30-Jan-22 – Owners of units in a condominium in River North did not need to give formal approval before their association negotiated a possible sale of the building, according to a new ruling from a state appeals court.

The property, Ontario Place, has 467 residential and three commercial units. All unit owners belong to the Private Residences at Ontario Place Condominium Association. Three owners sued the association and its board in July 2020 in response to a February 2020 memo regarding a possible sale to Strategic Properties of North America.

The sale never came to fruition.

Circuit Court Associate Judge Neil Cohen ultimately ruled in favor of the association, prompting the unit owners to appeal.

However, a three-justice panel of the Illinois First District Appellate Court backed up Judge Cohen. Justice Mary Mikva wrote the court’s decision on January 14; Justices Daniel Pierce and Sheldon Harris concurred. The order was issued under Supreme Court Rule 23, which may restrict its use as precedent.

According to court documents, the plaintiffs argued the Illinois Condominium Property Act vests authority for a bulk sale of units to owners – not a condo board – until at least two-thirds of unit owners approve. After the appeals panel affirmed Cohen’s denial of a temporary restraining order to block the association from negotiating, the owners voted in August 2020 on the sale proposal. Seventy-four percent voted in favor, but the law requires 85 percent approval to complete the sale.

Although the sale did not go through, the owners continued to press their allegations that the board acted outside its legal limits. They were seeking at least $25,000 for the expense of pursuing the sale.

Mikva (left) wrote, however, the state law “makes clear that the board’s powers are broader” than the owners’ framing. Although the challenged section doesn’t expressly grant a condo board the right to pursue and negotiate a bulk sale, the law also lacks a provision requiring formal authorization from a supermajority of unit owners before the board could begin talking with a potential buyer.

A condo board, she wrote, has “the power to do what is necessary for the association as long as that power is not given expressly to the unit owners.”

Bill tried to lower percent approval needed to sell but failed

The panel further noted State Senator Sara Feigenholtz (D-Chicago), in February 2020, introduced a bill that would expressly establish the plaintiffs’ position that 75 percent of unit owners need to approve before a board initiates the selling process. That amendment did not pass, which the association said underscored its position the law doesn’t currently contain the requirement the owners alleged.

The panel also rejected the unit owners’ argument the association breached its fiduciary duty by withholding documents during the voting process. The justices explained the owners did not show why documents they sought were material to unit owners or how they suffered from lack of disclosure. That, combined with the finding the association board did not violate the condo law, meant the panel found it unnecessary to address the remainder of the complaint.

The same plaintiffs filed a nearly identical lawsuit in the United States District Court for the Eastern District of California, located in Sacramento. There, the condo association is asking U.S. District Judge Troy Nunley to dismiss that complaint. The motion noted that, although some of the unit owners live in California, the owners haven’t established the basis for why the case should be heard in California federal court. Further, the association asserted the owner’s federal complaint merely restates the theories that led Judge Cohen to dismiss the Cook County complaint.

Private Residences at Ontario Place Condominium Association is represented in that matter by Christopher Nissen of the Los Angeles office of Wilson, Elser, Moskowitz, Edelman & Dicker. The unit owner plaintiffs have been represented in the Cook County case by attorneys with the firms of Robbins Salomon & Patt, and Cerda & Associates, both of Chicago. The plaintiffs are represented in California by Peter Samuel of Samuel and Samuel in Fair Oaks, California.