HB3973 96TH GENERAL ASSEMBLY

LRB096 06147 AJO 16229 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB3973

Introduced 2/26/2009, by Rep. Cynthia Soto

SYNOPSIS AS INTRODUCED:

765 ILCS 605/22	from Ch. 30, par. 322
765 ILCS 605/22.1	from Ch. 30, par. 322.1
765 ILCS 605/24.5 new

Amends the Condominium Property Act. Provides that in relation to an initial sale or offering for sale of a condominium unit, the seller and developer must disclose, in a required form, to any purchaser of a condominium unit any information of which they are aware about any material or latent defect in the condominium unit or common elements; the required form includes definitions of the terms "aware", "material defect", and "latent defect". Provides that the information is not a warranty, but the disclosures are ones that the seller and developer should provide knowing that a prospective buyer may choose to rely on this information in deciding whether or not, and on what terms, to purchase the unit. Provides that the disclosure applies to all common elements. Provides that the report provided to an initial buyer shall be provided to a subsequent purchaser if the purchase occurs within 18 months after the initial sale. Provides that the developer must place in an escrow account an amount of money equal to 10% of the amount of the initial offering prices of the condominium units and the escrow funds shall be segregated in a separate account designated for this purpose in an interest bearing account at a federally insured institution, within applicable federal insurance limits. Provides that the interest earned on the escrow shall be available to and follow the disposition of the escrow. Escrow funds shall not be subject to attachment by any creditor of a buyer or of the developer or by the holder of a lien against any unit or the condominium property. The account shall be applied to the cost of repair or reconstruction of any unit or the common elements to correct a material or latent defect. This escrow requirement cannot be waived by any individual unit buyer, unit owner, or the association. A developer who violates the escrow requirement shall be subject to an action by a unit buyer or the association for damages and attorney's fees from the developer due to a violation of the escrow requirement.

A BILL FOR

AN ACT concerning civil law.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Condominium Property Act is amended by changing Sections 22 and 22.1 and by adding Section 24.5 as follows:

(765 ILCS 605/22) (from Ch. 30, par. 322)

Sec. 22. Full disclosure before sale. In relation to the initial sale or offering for sale of any condominium unit, the seller and developer must make full disclosure of, and provide copies to the prospective buyer of, the following information relative to the condominium project:

(a) the Declaration;

(b) the Bylaws of the association;

(c) a projected operating budget for the condominium unit to be sold to the prospective buyer, including full details concerning the estimated monthly payments for the condominium unit, estimated monthly charges for maintenance or management of the condominium property, and monthly charges for the use of recreational facilities; and

(d) a floor plan of the apartment to be purchased by the prospective buyer and the street address of the unit, if any, and if the unit has no unique street address, the street address of the project.

(d-5) A disclosure report completed jointly by the seller and the developer concerning the condominium unit and common areas that discloses any material or latent defects. The disclosure report shall be in the following form:

CONDOMINIUM DISCLOSURE REPORT Unit Address:............................................... City, State & Zip Code:...................................... Seller's Name:............................................... Developer's Name.............................................

This report is a disclosure of certain conditions of the unit and common elements listed above in compliance with the Condominium Property Act. This information is provided as of ...(month) ...(day) ...(year). The disclosures herein shall not be deemed warranties of any kind by the seller, developer, or any person representing any party in the sale of a condominium unit.

In this form, "am aware" means to have actual notice or actual knowledge without any specific investigation or inquiry. In this form, "material defect" means a condition that would have a substantial adverse effect on the value of the unit or that would significantly impair the health or safety of future occupants of the unit unless the seller and developer reasonably believe that the condition has been corrected. In this form, "latent defect" means a condition that could not have been discovered by a reasonably thorough inspection before the sale, would have a substantial adverse effect on the value of the condominium unit, or would significantly impair the health or safety of future occupants of the condominium unit, unless the seller and developer reasonably believe that the condition has been corrected.

The seller and developer disclose the following information with the knowledge that even though the statements herein are not deemed to be warranties, prospective buyers may choose to rely on this information in deciding whether or not and on what terms to purchase the unit. The seller and developer represent that to the best of his, her, or their actual knowledge, the following statements have been accurately answered. 1. I am aware of material defects in the unit or the common elements as follows:......................................... 2. I am aware of latent defects in the unit or the common elements as follow:.......................................... Note: These disclosures include all of the common elements and not only the common elements allocated to the exclusive use of and that form an integral part of the condominium unit. Note: These disclosures are intended to reflect the current conditions of the premises and do not include previous problems, if any, that the seller or developer reasonably believe have been corrected.

Seller and developer certify that they prepared this statement and certify that the information provided is based on the actual notice or actual knowledge of the seller and developer without any specific investigation or inquiry on the part of the seller and developer. The seller and developer hereby authorize any person representing any principal in a unit purchase to provide a copy of this report, and to disclose any information in the report, to any person in connection with any actual or anticipated sale of the unit. Seller:.....................Date:............ Developer:...................... Date:............

This disclosure report required by subparagraph (d-5) of Section 22 of the Condominium Property Act cannot be waived by any buyer.

In the event of any resale of a condominium unit by a unit owner within 18 months after the date that title is conveyed to the initial buyer, the original seller and the developer shall likewise furnish a copy of this report to that subsequent buyer.

(e) in addition, any developer of a conversion condominium shall include the following information:

(1) A specific statement of the amount of any initial or special condominium fee due from the purchaser on or before settlement of the purchase contract and the basis of such fee;

(2) Information, if available, on the actual expenditures made on all repairs, maintenance, operation, or upkeep of the subject building or buildings within the last 2 years, set forth tabularly with the proposed budget of the condominium and cumulatively, broken down on a per unit basis in proportion to the relative voting strengths allocated to the units by the bylaws. If such building or buildings have not been occupied for a period of 3 years then the information shall be set forth for the last 2 year period such building or buildings have been occupied;

(3) A description of any provisions made in the budget for reserves for capital expenditures and an explanation of the basis for such reserves, or, if no provision is made for such reserves, a statement to that effect;

For developments of more than 6 units for which the notice of intent to convert is issued after the effective date of this amendatory Act of 1979, an engineer's report furnished by the developer as to the present condition of all structural components and major utility installations in the condominium, which statement shall include the approximate dates of construction, installation, major repairs and the expected useful life of such items, together with the estimated cost (in current dollars) of replacing such items; and

(5) Any release, warranty, certificate of insurance, or surety required by Section 9.1.

All of the information required by this Section which is available at the time shall be furnished to the prospective buyer before execution of the contract for sale. Thereafter, no changes or amendments may be made in any of the items furnished to the prospective buyer which would materially affect the rights of the buyer or the value of the unit without obtaining the approval of at least 75% of the buyers then owning interest in the condominium. If all of the information is not available at the time of execution of the contract for sale, then the contract shall be voidable at option of the buyer at any time up until 5 days after the last item of required information is furnished to the prospective buyer, or until the closing of the sale, whichever is earlier. Failure on the part of the seller to make full disclosure as required by this Section shall entitle the buyer to rescind the contract for sale at any time before the closing of the contract and to receive a refund of all deposit moneys paid with interest thereon at the rate then in effect for interest on judgments.

A sale is not an initial sale for the purposes of this Section if there is not a bona fide transfer of the ownership and possession of the condominium unit for the purpose of occupancy of such unit as the result of the sale or if the sale was entered into for the purpose of avoiding the requirements of this Section. The buyer in the first bona fide sale of any condominium unit has the rights granted to buyers under this Section. If the buyer in any sale of a condominium unit asserts that such sale is the first bona fide sale of that unit, the seller has the burden of proving that his interest was acquired through a bona fide sale.

(Source: P.A. 91-616, eff. 8-19-99.)

