Condominium & Common Interest Community Association Law Alert (April 2012)

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Illinois Appellate Court Rules That Association Cannot Detain Individuals
Authored By:
Robert M. Prince, Associate in the Bolingbrook Office

The Lake Holiday Owners Association (the “Association”) created a security department to enforce its governing documents, including the power to issue fines. The Board approved rules regulating speed. The security department had vehicles with oscillating and flashing lights, radar guns and recording equipment. The security department has a procedure to inform drivers that they are being recorded and to turn off the recording equipment if the driver does not want to be recorded.

One day an owner was driving through the Association and was stopped by a member of the Association’s security department for speeding in violation of the Association’s rules. The security officer pulled the owner over by activating the oscillating lights on his vehicle. Upon approaching the car, the security officer asked for and received the owner’s driver’s license and a membership card for the Association. More than four minutes later, the security officer informed the owner that he was being videotaped. The owner began questioning the security officer concerning why he was being detained and whether he was a police officer, which he was not. The owner was issued a citation for his excessive speed. Several months later the owner filed a lawsuit against the Association, its board of directors, its chief of security and a security officer. The case is entitled Kenneth Poris v. Lake Holiday Property Owners Association, Inc. et al., 2012 IL App (3d) 110131 (Jan. 24, 2012).

The case proceeded to the Third District Court of Appeals on a number of issues that affect Associations. The court found that the Association’s security department did not have the right to stop and detain drivers because the Association does not have police powers. The court also found that the Association was not permitted to use amber lights on its security vehicles since the Association is not an authorized security company, which must be a “commercial enterprise in the business of ‘keeping people secure and free from danger.’” However, the court found that the Association’s use of recording equipment was not a violation of the eavesdropping statute because the recording is stopped if a driver objects to the recording of his conversations. Likewise, the court found the Association’s use of radar guns to be a permissible use as any entity may use radar guns to detect speed on its property.
Finally, the court addressed whether the Association committed false imprisonment when it detained the owner. In order to succeed on a false imprisonment claim, the owner needed to prove that 1) his liberty was restrained by the Association and its officers and 2) the Association and its officers acted without reasonable grounds to believe that the owner committed an offense. In order to determine whether the owner’s liberty was restrained in this case, the court looked at other cases in which an officer requested a driver’s license, asked the driver to stay in his vehicle and issued a citation. The court found that the Association and its officers did not have probable cause to believe that the owner committed an offense, which only includes misdemeanors and felonies. Since the security officer pulled the owner over for a violation of the Association’s rules, which are neither misdemeanors nor felonies, he could not have had probable cause to detain the owner. Accordingly, the Association was found to have committed false imprisonment. The case is being sent back to the trial court to determine the owner’s damages.

What does this case mean for associations? Associations must be mindful of the fact that they are not arms of the state. Associations with security officers must check to ensure that the policies and procedures that those officers use are in compliance with the law. Otherwise those associations, like the Lake Holiday Owners Association here, should be prepared to compensate owners when the associations have overstepped their bounds.

Assessments After Bankruptcy Filing Still Due
Authored By:
Robert M. Prince, Associate in the Bolingbrook Office

A Federal Court for the Eastern District of Michigan has ruled that assessments which are levied after a Chapter 13 Bankruptcy is filed are not pre-petition debts and therefore are not dischargeable during the bankruptcy proceeding. The owner indicated that he intended to surrender the property in the bankruptcy. The court ruled that an owner remained liable to pay assessments as long as he retained ownership to the property within the association. The court stated that the owner could avoid having to pay assessments merely by transferring title to the property. The court did not decide what to do in those instances where an owner cannot divest himself of title to the property either by selling it or enticing the bank to take title, which banks are not in a rush to do in today’s market. While this Michigan case does not bind Illinois courts, it is interesting to see how other courts view an issue that arises all too often in Illinois.

Public Act 97-666 – Shortening the Short Sale
Authored By:
Robert M. Prince, Associate in the Bolingbrook Office

Foreclosures have wreaked havoc in associations throughout Illinois. Considering that associations have somewhat limited remedies after a foreclosure, any news that can shorten the foreclosure process or result in payment in full to the association is good news. On January 13, 2012, the Governor delivered some good news by signing Senate Bill 1259 into law.

SB 1259, which is Public Act 97-666, amends the Illinois Mortgage Foreclosure Law to add provisions concerning short sales. SB 1259 applies to situations where a unit owner presents the bank with a written bona fide (real) offer to purchase the unit for less than the amount owed on the mortgage and makes a written request to the bank to approve the offer. In such a case, the bank has 90 days after it receives the written offer and request to respond to it. The law does not state what remedies a unit owner would have if the bank fails to respond to his or her request.

The bank is not forced to accept the short sale offer. Instead, it merely has to respond to the request. If the bank denies the short sale offer, the bank’s foreclosure case will not be affected. It is important to note that the presentation of a bona fide short sale offer does not act as a stay of the proceedings. So, even though the short sale might be pending, the bank can proceed through the foreclosure process.

Why is this important for associations? Prior to SB 1259, there was no time limit on how long a bank could take to respond to a proposed short sale. Unit owners proposing a short sale could wait for up to a year or more for the bank to respond. This change should give associations more certainty regarding short sales which can provide associations an extra opportunity to be paid in full.

Allowing Day Care Homes – HB 5512 and HB 5513
Authored By:
Robert M. Prince, Associate in the Bolingbrook Office

Two bills have been introduced in the General Assembly that would apply to day care homes. HB 5512 and HB 5513 would both amend the Common Interest Community Association Act to allow day care homes in associations in a number of circumstances, but would do so differently. Both bills consider the operation of a day care home as incidental to the primary residential use of the dwelling, and that it cannot be considered a business, commercial activity or trade. This provision would prevent an association from interpreting a provision in its declaration prohibiting the operation of businesses as prohibiting day care homes. HB 5513 also states that an association cannot otherwise prohibit the operation of a day care home unless a community instrument, which should include rules and regulations, specifically prohibits the activity.

HB 5512, on the other hand, would not allow a community instrument to include restrictions on the operation of a day care home unless the restrictions are no more restrictive than the Child Care Act of 1969 and the rules enacted by the Department of Children and Family Services, which include a requirement for a day care license and caps on the number of children who can be in a home, among others. Further, HB 5512 would only allow an association to prohibit day care homes if it is necessary to preserve the health, safety and welfare of the other residents of the community. HB 5512 puts the burden on the association seeking to enforce the restriction rather than on an owner.

Neither bill would apply to condominiums or cooperatives.

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