A Warning About Disclosure Document Fees, From Illinois
An Illinois state court has sent a warning signal to association management firms about the fees they charge for disclosure documents. Disagreeing with a federal court ruling to contrary, the court held that owners can sue a manager for charging excessive fees under the state condo law.
In reaching its decision, the Illinois Court of Appeals focused on Section 22.1 of the Condominium Property Act. It requires owners to make available to prospective buyers nine categories of documents and information about their unit and the association. Under the law, associations can charge a “reasonable fee covering the direct out-of-pocket cost of providing such information and copying.”
In 2019, the Seventh Circuit Court of Appeals held that Section 22.1 doesn’t provide sellers with a private right to sue for violations of the provision.
“I think the plaintiffs in this recent case were in the right place — state court,” says Michael Kim, of counsel with the Chicago law firm Schoenberg Finkel Newman & Rosenberg, LLC. “They made similar arguments as in the other case, but the state court was more receptive.”
In the Seventh Circuit case, which was brought by two sets of owners, the fees were $240 and $365, respectively. The owners in the recent case were charged $245.
“This has been going on for many years now,” says Blake Strautins, managing partner at Kluever Law Group in Chicago, “where some management companies charge high fees for disclosure document packets and get pushback.
“After the Horist ruling, I kind of predicted that plaintiffs’ attorneys would get creative with finding a way to extract money from management companies.” Apparently, all it took was for a plaintiffs’ attorney to get an owner’s case in front of a state court instead of federal.
The ruling applies only in Illinois, but read the full story now and learn why the case is a cautionary tale for managers nationwide: