CHICAGO — A state appeals panel has ruled condominium owners can initiate class actions against agents of homeowner associations they believe charged excessive fees to owners seeking documents they are required by law to provide to buyers when they sell their condo units.
Harry and Dawn Channon, who sold their Chicago condo in 2016, sued Westward Management, the retained agent of the Kenmore Club Condominium Association, alleging the firm charged excessive, unreasonable fees to produce materials to give to prospective buyers. They said the charges violated the Condominium Property Act and the Consumer Fraud and Deceptive Business Practices Act.
Cook County District Judge Anna Loftus denied Westward’s motion to dismiss the complaint, but did certify a legal question to the First District Appellate Court:
Illinois First District Appellate Court Judge James G. Fitzgerald Smith
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Whether the law the Channons invoked provides an implied cause of action for condo sellers, which would give them the ability to sue.
First District Appellate Justice James Fitzgerald Smith wrote the panel’s opinion, issued Dec. 7; Justices Terrence Lavin and Cynthia Cobbs concurred.
According to the panel, the Condominium Property Act says any seller who isn’t the developer of a condo unit has to obtain, for potential buyers, “nine categories of documents and information concerning the condominium and its unit owners’ association.” This includes the association’s governance documents, insurance coverage and information about the association’s financial condition and obligations.
When the Channons entered into a contract to sell their condo in February 2016, Westward provided an itemized list of documents and forms and charged them $245.
In arguing for dismissal, Westward said the Condominium Property Act exists to protect buyers, not sellers, and further that it doesn’t dictate what a management firm may charge, “as its unambiguous language mentions only what condominium associations or their boards of managers may charge for providing information,” Smith wrote.
Although prior case law did establish a buyer’s right to sue, the panel said, no precedent addressed the issue of sellers’ legal rights, even though the Condominium Property Act does stipulate protections for both parties.
“It is clear from the plain language of this statute that it also has the purpose of benefiting condominium unit owners who wish to sell their units,” Smith wrote, adding that most of the information the contested section governs “concerns the financial status of the property’s unit owners’ association and anticipated capital expenditures involving the condominium property as a whole. Most of it is information that is not within the knowledge or possession of an individual unit owner.”
The panel further said the law protects sellers because it creates the only mechanism under which they can prove to buyers the financial health of an association, essential information in any condo sale. Also, the inclusion of stipulations that a condo association can collect “only a direct out-of-pocket charge” indicates lawmakers’ intent to protect sellers.
Determining sellers’ right to challenge the fees, the panel then turned to the question of whether condo owners could sue a management firm. Judge Loftus determined Westward could be liable because it took on the KCCA’s legal obligations as part of its management contract. The panel agreed with Loftus, saying an agent “cannot be delegated or agree to perform those duties as agent in a way that the association or board would be prohibited from doing as principal.”
Westward also argued the Channons could have asked the association to produce the documents at a lower cost. The panel rejected that argument, saying it was not the question before it. The justices also noted Westward “could be liable as agent it if took an active part in violating a statutory duty that Kenmore Club Association owed to the plaintiffs.”
Finally, the panel rejected Westward’s argument it should be considered the same as other hired businesses like roofers or landscapers. Smith wrote that independent contractors “are not agents acting on behalf of the association who have undertaken the performance of the association’s statutory duties owed to unit owners. Thus, the fact that the Condominium Property Act does not control what such independent contractor vendors may charge for services or authorize unit owners to sue such vendors has no bearing on the certified question in this case.”
The Channons have been represented in the action by attorneys Terrie C. Sullivan, Jeffrey C. Blumenthal and Michael D. for Richman, of the firm of Jeffrey C. Blumenthal Chtrd., of Northbrook; attorneys Karnig S. Kerkonian and Elizabeth Al-Dajani, of Kerkonian Dajani, of Evanston; and Richard A. Greenswag, of Greenswag & Associates, of Northfield.
Westward has been represented by attorneys Melinda S. Kollross, Brian J. Riordan, James M. Weck and Paul V. Esposito, of Clausen Miller, of Chicago