Courtesy of The Chicago Tribune
Pamela Dittmer McKuen
November 15, 2009
associations have a big legal headache these days. They, or their
representatives, are spending increasing amounts of time on lawsuits and
liability claims. Some of the action is initiated by boards, and some by
residents. The disputes vary, but many are prompted by the economy.
"I'm seeing a little of everything -- an increase in delinquencies, an
increase in the scramble to amend governing documents to shore up the
holes," said association attorney Sima L. Kirsch of Chicago. "There
are unit owners who are not behaving properly and boards who are not behaving
properly, and developer problems too."
"We're also seeing a lot of people suing the association because they
don't like something the board of directors has decided to do," said Joel
Garson, president of Hillcrest Property Management in Lombard. "That goes
into the directors' and officers' insurance."
A huge problem for many associations is delinquent assessments, which goes
hand-in-hand with job losses and mortgage foreclosures. A recent survey of
property managers by the Chicago-based Institute of Real Estate Management
shows that 69 percent said debt collection is a significant source of legal
disputes. In 2007, the first and last time the survey was conducted, 48
percent of the respondents said that debt collection is a top issue.
The survey queried 200 managers of all property types who hold leadership
positions in the industry. It also analyzed 700 relevant court cases as well
as legislative and regulatory actions within the past two years.
"It depends on the association," said Thomas Taylor, vice president
of Draper and Kramer Inc. in Chicago. "We are fortunate that it is
occurring in a limited number of our buildings, but a few years ago we didn't
see it at all. And there certainly are far more foreclosures than even a year
or two ago."
Collecting past due assessments often involves multiple court appearances and
filings and possibly eviction proceedings, all stretched out over several
Insurance claims against the association also are on the rise. In the current
IREM survey, 69 percent of the respondents cited "slip-and-fall"
accidents as a primary cause of disputes. The number is up from 57 percent in
2007. Several of this year's respondents suggested that the depressed economy
leads more people to try to cash in by making claims against a property's
Insurance broker Karyl Dicker Foray of Rosenthal Bros. in Deerfield has seen
an estimated 40 percent increase since 2005 in general liability claims, which
includes slip-and-falls, against her client associations. She also has seen
residents make repeat claims. Even if the claims prove to be unfounded, the
association could end up paying in the form of higher insurance premiums.
"The insurance companies still have to do an investigation, which costs
money," she said. "It shows as a ding on the association loss
history. Multiple claims for the same reason are not taken lightly by
underwriters during pricing renewals."
Boards will cut down on misunderstandings and contention by following the laws
that govern associations and creating good rules and applying them equally,
Inspect your property carefully and remove any obvious hazards. You won't
deter scam artists, but you might cut down on legitimate accidents, said