Whether you just got elected to your association’s board, you’re forming a new board, or you inherited a board position when you moved in, you’re probably wondering what you need to do. While serving on the board of an association shouldn’t take too much of your time, there’s a surprising amount to learn. We’ve condensed the basics into a simple guide to help get you started. If you would appreciate some help on this journey, Condo Ally can help you along the way!
Forming a Condominium Association Board
Establishing a condominium association for small condominiums is a great way to help maintain quality, keep property values high, and provide opportunities for residents to share expenses and benefits. Condominiums are not required, by law, to have a board. However, when a number of residents live in a shared space with common areas, a homeowners’ association can help to provide and enforce certain guidelines that will help all residents benefit from the advantages and protect them from the disadvantages. Forming the initial board for the condo association is typically done by a developer, but for established condominiums without boards, boards can be formed by gathering a small group of people (usually no more than 10) who share a common vision and mission that will best serve the majority of the residents. Keeping the group small can increase productivity and accountability. Here are a few tips for forming and maintaining a condo association board:
- During the first meeting, an attempt should be made to elect at least temporary officers, including a president, vice president, secretary and treasurer. Each of these offices holds certain responsibilities, and is accountable to the entire board. Duties vary, but are all related to carrying out the various actions (maintaining financial records, recording documents and data, establishing policies, enforcing policies, interact with third parties, execute contracts, and consistently act in a manner which serves the best interests of the association). Once officers are elected, other board members can develop needed committees and task forces to tackle smaller projects.
- President: Presides over meetings, executes contracts
- Vice President: Supports the president and runs things when the president can’t
- Secretary: Takes meeting minutes or finds someone who will, custodian for official records
- Treasurer: Handles all things financial
- Board member terms should be limited. The initial board often votes to determine the term length, typically 2 years. Limitations on term length help to keep the board fresh and limit the potential for abuse of power. It also allows many different residents to participate in the board proceedings and make contributions to the association other than their dues and votes.
- Remember that a board position is not a social position. Those on the board should have the ability to interact respectfully and appropriately with others, while keeping the overall needs of the association as a primary objective. It can be helpful to seek out board members who possess particular skill sets—such as accountants, lawyers, or those with previous board experience. Even when their experiences are not specific to condo associations, they will often know some of the “right” questions to ask, and where to start looking for information.
Holding Condo Association Meetings
Several types of meetings should be held by a condo association. Larger condo associations (50 units or more) often hold monthly meetings to address concerns and offer residents a voice and an opportunity to become involved with the association. Smaller condo associations and homeowners’ associations may hold less frequent meetings. Condo associations are required to hold board meetings four times per year. Other special interest meetings may be held throughout the year for smaller groups. The date and time of the meeting should be set by the board, and ample notice of the meeting should be provided to all residents. Here are some helpful suggestions for making the meetings as productive as possible:
- Provide ample notice to all those who should attend meeting (e.g., a general meeting should be announced to all residents—or scheduled on a regular interval such as the first Wednesday of each month; board members should be invited to all board meetings well in advance; committee meetings should be arranged at times convenient for the most committee members).
- Present the suggested agenda prior to the meeting.
- Offer an anonymous method for residents to offer suggestions to the board members.
Legal Issues Related to Condo Associations
There are several important legal issues that must be addressed when deciding about if and how to form a condo association. For any planned community, such as a condominium, with shared space and amenities, there must be rules and by-laws established that help guide the board and the residents regarding covenants, conditions, and restrictions (CC&Rs), as well as any other rules and regulations. The condo association must file at least the following legal documents:
- Articles of incorporation – A charter to establish the existence of a corporation
- Bylaws – Governs how the association operates and contain the information needed to run the HOA as a business
- CC&Rs (Covenants, Conditions, and Restrictions) – Basically, the rules of your association
- Rules and Regulations – Further clarifies the CC&Rs and is less permanent, leaving room to adapt to the needs of the association
In the state of Illinois, it is not mandatory that a condo association be incorporated, but it is strongly recommended from a legal standpoint. Incorporation helps to avoid many problems, including certain building code violation punishments, protects unit owner association members from personal liability, and help with contractual and tort liabilities that may develop.
Tax Requirements and Documents
The IRS requires that all condo and homeowners’ associations file a form 1120-H yearly. If you’re like most small condo associations in Chicago, and around the country, you won’t have to pay any taxes. Although condo associations are nonprofit organizations, they are taxable organizations because they are not charities. However, most of the time, the only situation that may cause a small condo association to pay taxes is if the association owns a unit and rents it out. Fortunately in Illinois, unlike many states, if you pay no taxes on the 1120-H then you do not need to file an IL-1120, the Illinois state version of the 1120. Review the full instructions to make sure you don’t make a mistake: https://www.irs.gov/pub/irs-pdf/i1120h.pdf.
Starting out a small condo association really only takes a few important steps. Although it should always be considered a work in progress, with the board focused on the best interests of the association and the members, being open to new developments and changes is the key to sustaining a great association. With these 4 fundamentals taken care of, your association will be well on its way to success:
- Form a board with at least two members
- Incorporate your condo association
- Hold four meetings per year and keep minutes for each meeting
- File your 1120-H annually before March 15
Be sure that you are clear about any federal and state regulations related to running a condo association in Chicago, and the specifics that apply to condo associations in Illinois (this is where having a lawyer on the board can come in handy). But, following the basic tips in this guide will get your condo association up and running and help maintain organization, stability, and quality for all of the residents.