ChitownLiving | Chicago Real Estate + Life

Anyone thinking of buying a condo in Chicago should know a little more about this infamous disclosure.  The 22.1 disclosure is a statement that is completed by the Condominium Association (Board of Managers) or the Management Company that reflects the current standing of the Association. Section 22.1(a) of the Illinois Condominium Property Act requires that a condominium seller furnish the prospective purchaser 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 owners 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 principle officer of the unit owner’s Association or of the other officer or agent as is specifically designated to receive notices.

This discussion is focused on what is referenced in number 3, as this appears to be one of the more contested disclosures. One of the purposes of this 22.1 disclosure is to keep the prospective purchaser fully informed as to any upcoming expenses the Association may incur, especially if those expenses are paid for in the form of a special assessment.  This is a worst-case scenario for a buyer when only 2 months after living in their new place, they are informed that they need to pay $3000 for their share of a new roof.  This is also why a healthy reserve account is desirable when purchasing a condominium, so these costs are not passed to the unit owners directly. A recent case addressing this issue of disclosure and “anticipated capital expenses” was Mikulecky v. Bart et al, 204 Ill.App. LEXIS 1476 (First District 2004) .  In that case, The Illinois Appellate Court stated that “A plain reading of the section 22.1(a)(3) of the Act reveals that its purpose, like that of the original section 22, is to encourage disclosure by the seller of a condominium unit for the protection of the prospective purchaser.  The Supreme Court of Illinois has held that public policy, ‘concerns what is right and just and what affects the citizens of the State collectively.” In Mikulecky v. Bart et al., the Defendant argued that the information about “anticipated” capital expenditures he obtained through the correspondence from the management company did not need to be provided to Plaintiff because they had not been “approved.”  The Court found Defendant’s arguments unpersuasive in that “anticipated” is not synonymous with “approved.” Thus, as a Buyer, it is important to confirm receipt of this document and thoroughly review the answers provided.  If  upcoming or anticipated capital expenditures are disclosed, you will then have the ability to bargain with the seller over the proper payment of such expenses.  If, on the other hand, such anticipated expenses were not disclosed and should have been, it appears that you have case-law on your side.