Gold Coast condo board approves $500,000 assessment for legal expenses

Gold Coast condo board approves $500,000 assessment for legal expenses

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26-Jul-17 - Half a million dollars for legal expenses will be paid by unit owners at a Gold Coast condominium over the next two years.

State Parkway Condominium Association approved the special assessment on Monday. The amount each owner pays will depend on percentage of ownership. Payments can be spread over 24 months interest-free.

The expenses cannot be claimed on the 160-unit condo association's insurance policy because one policy is maxed out and the carrier that sold them the second policy is refusing to pay.

Much of the legal expenses were incurred responding to complaints and lawsuits filed by one unit owner who is deaf. Michael Novak has filed complaints with the City of Chicago and battled his condo association in Cook County Circuit Court, Illinois Circuit Court, and United States District Court.

Novak believes more special assessments will be necessary. He says State Parkway is responsible for a $10 million shortfall that unit owners will have to make up for through increased assessments. He wants a court-appointed custodian to manage State Parkway's affairs and says the 197-page memorandum of law he has filed in state court details "massive fraud, including criminal federal and state tax evasion, oppression, and misapplication or wasting of assets" of the condo association.

His complaints to the Department of Business Affairs and Consumer Protection resulted in three citations from the city against the association.

Novak says condo board president Howard Robinson publicly offered him $250,000 in June to settle his lawsuits so State Parkway would not have to pay another $250,000 in legal fees.

Fees the result of law-breaking, says owner

State Parkway's legal fees were incurred, says Novak, because the condo board "intentionally disregarded federal, state, and local laws."

Michael Novak

"Unit owners should not be asked to pay legal fees when the board engages in fraud and/or gross negligence," said Novak (left).

According to Novak, State Parkway's operating fund has current assets of only $19,000 and current liabilities totaling $114,000 but "most likely, the situation is much worse due to invoices being left in the drawer and certain expenses improperly paid from reserves."

State Parkway exhausted its $1 million insurance policy from Travelers Indemnity Company that covered legal expenses. The condo association had planned on using Great American Insurance Group as the excess carrier but Great American has refused to pay and is now suing State Parkway.

The lawsuit, filed in U.S. District Court on April 25 against State Parkway Condominium Association, its property management company, Lieberman Management Services, and its property manager, Donna Weber, seeks a declaration that it owes "no insurance coverage obligations" to any party.

Great American, based in Cincinnati, says it is not liable for a variety of reasons, most notably because State Parkway expects coverage for expenses incurred on a claim first filed with Travelers before the Great American coverage period started.

State Parkway Condominium Association

"The [Great American] policy...only provides excess [directors and officers] liability coverage for claims first made within the policy period," explained Senior Claim Specialist Jennifer Edmonds in a letter to Lieberman Management Services. "Furthermore, claims based on or arising out of the same 'wrongful act' or 'related wrongful acts' are considered one 'claim' first made on the date of the first claim."

According to Novak, State Parkway has already spent more than $500,000 of assessments on legal fees, including money he says was improperly transferred from reserves. "So, this second $500,000 round and the insurer's $1 million makes it $2 million total for legal fees."

Condo boards in Illinois do not need approval from unit owners to adopt a special assessment unless it is for an addition or alteration to common elements or to association-owned property not included in the adopted annual budget. However, a special meeting of unit owners can be called to vote on the special assessment if within 14 days owners representing at least 20 percent of ownership sign a petition.

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