Condo Law Watch

Records Requests Must Comply With Section 19; Vexatious Owner Requests Foiled By First District

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The First District Court of Appeals (Cook County) has issued an opinion that deals a blow to unit owners seeking to ensnare boards in records request disputes during pending assessment collections. In Oviedo and VMO Properties, LLC v. 12709 S. Blue Island Condominium Association and Osorio, 2014 Ill. App. 133460 (1st Dist. 2014), the First District issued an opinion that overturned a circuit court decision that penalized an association for not complying with a records request. The owner in question, also an attorney, was subject to a collection proceeding for unpaid assessments and, in response, he issued a separate request to the association to produce records. The appellate court’s opinion provides some useful language for associations.

The result in the circuit court was not positive for the association in question. The circuit court ruled that the association was responsible for the owner’s attorney’s fees incurred from seeking access to association records, holding that access was denied. Sanctions of just over $27,000 were entered for the association to pay. The First District, however, disagreed and overturned the case on the issue of failing to comply with the records request. The records requested were rich with litigation between the parties, from the association prevailing on its forcible entry and detainer suit to recover unpaid assessments to the owner’s filing of a complaint that included counts for breach of fiduciary duty against the board and other claims.

On appeal, the First District reversed the circuit court decision and held that the association did not fail to comply with the owner’s records request. The owner did not reference Section 19 of the Illinois Condominium Property Act (the Condominium Act), the Not for Profit Corporations Act, or the City of Chicago Municipal Ordinance 13-72-080 (City ordinance). The owner’s request demanded documents be examined in 15 days, but did not state a purpose for the records request, a requirement under Section 19. The First District held that the owner’s written request did not state the proper time in which to inspect records (30 days), did not recite the relevant ordinance or statute, and did not state a proper purpose. The association did indicate, however, that records were available for inspection but that the owner never came to inspect them.

Specifically, the court provided extensive discussion on Section 19 of the Condominium Act’s proper purpose requirement and related references in Section 107.75 of the Not For Profit Corporation Act and how that interacts with the City of Chicago Municipal Code provision regarding condominium records. The court held that owners still must recite a proper purpose when they seek to examine certain records under the ordinance if those records fall into the proper purpose categories of Section 19 of the Condominium Act. The court reasoned that “it would be unreasonable to conclude that the drafters of the Municipal Code intended for unit owners to be able to request inspection of the financial records for any reason, including for purposes of harassment or retaliation. We therefore conclude that the requirement in both the Condominium Act and the Not For Profit Act that the request be made for a proper purpose is not superseded by the Municipal Code, which is silent on this issue, but rather fills a gap in the ordinance.” See Oviedo and VMO Properties, LLC v. 12709 S. Blue Island Condominium Association and Osorio, 2014 Ill. App. 133460, p. 10 (1st Dist. 2014).

The important distinction here is that the courts have recently ruled that gaps in the City ordinance may be filled in by more stringent provisions in state law. Owner and association counsel may make this a debate in the future as to whether the City ordinance’s lack of a purpose requirement is a more or less stringent requirement on associations such that the gap should be filled by Section 19. For now, owners must state a proper purpose even if exercising their rights under the City of Chicago ordinance for financial records. From the court’s reasoning in Oviedo, it seems that the request to access (6) all contracts, leases, and other agreements, a current listing of the names, addresses, and weighted vote of all members entitled to vote, ballots and proxies related to the immediately preceding 12 months, including but not limited to the election of members of the board of managers, and the financial records for the 10 immediately preceding fiscal years are all subject to a proper purpose recitation before access is granted.

Access was also discussed in the opinion. The court specifically rejected the concept that “access to inspect the records” requires that boards produce photocopies or scans to owners instead of simply making the records available. The court ruled that access to records for inspection is all that Section 19 requires. Owners cannot allege that they were denied access to records after an association states they are available for inspection and the owner fails to schedule the appointment to inspect them.

In the opinion, the court also chastised the owner, an attorney, for his lack of familiarity with the law and improper arguments against the association. The court ruled that he could not benefit from a late-in-the game realization that a different statute applied to his records request might attach liability. The owner was not aware of the shorter (at that time) access window available under the City ordinance versus the 30-day timeline in Section 19 of the Condominium Act. The court also ruled that the owner could not allege that the association’s hiring of counsel to collect assessments was mismanagement of association funds, where he himself was the delinquent owner in collections that caused the need for a collection attorney.

The court also discussed the owner’s timing in issuing the request. The owner issued his records request after the association started assessment collection proceedings against him for his lack of regular payment of assessments. The court noted that it was clear that the owner was issuing the records request only as an attempt to frustrate the association during collections. Though it did not incorporate this frustration of purpose into his operative holding, we believe the case provides some interesting fuel for associations defending against owners’ attempts at collateral attacks during the assessment collection process.

This case helps to clarify the debate over whether records must be produced to comply or if associations need only follow the letter of the law; this also clarifies that a proper purpose must be stated and that access means access, not production by email or photocopying without a reasonable charge.

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