(765 ILCS 605/22.1) (from Ch. 30, par. 322.1)

Sec. 22.1. (a) In the event of any resale of a condominium unit by a unit owner other than the developer such owner shall obtain from the Board of Managers and shall make available for inspection to the prospective purchaser, upon demand, the following:

(1) A copy of the Declaration, by-laws, other condominium instruments and any rules and regulations.

(2) A statement of any liens, including a statement of the account of the unit setting forth the amounts of unpaid assessments and other charges due and owing as authorized and limited by the provisions of Section 9 of this Act or the condominium instruments.

(3) A statement of any capital expenditures anticipated by the unit owner's association within the current or succeeding two fiscal years.

(4) A statement of the status and amount of any reserve for replacement fund and any portion of such fund earmarked for any specified project by the Board of Managers.

(5) A copy of the statement of financial condition of the unit owner's association for the last fiscal year for which such statement is available.

(6) A statement of the status of any pending suits or judgments in which the unit owner's association is a party.

(7) A statement setting forth what insurance coverage is provided for all unit owners by the unit owner's association.

(8) A statement that any improvements or alterations made to the unit, or the limited common elements assigned thereto, by the prior unit owner are in good faith believed to be in compliance with the condominium instruments.

(9) The identity and mailing address of the principal officer of the unit owner's association or of the other officer or agent as is specifically designated to receive notices.

(10) If the resale is within 18 months of the initial transfer of title, the same report for the unit at the time of the initial sale as required by subsection (d-5) of Section 22.

(b) The principal officer of the unit owner's association or such other officer as is specifically designated shall furnish the above information when requested to do so in writing and within 30 days of the request.

(c) Within 15 days of the recording of a mortgage or trust deed against a unit ownership given by the owner of that unit to secure a debt, the owner shall inform the Board of Managers of the unit owner's association of the identity of the lender together with a mailing address at which the lender can receive notices from the association. If a unit owner fails or refuses to inform the Board as required under subsection (c) then that unit owner shall be liable to the association for all costs, expenses and reasonable attorneys fees and such other damages, if any, incurred by the association as a result of such failure or refusal.

A reasonable fee covering the direct out-of-pocket cost of providing such information and copying may be charged by the association or its Board of Managers to the unit seller for providing such information.

(Source: P.A. 87-692.)

(765 ILCS 605/24.5 new)

Sec. 24.5. Initial sales escrow. To provide assurance to the buyer in the initial sale of the unit, or to the buyer in a resale within 18 months of the initial sale, that the developer will fulfill his or her obligations to the association or the unit owners collectively with respect to any material or latent defect in any unit or in the common elements for which the developer is responsible, the developer shall establish an escrow in an amount equal to 10% of the aggregate initial sale prices of all units in the condominium, which escrow shall be kept separate and apart from the developer's funds or the funds of any other person and which funds shall be maintained at a federally insured depository. The escrow shall be maintained for a period of not less than 2 years after the last initial sale of a condominium unit unless sooner disbursed to or at the direction of the association in order to remedy or repair a condition caused by a material or latent defect in one or more units or the common elements. If the escrow is not used, or if the escrow is partially used then so much of the escrow as remains, on the date that is 2 years after the last initial sale shall become the property of the developer unless there is a court order to the contrary because of a pending claim for a material or latent defect in one or more units or in the common elements. The escrow shall not be deemed to impose any limitation on the developer's obligation under any warranty or other legal obligation. The interest earned on the escrow shall be available to and follow the disposition of the escrow. Escrow funds shall not be subject to attachment by any creditor of a buyer or of the developer or by the holder of a lien against any unit or the condominium property. The account shall be applied to the cost of repair or reconstruction of any unit or common elements to correct a material or latent defect. This escrow requirement cannot be waived by any individual unit buyer, unit owner, or the association. A developer who violates this Section shall be subject to an action by a unit buyer or the association to recover damages and attorney's fees from the developer due to a violation of this Section.