Every condominium owner, director and property manager will be impacted by a recent Appellate Court decision in the case of Channon v. Westward Management, Inc. It gave every condominium seller the right to sue the property manager, as agent of a condominium association or board of directors, based on allegations that the property manager charged excessive fees for the production of information required to be disclosed to a prospective buyer.
This case arose out of a very common fact pattern. Plaintiffs filed a class action lawsuit against the property management agent. Plaintiffs alleged that, when they sold their unit in 2016, the agent charged excessive and unreasonable fees totaling $245 to provide them with the documents and other information they were required to provide to the buyers of their unit.
The Appellate Court did not rule whether the $245 that plaintiffs paid to defendant was indeed excessive and unreasonable. Plaintiffs will still have to argue that issue back at the trial court.
The Appellate Court recognized a new cause of action in favor of condominium sellers. Previously, Illinois courts case extended such protection to buyers only. At first sight, this opinion may appear a mere extension of rights from current buyers to those same buyers who will one day become sellers. However, any newly recognized cause of action will excite prospective litigants to take their grievances to court. It should also be easier to certify a class of “sellers” (past and present) within a condominium association that it would be for a group of similarly situated “buyers”. In real life, it is seller who pays the bulk of disclosure fees. If buyer is asked to pay a disclosure fee which buyer deems excessive, a seller may be forced to pay it with the hope of not losing the deal.
Finally, this case spotlights the relationship between condominium associations, their boards of directors, and the property managers that they hire. It is not just the condominium owners who are impacted by this decision, but the board members as well. If a property manager is now exposed to liability for the fees that it charges in connection with producing disclosures with each sale, it will certainly try to shift that responsibility back to the association and the board of directors. The directors will have to revisit soon the issue of protecting themselves from property managers’ indemnification claims under management agreements.