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Oftentimes, management companies will include their own management fees (such as a collection turnover fee or trial witness fee) on the ledger of a delinquent owner’s account when collecting unpaid assessments. As courts are reviewing account ledgers with increasing scrutiny, it is important for associations to be aware of the law regarding an association’s ability to include these types of fees to a delinquent owner’s account.

A brief refresher of the relevant sections of the Illinois Condominium Property Act (the Condo Act) and the Illinois Common Interest Community Association Act (CICAA) will help ensure that associations are meeting the requirements that allow for these fees to be collected from a delinquent owner.

Both the Condo Act and CICAA provide that three specific requirements must be met before a management/administrative fee may be added to a delinquent owner’s account. For example, Section 9.2(c) of the Condo Act provides as follows:

Other than attorneys fees, no fees pertaining to the collection of a unit owners financial obligation to the Association, including fees charged by a manager or managing agent, shall be added to and deemed a part of an owners respective share of the common expenses unless:

(i) the managing agent fees relate to the costs to collect common expenses for the Association;

(ii) the fees are set forth in a contract between the managing agent and the Association; and

(iii) the authority to add the management fees to an owners respective share of the common expenses is specifically stated in the declaration or bylaws of the Association.

Similarly, Section 1-30(h) of CICAA provides as follows:

Other than attorneys fees and court or arbitration costs, no fees pertaining to the collection of a members or unit owners financial obligation to the association, including fees charged by a manager or managing agent, shall be added to and deemed a part of a members or unit owners respective share of the common expenses unless:

(i) the managing agent fees relate to the costs to collect common expenses for the association;

(ii) the fees are set forth in a contract between the managing agent and the association; and

(iii) the authority to add the management fees to a members or unit owners respective share of the common expenses is specifically stated in the declaration, bylaws, or operating agreement of the association.

Generally, the first element of the management fee relative to the costs of collecting unpaid assessments is a given. The second two elements, however, are often overlooked. Most notably, many declarations do not specifically state that management fees may be added to a delinquent owner’s account. Rather, most declarations contain broad language regarding the fees and costs that can be charged back to a delinquent owner. However, this broad language will not suffice as the Condo Act and CICAA use the term “specifically,” which indicates that it must be spelled out in the declaration. Additionally, associations should carefully review their management contracts to ensure that the contracts also include that management fees will be charged back to a delinquent owner.

Once the three requirements set forth above are met, then management fees can be collected from a delinquent owner just like any other common expense. If these three requirements are not met, then management fees cannot be added to an owner’s account and the recovery of such fee will be denied by the court.

Please contact your Tressler attorney if you have any questions or concerns about whether your association is meeting these requirements.