Effects of Restated Covenants and CICAA on Property Owners
By Marge Smith Clark
On behalf of the Legal Committee
On November 6, 2011, the Restated Covenants go into effect. As of July 29, 2010, the Common Interest Community Association Act (CICAA) became law and as amended by Senate Bill 1651 requires all community associations to be in compliance by January 1, 2012. Both documents present changes that affect several important rights and privileges of property owners and deserve explanation. It is important for all property owners to understand that CICAA is the law and as such trumps some provisions in our governing documents that might be in conflict with the law.
1. The Restated Covenants in Article VI, Section 12, provide property owners of vacant lots an option to restrict a vacant lot to no construction in perpetuity and receive a 40 percent reduction in association dues.
2. The Restated Covenants in Article VI, Section 13, provide a Senior Exemption from any increase in future annual assessments to those senior citizens whose dwelling qualifies for the Senior Citizen Assessment Freeze as provided in the Jo Daviess County, Illinois Ordinances.
3. CICAA specifies that twenty percent of the membership shall constitute a quorum, unless the community instruments indicate a lesser amount.
4. CICAA provides for communication of a proposed association budget to the property owners at least 30 days but not more than 60 days prior to adoption of the budget by the Board of Directors.
5. CICAA provides that a proposed annual budget shall indicate which portions are intended for reserves, capital expenditures, or repairs or payment of real estate taxes.
6. CICAA provides a procedure by which property owners may petition the Board if an adopted budget or any separate assessment adopted by the Board would result in the sum of all regular and separate assessments payable in the current fiscal year exceeding 115% of the sum of all regular and separate assessments payable during the preceding fiscal year.
1. Restricted Lot under the Restated Covenants
The owner of any lot upon which no structure has been erected may enter into an agreement with the Association in which the owner agrees that the lot shall remain forever vacant open space on which no structure of any kind shall be erected, except one requested by the Association and agreed upon by the owner and the Board. All agreements creating a Restricted Lot shall be acceptable to the Board and suitable for recording. When agreed to by the Association, the agreement shall be recorded with the Recorder of Deeds of Jo Daviess County, Illinois. Beginning in the year following the recording of the agreement, Restricted Lots subject to such an agreement shall be eligible for a forty percent (40%) reduction on any future annual assessments. However, Restricted Lots remain liable for any special assessments approved pursuant to Section 4 of Article VI of the Restated Covenants. The owner of a Restricted Lot shall have all the rights and privileges of any other owner, except as modified by the agreement. Owners of Restricted Lots will remain responsible for the maintenance of such Restricted Lot as is the owner of any other vacant lot.
2. Senior Exemption under the Restated Covenants
If a dwelling qualifies for the Senior Citizen Assessment Freeze as provided in the Jo Daviess County, Illinois Ordinances, such dwelling shall be exempt from any increase in future annual assessments which become effective the year after the granting of such Senior Citizen Assessment Freeze. Application for the Senior Citizen Assessment Freeze must be submitted to the Chief County Assessment Office on or before July 1 of each year, and an applicant must meet all county requirements to qualify for the assessment freeze. The owner of a dwelling that qualifies for the Senior Exemption must before January 1 provide the Association with satisfactory evidence that the dwelling has qualified for the Senior Assessment Freeze program for the following year. Any application and paper work with the Chief County Assessment Office must be completed and filed in the Association office by December 2011 in order to qualify for the Senior Exemption in 2012. Such dwelling shall remain liable for any special assessments approved by the members. All Senior Exemptions shall end on the year immediately following the sale or transfer of the dwelling to a third party or the death of the last surviving owner entitled to the Senior Citizen Assessment Freeze.
3. CICAA Specifies a Quorum of Twenty Percent (20%) or Less for Meetings
As a result of language changes in Senate Bill 1651, which amends CICAA, a quorum shall constitute twenty percent (20%) of the membership, unless the community instruments indicate a lesser amount. For years our Covenants and Restrictions and Bylaws have provided for different quorum percentages depending upon the issue—annual assessments and special assessments, changes to the Articles of Incorporation, changes to the Covenants, changes to the Bylaws, Recall of a Board member, etc. Increases in annual assessments and special assessments require a 60 percent (60%) quorum on a first ballot. Amendments to the Articles of Incorporation also require a 60 percent (60%) quorum.
