Summary

When faced with the question of how much is too much for a “reasonable fee” the US Court of Appeals for the 7^th Circuit held that it could not answer the question because the right parties were not before the court.

The Facts

Keith Horist owned a condominium in downtown Chicago building’s condominium association. Joshua and Lori Eyman also owned a condominium in Chicago, but at a difference association. Both associations hired Sudler Property Management to manage their day-to-day operations.

In 2017 Horist and the Eymans put their units up for sale and found buyers. The Illinois Condominium Property Act requires that “[i]n the event of any resale of a condominium unit by a unit owner[,] … such owner shall obtain from the [association’s] Board of Managers and shall make available to the prospective purchaser, upon demand…” § 605/22.1(a). Subsection (b) of the statute requires the association’s “principal officer” to provide the required documents within 30 days of the request. § 605/22.1(b). Subsection (c) allows “the association … [to] charge the unit owner a ‘reasonable fee covering the direct out-of-pocket cost of providing such information and copying.’” § 605/22.1(c).

Sudler Property Management contracted with HomeWiseDocs.com to provide the required disclosure documents in PDF. “HomeWise charged Horist $240 for a PDF of his disclosure documents. The Eymans paid $365 for a PDF of theirs.” Horist and Eymans then brought suit against Sudler and HomeWise seeking a class action and alleging violations of the Illinois Statute, breach of the condominium documents, breach of fiduciary duty, conspiracy and unjust enrichment.   Sudler and HomeWise brought a motion to have the case dismissed.

7^th Circuit Court of Appeals

Affirmed the decision of the trial court finding:

1. The “unmistakable takeaway from [two prior decisions] is that section 22.1 is designed to protect the interests of condominium purchasers, not condominium sellers.” Holding that the statute works to protect buyers from fraud and not to benefit sellers;
2. The law does not support an argument that either the property manager or HomeWise could be liable for consumer fraud under these facts, because the duties under that statute all lie with the board of directors, who were not sued and charging a high fee is not sufficient to support a claim of unfairness under the act; and
3. The common law claims of unjust enrichment and conspiracy are not supported by the facts; and
4. The breach of fiduciary duty claim is derivative as pled in that plaintiffs’ allege that the defendants “aided and abetted” a breach of fiduciary duty. The contractual arrangement is not a breach and it does not become one even if the fee was too high.

Lessons Learned

1. If you think the fees being charged by your association for anything are too high, make sure that you sue the right parties;
2. If you are relying on a statute, make sure the statute fits the facts; and
3. If you are a property manager or provider of documents, expect to be sued if you charge a fee that may seem excessive.

Horist et. al. v. Sudler and Company et. al. (including HomewiseDocs.com) US Court of Appeals, 7^th Cir. No. 18-2150 (decided 10/21/19).