Serving on a condominium association board comes with important responsibilities and potential legal risks. In Illinois, the Condominium Property Act outlines specific duties and requirements that board members must follow to protect both their communities and themselves from liability.
Below is an overview of common legal challenges for Chicago condo associations and practical steps boards can take to avoid them.
Avoiding Fiduciary Duty Breach Risks
Under the Illinois Condominium Property Act, board members owe fiduciary duties of care, loyalty, and good faith to their communities. These legal obligations carry personal liability risks if breached.
- Duty of Care: Make informed, prudent decisions after reasonable investigation.
- Duty of Loyalty: Place the association’s interests above personal interests.
- Duty of Good Faith: Act honestly and fairly in all association matters.
Illinois law requires all elected condominium board members to complete a one-time training on fiduciary duties within 90 days of election or appointment. Scheduling annual refresher courses through your management company can help reinforce best practices and reduce liability risks.
Best practices to reduce risk:
- Maintain detailed meeting minutes documenting deliberations, expert consultations, and decision rationales.
- Adopt clear conflict-of-interest policies requiring disclosure and recusal when appropriate.
- Maintain adequate Directors & Officers (D&O) insurance with coverage suited to your association’s size and needs.
Following these safeguards protects the association legally and helps build community trust through transparent governance.
Managing Construction Defect Liability
Construction defects, such as water intrusion, structural issues, or code violations, are among the most costly legal challenges for condominium associations.
In Illinois, associations generally have four years from the date a defect is discovered to file claims. For latent defects that were not immediately apparent, the period can extend up to 10 years from the date of construction. Deadlines can vary based on circumstances, so boards should confirm timelines with their association attorney.
Preventive steps include:
- Schedule professional building inspections every 3–5 years to identify early issues.
- Maintain a warranty log for all common elements, with reminders for expiration dates.
- After developer turnover, commission a thorough engineering review to identify defects while warranties are still active.
- Address minor issues promptly to avoid costly escalations.
Proactive maintenance and timely legal review can often resolve construction issues without litigation.
Ensuring Fair Housing Compliance
The Fair Housing Act (FHA) prohibits housing discrimination, and violations can result in costly legal action. Common risks for associations include:
- Improperly denying disability accommodations (e.g., ramps, service animals).
- Applying rules inconsistently to families with children.
- Policies that unintentionally impact a protected class.
Ways to reduce risk:
- Conduct annual policy reviews to remove potentially discriminatory language.
- Establish and publish clear accommodation request procedures.
- Keep detailed records of all requests, board discussions, and decisions in accordance with Illinois record retention guidelines (generally at least seven years for key governance documents).
Proactive compliance fosters an inclusive community while reducing legal exposure.
Maintaining Transparency in Meetings and Communications
Under the Illinois Condominium Property Act, board meetings must be open to unit owners and include advance notice. Closed sessions are permitted only for specific topics such as litigation, personnel matters, or attorney consultations.
Digital communications also carry risks. While the Damon v. Ocean Hills case originated in California, it serves as a reminder that association websites, bulletin boards, and online forums may be considered public spaces—meaning boards should moderate for discriminatory, defamatory, or false content.
Best practices:
- Follow statutory procedures for meeting notices, agendas, and minutes.
- Adopt clear communication guidelines for newsletters, websites, and social media.
- Maintain a secure, searchable archive of association records.
- Review bylaws regularly to ensure they reflect current Illinois law and community needs.
Funding Reserves to Avoid Legal and Financial Trouble
Underfunded reserves create financial strain and can expose board members to claims of breaching fiduciary duties. Consequences include emergency special assessments, deferred maintenance, and declining property values.
Recommended steps:
- Commission a reserve study every 3–5 years, with annual updates.
- Adopt a formal funding policy aligned with professional recommendations.
- Provide quarterly financial updates to owners, including reserve allocations.
- If a special assessment is necessary, consider phased payment schedules to minimize owner hardship while keeping projects on track.
Proactive Legal Risk Management
Chicago condo associations face a complex legal landscape, from compliance with state laws to managing construction defects and fair housing requirements. Proactive governance, thorough documentation, and professional guidance are key to minimizing risk.
First Community Management partners with Chicagoland condo associations to develop tailored legal risk management strategies, helping boards protect their communities while building trust with residents.
If your board is looking for a trusted partner to help navigate legal requirements, improve operations, and protect your community’s long-term value, connect with First Community Management. Request a proposal today.