With the implementation of the Restated Covenants on November 6, 2011, quorum requirements were scheduled to be lowered to 40 percent (40%) on a first ballot for increases in annual assessments and special assessments and dropped to 30 percent (30%) if a second meeting were necessary. The quorum requirement for Amendments to the Articles of Incorporation and Restated Covenants were scheduled to be lowered to 40 percent (40%).
However, CICAA trumps our governing documents; and under CICAA and SB1651 Section1-40 (b) (1) twenty percent of the membership shall constitute a quorum, unless the community instruments indicate a lesser amount. Work on the proposed Restated Bylaws (which are subject to approval by the Board and the membership) has incorporated further changes to comply with the twenty percent or less quorum requirements of CICAA. Quorum requirements that had been adjusted downward to forty percent (40%) are being adjusted downward further to twenty percent (20%) or less in the Restated Bylaws. In our Restated Bylaws, the quorum requirement for special meetings of the membership will be 125 Voting Members, unless the action for which the meeting is called requires a greater quorum. For example, if the meeting is called to vote on a merger or dissolution or increase in the permitted indebtedness, the quorum requirement is 20%. It is recommended that members review the Restated Bylaws as published in the June Apple Core and carefully review the recommended changes to these Restated Bylaws that will be published in the September Apple Core.
4. CICAA Provides for Publication of the Budget before Adoption
Historically, the Association has published the budget following adoption of the budget by the Board of Directors. However, under CICAA requirements, the Association must provide to the membership through a prescribed delivery method a copy of the proposed budget at least 30 days but not more than 60 days prior to adoption of the budget. Included with the budget must be an indication of which portions are intended for reserves, capital expenditures or repairs or payment of real estate taxes. A “prescribed delivery method” for the proposed annual budget at ACLPOA will be publication in The Apple Core since a copy of such is sent to all members on a regular basis. A copy of the 2012 proposed budget is included in this August issue.
Originally posted on August 8, 2011 and published in the August issue of The Apple Core
On behalf of the Legal Committee
On November 6, 2011, the Restated Covenants go into effect. As of July 29, 2010, the Common Interest Community Association Act (CICAA) became law and as amended by Senate Bill 1651 requires all community associations to be in compliance by January 1, 2012. Both documents present changes that affect several important rights and privileges of property owners and deserve explanation. It is important for all property owners to understand that CICAA is the law and as such trumps some provisions in our governing documents that might be in conflict with the law.
1. The Restated Covenants in Article VI, Section 12, provide property owners of vacant lots an option to restrict a vacant lot to no construction in perpetuity and receive a 40 percent reduction in association dues.
2. The Restated Covenants in Article VI, Section 13, provide a Senior Exemption from any increase in future annual assessments to those senior citizens whose dwelling qualifies for the Senior Citizen Assessment Freeze as provided in the Jo Daviess County, Illinois Ordinances.
3. CICAA specifies that twenty percent of the membership shall constitute a quorum, unless the community instruments indicate a lesser amount.
4. CICAA provides for communication of a proposed association budget to the property owners at least 30 days but not more than 60 days prior to adoption of the budget by the Board of Directors.
5. CICAA provides that a proposed annual budget shall indicate which portions are intended for reserves, capital expenditures, or repairs or payment of real estate taxes.
6. CICAA provides a procedure by which property owners may petition the Board if an adopted budget or any separate assessment adopted by the Board would result in the sum of all regular and separate assessments payable in the current fiscal year exceeding 115% of the sum of all regular and separate assessments payable during the preceding fiscal year.
1. Restricted Lot under the Restated Covenants
The owner of any lot upon which no structure has been erected may enter into an agreement with the Association in which the owner agrees that the lot shall remain forever vacant open space on which no structure of any kind shall be erected, except one requested by the Association and agreed upon by the owner and the Board. All agreements creating a Restricted Lot shall be acceptable to the Board and suitable for recording. When agreed to by the Association, the agreement shall be recorded with the Recorder of Deeds of Jo Daviess County, Illinois. Beginning in the year following the recording of the agreement, Restricted Lots subject to such an agreement shall be eligible for a forty percent (40%) reduction on any future annual assessments. However, Restricted Lots remain liable for any special assessments approved pursuant to Section 4 of Article VI of the Restated Covenants. The owner of a Restricted Lot shall have all the rights and privileges of any other owner, except as modified by the agreement. Owners of Restricted Lots will remain responsible for the maintenance of such Restricted Lot as is the owner of any other vacant lot.
