Question and Answer re Funding Multi-Year
Condominium AssociationSpecial Assessment

   by Barry Kreisler

("Question of the Month", as published in the November,
2009 issue of ACTHA News, the newsletter of the
Association of Condominium, Townhouse
and Homeowners Associations)
Law Offices of Barry Kreisler, P.C.
_____________________________________________________________________

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Law Offices of Barry Kreisler, P.C.
Chicago Condominium Assessment Collection Lawyers
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The Law Offices of Barry Kreisler, P.C. are Chicago condominium and town home association assessment collection attorneys who assist Chicago and other Cook County town home and condominium associations in the collection of past due assessments and fines as well as representing new and seasoned town home and condominium associations with regard to Illinois condominium law and in all other legal matters.  Click here for more information about our condominium association collection eviction services.  Or you can simply call Barry Kreisler at (773) 394-6400, ext 1 or make a submission to our website and we will contact you.
Q.
Our condo association is undertaking a major capital improvement which will require financing.  We know some owners are in a position to help upfront the money so that we can avoid borrowing more money than needed.  But these owners have also raised the question of whether or not they can receive an incentive for doing so (i.e. a discount or less assessment
amount).  Can a board offer this type of incentive to all owners and not violate the Illinois Condominium Property Act which states that an association cannot create two different classes of ownership?
A.
Section 18(o) of the Illinois Condominium Property Act specifically provides that an “association shall have no authority to forbear the payment of assessments by any unit owner.”  Thus, the Association cannot offer a discount or other reduction in the amount of assessments. 
However, if properly structured, there are ways to legally accomplish what your Association would like to do.  (It should be noted that either of these options would also work for an Association which did not need to obtain a loan for the balance of the special assessment not paid immediately but where the Board feels that fairness requires that those owners choosing to pay on a deferred basis be charged interest on the deferred portion of their special assessment payment.)

Here are two ways to approach the situation:

1.A multi-year special assessment could be passed.  The owners with available funds could then make a loan to the Association, which could pay them interest and other fees or charges on their loans at a rate equivalent to that payable on the commercial loan, if one is used to obtain the balance of the funds for the project, or otherwise at rates deemed reasonable by the Board.  The owner loans could be reflected in a series of individual notes equivalent in principal amount to the amount of the periodic special assessment payments, to allow the lending owners to use cancellation pf the notes to pay their special assessments due to the Association.
2.The special assessment could be structured to be a one time special assessment, but with financing terms for owners not paying the entire special assessment immediately, i.e. interest and loan fees at a reasonable rate or at rates equivalent to those charged on a commercial loan obtained by the Association could be charged to those owners not paying immediately, while those who did pay immediately would only have to pay the actual amount of the special assessment.

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