Association suits, claims prevalent


Article Courtesy of The Chicago Tribune

By Pamela Dittmer McKuen

Published November 15, 2009


Community 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 months.

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.

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, said Kirsch.

Inspect your property carefully and remove any obvious hazards. You won't deter scam artists, but you might cut down on legitimate accidents, said Foray.