2. Senior Exemption under the Restated Covenants
If a dwelling qualifies for the Senior Citizen Assessment Freeze as provided in the Jo Daviess County, Illinois Ordinances, such dwelling shall be exempt from any increase in future annual assessments which become effective the year after the granting of such Senior Citizen Assessment Freeze. Application for the Senior Citizen Assessment Freeze must be submitted to the Chief County Assessment Office on or before July 1 of each year, and an applicant must meet all county requirements to qualify for the assessment freeze. The owner of a dwelling that qualifies for the Senior Exemption must before January 1 provide the Association with satisfactory evidence that the dwelling has qualified for the Senior Assessment Freeze program for the following year. Any application and paper work with the Chief County Assessment Office must be completed and filed in the Association office by December 2011 in order to qualify for the Senior Exemption in 2012. Such dwelling shall remain liable for any special assessments approved by the members. All Senior Exemptions shall end on the year immediately following the sale or transfer of the dwelling to a third party or the death of the last surviving owner entitled to the Senior Citizen Assessment Freeze.
3. CICAA Specifies a Quorum of Twenty Percent (20%) or Less for Meetings
As a result of language changes in Senate Bill 1651, which amends CICAA, a quorum shall constitute twenty percent (20%) of the membership, unless the community instruments indicate a lesser amount. For years our Covenants and Restrictions and Bylaws have provided for different quorum percentages depending upon the issue—annual assessments and special assessments, changes to the Articles of Incorporation, changes to the Covenants, changes to the Bylaws, Recall of a Board member, etc. Increases in annual assessments and special assessments require a 60 percent (60%) quorum on a first ballot. Amendments to the Articles of Incorporation also require a 60 percent (60%) quorum.
With the implementation of the Restated Covenants on November 6, 2011, quorum requirements were scheduled to be lowered to 40 percent (40%) on a first ballot for increases in annual assessments and special assessments and dropped to 30 percent (30%) if a second meeting were necessary. The quorum requirement for Amendments to the Articles of Incorporation and Restated Covenants were scheduled to be lowered to 40 percent (40%).
However, CICAA trumps our governing documents; and under CICAA and SB1651 Section1-40 (b) (1) twenty percent of the membership shall constitute a quorum, unless the community instruments indicate a lesser amount. Work on the proposed Restated Bylaws (which are subject to approval by the Board and the membership) has incorporated further changes to comply with the twenty percent or less quorum requirements of CICAA. Quorum requirements that had been adjusted downward to forty percent (40%) are being adjusted downward further to twenty percent (20%) or less in the Restated Bylaws. In our Restated Bylaws, the quorum requirement for special meetings of the membership will be 125 Voting Members, unless the action for which the meeting is called requires a greater quorum. For example, if the meeting is called to vote on a merger or dissolution or increase in the permitted indebtedness, the quorum requirement is 20%. It is recommended that members review the Restated Bylaws as published in the June Apple Core and carefully review the recommended changes to these Restated Bylaws that will be published in the September Apple Core.
4. CICAA Provides for Publication of the Budget before Adoption
Historically, the Association has published the budget following adoption of the budget by the Board of Directors. However, under CICAA requirements, the Association must provide to the membership through a prescribed delivery method a copy of the proposed budget at least 30 days but not more than 60 days prior to adoption of the budget. Included with the budget must be an indication of which portions are intended for reserves, capital expenditures or repairs or payment of real estate taxes. A “prescribed delivery method” for the proposed annual budget at ACLPOA will be publication in The Apple Core since a copy of such is sent to all members on a regular basis. A copy of the 2012 proposed budget is included in this August issue.
Originally posted on August 8, 2011 and published in the August issue of The Apple Core