CONDO LIFESTYLES
by Kelly Elmore – Kovitz Shifrin Nesbit
SECTION 15 DECONVERSION SALES:
Legal Challenges & Legal Duties of the Board of Directors We are now more than three years into the condominium deconversion wave that took the Chicagoland real estate industry by surprise in 2015. While deconversions may appear to be commonplace, so are the challenges to these unique large sale transactions.
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ome unit owners have mounted vocal and often caustic challenges in opposition to these sales. Ohers have taken to the courts to seek court intervention to stop the sales in their associations. However, the result of these challenges (and the court rulings that have resulted in these legal battles) is clarity regarding the role and authority of a Board of Directors in a condominium deconversion.
Defining a Section 15 Sale A Section 15 or “deconversion sale” is a sales transaction where the buyer purchases all the units in an association pursuant to
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CONDO LIFESTYLES
Section 15 of the Illinois Condominium Property Act, 765 ILCS 605/15 (the Act). In order to purchase all of the units in the Association, a sale with a buyer requires approval by unit owners having at least 75% of the ownership of the common elements (Note: In some cases, the percentage varies based on the size of the building or the Association’s governing documents). Section 15 of the ICP Act generally states that if the requisite 75% affirmative vote of the ownership is obtained, the approval of the sale will be binding upon all unit owners, even those who did not vote in favor of the sale. In
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addition, if the sale is approved, it becomes “the duty of every unit owner to execute and deliver such instruments and to perform all acts as in manner and form may be necessary to effect such sale.” In other words, if at least 75% of the ownership votes in favor of accepting a contract for the sale of the units, all owners are required to sell their units.
Board’s Contractual Authority in a Section 15 Sale Pursuant to the ICP Act, the Board of Directors of a condominium association is granted the express authority to act in a representative capacity on behalf of the unit owners in relation to a Section 15 sale. Pursuant to the Act, the only decision that falls outside of the purview of the Board is the specific deci-
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