Law Offices of David L. Rudolph, P.C.: Practicing Real Estate Law, Condominium Law, Business Law and Litigation in Chicago, Illinois.

Condominium Law

Not for Profit Incorporation:

There are three (3) compelling reasons why your condominium association should file the necessary forms to incorporate as a not-for-profit corporation under the laws of the state of Ilinois.

1. Notice of pending unit foreclosures: Given the present turmoil in the real estate market, it is critical that the association stay informed of all pending unit foreclosures. Whenever a unit goes into foreclosure, the foreclosing mortgage lender must serve the condominium association with the legal complaint. However, if the association is not on file with the Secretary of State, there is no way for the mortgage lender to determine who it should serve. The lender may eventually mail a copy of the complaint to the association building address, but without a specific person’s name on the envelope, the document often gets lost in the mailbox area of your lobby.  Once again, if in good standing, the association’s registered agent can receive the complaint and monitor the status of the foreclosure proceedings, such as the anticipated date of the sheriff’s sale. 
2. Securing Bank Loans: Like all property owners, condominium associations are often faced with unexpected major expenses, such as making necessary repairs to the condominium building. The securing of a bank loan for the capital project is often a valuable alternative to the levying of large special assessment to the unit owners. However, an initial underwriting requirement is of course confirmation that the association is a registered not-for-profit with the State of Illinois.
3. Additional Liability Protection:  In addition to filing a lawsuit against the association, a disgruntled owner will often sue the board members individually under a “breach of fiduciary duty” theory. Most modern declarations contain a provision whereby the association “indemnifies” and holds the individual board members harmless from claims or judgments. However, Sec. 108.70(b) of the Illinois Not-For-Profit Corporation Act provides another layer of protection, and provides an easy way to dismiss the individual board members from the lawsuit. Specifically, this section states that no director of a corporation organized under the Act “shall be liable, and no cause of action may be brought for damages resulting from the exercise of judgment or discretion in connection with the duties or responsibilities of such director unless such director earns in excess of $5,000 per year from his duties as director...”