination, the Appellate Court found that “being charged an excessive fee to receive documents and information required by Section 22.1 is an injury that the statute was designed to prevent”. The Appellate Court further held that Section 22.1 provides an implied cause of action in favor of a condominium unit seller against a property manager, as agent of a condominium association, based on allegations that the property manager charged excessive fees for the production of information required to be disclosed to a prospective buyer.
The result of the Appellate Court’s decision is critical for not only sellers of their condominium units but also for management companies and the condominium boards to ensure that the fees they are charging for the production of documents are reasonable and not in violation of Section 22.1 of the Act.
The attorneys at Franklin, Greenswag, Channon & Capilla have experience representing condo unit sellers, specifically in relation to Section 22.1 Please contact them if you have questions about this case, Section 22.1, or your obligations as a condo unit seller or purchaser.
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