Owners of units in a condominium on Chicago’s Magnificent Mile didn’t need to give formal approval before their association negotiated a possible sale of the building, according to a new ruling from a state appeals court.
The property, 10 E. Ontario St., known as the Private Residences at Ontario Place, in Chicago's River North neighborhood, has 467 residential and three commercial units. All unit owners belong to the Ontario Place Condominium Association. Three owners sued the Association and its board in July 2020 in response to a February 2020 memo regarding a possible sale to Strategic Properties of North America.
The sale never came to fruition.
Illinois First District Appellate Justice Mary Mikva
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Cook County Judge Neil Cohen ultimately ruled in favor of the Association, prompting the condo owners to appeal.
However, a three-justice panel of the Illinois First District Appellate Court backed up Judge Cohen. Justice Mary Mikva wrote the court's decision Jan. 14; Justices Daniel Pierce and Sheldon Harris concurred. The order was issued under Supreme Court Rule 23, which may restrict its use as precedent.
According to court documents, plaintiffs argued the state Condominium Property Act vests authority for a bulk sale of units to owners, not an association board, until at least two-thirds of unit owners approve. After the appeals panel affirmed Cohen’s denial of a temporary restraining order to block the Association from negotiating, the unit owners voted in August 2020 on the sale proposal. Although 74% voted in favor, the law requires 85% approval to complete the sale.
Although the sale didn’t go through, the owners continued to press their allegations the board acted outside its legal limits. They were seeking at least $25,000 for the expense of pursuing the sale. However, Mikva wrote, the state law “makes clear that the board’s powers are broader” than the owners’ framing. Although the challenged section doesn’t expressly grant a condo board the right to pursue and negotiate a bulk sale, the law also lacks a provision requiring formal authorization from a supermajority of unit owners before the board could begin talking with a potential buyer.
A condo board, Mikva wrote, has “the power to do what is necessary for the Association as long as that power is not given expressly to the unit owners.” The panel further noted state Sen. Sara Feigenholtz, D-Chicago, in February 2020, introduced a bill that would expressly establish the plaintiffs’ position that 75% of unit owners need to approve before a board initiates the selling process. That amendment didn’t pass, which the Association said underscored its position the law doesn’t currently contain the requirement the owners alleged.
The panel also rejected the owners’ argument the Association breached its fiduciary duty by withholding documents during the voting process. The justices explained the owners didn’t show why documents they sought were material to unit owners or how they suffered from lack of disclosure. That, combined with the finding the Association board didn’t violate the condo law, meant the panel found it unnecessary to address the remainder of the complaint.
The same plaintiffs filed a nearly identical lawsuit in federal court in the U.S. District Court for the Eastern District of California, located in Sacramento. There, the Association is asking U.S. District Judge Troy Nunley to dismiss that complaint. The motion noted that, although some of the unit owners live in California, the owners haven't established the basis for why the case should be heard in California federal court. Further, the Association asserted the owners federal complaint merely restates the theories that led Judge Cogen to dismiss the Cook County complaint.
The Association is represented in that matter by the Christopher Nissen of the Los Angeles office of Wilson, Elser, Moskowitz, Edelman & Dicker.
The owner plaintiffs have been represented in the Cook County case by attorneys with the firms of Robbins Salomon & Patt, and Cerda & Associates, both of Chicago.
The plaintiffs are represented in California by attorney Peter F. Samuel, of the firm of Samuel and Samuel, of Fair Oaks, California.