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Condo | HOA Lawyers

Fee Limits for Statutory Mandated Documents – How Much Can the Association Charge?

Facts:

The plaintiffs, the Channons, planned to sell their condominium unit.  The Illinois Condominium Property Act required them to obtain specific disclosure documents from the Association or its agent prior to a sale, and to provide them to potential buyers on request.  The Channons then entered into a “standard sales contract” with a potential buyer who asked for the disclosures.  The Channons obtained the disclosures from the property manager, Westward Management, for a fee of $245.  After obtaining the disclosures, the Channons filed a class-action lawsuit in Cook County Circuit Court alleging that the property manager charged “unreasonable fees for the statutorily required documents” and that the property managers conduct “violated the Consumer Fraud and Deceptive Business Practices Act (“Fraud Act”).”

Cook County Circuit Court:

The property manager filed a motion to dismiss the suit.  The trial court certified the question of whether the “Condominium Property Act provides an implied cause of action in favor of a condominium unit seller against a property manager, as agent of a condominium association or board of directors, based on allegations that the property manager charged excessive fees for the production of information required to be disclosed to a prospective buyer under that statute.”

Illinois Court of Appeals:

The appellate court applied a four-part test to answer the question: whether

(1) the plaintiffs are members of the class the statute was intended to benefit,

(2) the statute was designed to prevent the plaintiffs from suffering the injury they incurred,

(3) the statute’s purpose is consistent with the creation of a private right of action, and

(4) it is necessary to imply a private right of action to provide an adequate remedy for the statutory violation. 

The appellate court rejected the property manager’s argument that the legislature’s intent was to make the board and its managers directly responsible for providing the mandated disclosures at a reasonable cost, finding that when the property manager contracts with the association to fulfill its statutory duties it “could also be liable if it actively participated in breaching the Association’s duty.”   The property manager filed a petition to the Illinois Supreme Court, which it accepted.

Illinois Supreme Court:

The Supreme Court held that the “mandated disclosures establish a clear legislative intent to impose a duty on unit sellers for the sole benefit of potential buyers.”  The court found that because the plaintiffs were not part of the class the legislature “primarily intended to benefit” (the buyers) they failed to meet the first test.  The court also held that it would not imply a private right of action because the statute is not ineffective without it.  Accordingly, it reversed the court of appeals and remanded the case to the circuit court.

Lessons Learned:

  1. Although $245 for the documents might sound expensive, the time and effort expended to push this case through three courts was not likely worth it. 
  2. The fact that this was brought as a class action would imply that the attorneys likely handled it on a contingent fee, hoping for a large recovery if the court had held in their favor.
  3. If you are going to bring a claim that the fees charged for statutorily mandated documents is too high, and you are not the “primary intended beneficiary” of the statute, then you may be out of luck. 

Channon v. Westward Management, Inc., — N.E.3d — (2022) 2022 IL 128040 (11/28/2022)

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