So-called “condominium deconversion” has become commonplace, especially in Chicago. The path to deconversion can be a good thing for unit owners, or it can be a bad thing for unit owners, depending upon their circumstances. Often the path to deconversion includes what is known as a “Section 15 Sale”. The decision to pursue a Section 15 Sale is exclusively a decision reserved to the unit owners.
In my previous White Paper entitled Illinois Condominium Deconversion – Getting it Right, I discussed Section 15 Sales and the statutory procedure for authorizing a Section 15 Sale. If done correctly, Section 15 of the Condominium Property Act gives unit owners a powerful tool to carry out the will of a supermajority of unit owners to sell the property as-a-whole notwithstanding efforts by a small minority of unit owners to stand in the way. The Section 15 Sale requirement for supermajority consent of unit owners (at least 75%) is a valuable requirement to protect the rights of unit owners opposed to the sale, but it is not the only requirement.
This White Paper Supplement discusses how the Board of Managers of some condominium associations are usurping the authority of unit owners, engaging in ultra vires acts, and thereby breaching their fiduciary duties owed to all unit owners by pursuing a Section 15 Sale without proper unit owner consent. If a unit owner wants to stop a Section 15 Sale, the time to act is early in the process. Many unit owners wait too long to resist efforts by the Board of Managers to promote a Section 15 Sale. Once a Section 15 Sale is approved by the requisite majority of unit owners it is too late. At that point, every unit owner must sell their unit in accordance with the approved terms whether they want to or not. Objecting unit owners and their attorneys often focus on the wrong issue in attacking a Section 15 Sale and pursue theories of attack that are certain to fail. The Board of Managers has a fiduciary duty to the unit owners, but not the fiduciary duty often claimed by unit owner attorneys.