A condo resale package protects both the seller and the buyer in a unit resale. Condo associations have their own roles to play, as most of the information included in the package will come from them. Illinois law sets forth certain requirements and limitations concerning these packages.
What is a Condo Resale Package?
A condo resale package is a bundle containing the condo association’s financial, legal, and governing documents, typically provided by a unit seller to a buyer.
When an owner wishes to sell their unit, they must supply the prospective buyer with a packet of documents. This is what’s known as a resale package for condo associations. This package provides the buyer with a comprehensive overview of the association’s financial health, monthly dues, and community rules before finalizing the purchase.
What is a Condo Disclosure Statement?
A condo disclosure statement is a document that summarizes the resale package.
While many use the two terms interchangeably, a resale package and a disclosure statement are not the same. The resale package is a bundle of documents, and a disclosure statement is simply one of them. It summarizes the package’s contents and includes information about the association’s financial status.
Is a Condo Resale Disclosure Required in Illinois?
Yes, Illinois law does require condo resale disclosures as part of unit sales. Disclosure requirements are set forth in two statutes: the Illinois Residential Real Property Disclosure Act and Section 22.1 of the Illinois Condominium Property Act.
While these laws both address disclosures, specifics differ. It is important for sellers to check these statutes before listing their properties for sale.
On the buyer’s side, these documents help them make an informed decision. Understanding how the condo works, its financial status, and any legal issues will help the buyer decide whether the community is a good fit for them.
What is the Illinois Residential Real Property Disclosure Act?
The Illinois Residential Real Property Disclosure Act sets out the requirements sellers must meet before closing a sale with a buyer.
The Act mandates that sellers complete a form with 23 questions regarding the property’s condition. It covers the roof, basement, plumbing, electrical systems, environmental hazards (such as radon or asbestos), and boundary disputes.
If the seller answers yes to any question, they must then describe the known defect. Keep in mind that marking “no knowledge” to a question should be done legitimately. Sellers who lie on the form could face legal and financial consequences.
What Does the Illinois Condominium Property Act Say About Resale Disclosures?
According to Section 22.1 of the Illinois Condominium Property Act, every unit resale must come with a disclosure packet. The condo association must provide a bundle of documents that informs the buyer of the association’s legal and financial condition.
If a seller or buyer requests the condo resale package, the association or HOA management company must provide it within 10 days. The association may also charge a fee for supplying this packet, up to $375.
After receiving the package, buyers have a few business days to review the documents and, if they choose, back out of the sale without penalty.
What Should a Condo Resale Package Include?
The Illinois Condominium Property Act requires resale packages to contain the governing documents, any outstanding debts or liens on the unit, upcoming major expenses, reserve fund information, financial statements, lawsuits and judgments on the association, insurance policies, unit alterations, the association’s contact details, and the collection policy.
Let’s break this down below.
1. Governing Documents
The buyer must get a copy of the condo association’s governing documents. These include the CC&Rs, bylaws, and operating rules.
2. Outstanding Debts and Liens
The association must provide information about any liens on the unit and any unpaid dues or other charges owed by the owner. The new owner (buyer) will assume responsibility for these.
3. Upcoming Major Expenses
The buyer must be aware of any major capital expenditures the association plans or expects in the next two years. This includes capital improvements, renovations, or amenity upgrades.
4. Reserve Funds
The association must provide information on the amount of money in its reserve fund and whether any of it has already been set aside for a specific project.
5. Financial Statements
Buyers must receive a copy of the association’s most recent financial statements. These can include the balance sheet, the income statement, and the cash flow statement. By reviewing these, the buyer can better understand the association’s financial position.
6. Lawsuits and Judgments
The resale package must disclose any pending lawsuits or judgments involving the association. Increased dues or large special assessments often follow legal issues, giving buyers a chance to think twice.
7. Insurance Policies
The buyer must receive information about the insurance coverage the association provides for the unit owners. This way, the buyer can prepare their own HO-6 policy.
8. Unit Alterations
The resale packet must state if the association believes that the previous owner made any alterations to the unit that comply with the governing documents. The association must make this statement in good faith.
9. Association Contact Information
Buyers must be given the name and mailing address of the association’s principal officer or designated representative. This way, they know who to contact for questions or concerns.
10. Collection Policy
Associations must provide buyers with a copy of their collection policy. Buyers have a right to know what’s in store for them regarding dues and potential penalties for nonpayment.
FAQs
What is a resale disclosure?
A resale disclosure is a general term for the documents a seller must provide to a buyer, typically with the help of the condo association. These documents reveal the association’s legal and financial status, allowing the buyer to make an informed decision about whether to proceed with the sale.
Who pays for the condo resale package?
It depends on local customs, but in Illinois, the seller typically includes the resale package as part of their closing costs. Sellers and buyers may negotiate the responsibility in the contract.
Should the seller request a resale disclosure before listing?
Sellers are obligated to provide disclosures to the buyer under both the Illinois Residential Real Property Disclosure Act and Section 22.1 of the Illinois Condominium Property Act.
Since it takes time to complete the form and provide the resale documents, sellers must begin the process in advance. Associations have 10 days to respond to a resale disclosure request, so sellers must factor in this timeframe before listing their unit for sale.
Early preparation allows sellers to ensure a smooth transaction. They can prevent delays in closing while ensuring buyers are aware of what they may be getting into before they commit to the purchase.
How long does a condo have to respond to a resale disclosure request?
According to Section 22.1 of the Illinois Condominium Property Act, condo associations must respond within 10 days of the request. Sellers must work with their association early on to avoid stalling the transaction.
Can a condo association charge for a resale package?
Yes, condo associations can legally charge a fee to produce a resale package, but this fee is capped at $375. An additional $100 may be charged for rush delivery requests completed within 72 hours.
For Everyone’s Benefit
Clearly, a condo resale package is not only a legal requirement but also a tool that helps buyers make an informed choice and helps sellers transact honestly. For their part, condo associations must fulfill resale disclosure requests within a specified timeframe, and the law specifies what these packages must contain.
First Community Management offers expert HOA management services to condos and HOAs in Chicago and beyond. Get in touch with us today!
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