Do Condominium Associations have a Fiduciary Duty to Contract Purchasers?
What if you buy a condominium, relying on the disclosure information the condominium association board or management company provided you, only to find out that they didn’t give you everything they should have? What if you would never have bought the condominium if the association had disclosed all of the information they were supposed to? Well, you’re out of luck.
In a recent case, D’Attomo v. Baumbeck, 2015 IL App (2d) 140865, this very issue was decided by the Illinois Appellate Court in favor of the condominium association. In that case, the contract purchaser of the unit sued the condominium association board, stating that they had breached their fiduciary duty by not providing the buyer with a copy of the amendment to the condominium declaration which prohibited leasing. The court held that the condominium association has no fiduciary duty to a contract buyer. Their duty is only to existing owners in the association. Incidentally, the existing owner/seller of the unit in question was apparently aware that leasing wasn’t allowed, as he had been on the board at the time the leasing restriction was adopted. The buyers were allowed to continue their case against the seller.
Incidentally, one of my own clients purchased a condominium in suburban Cook County in 2014, and one of the things we specifically looked into was whether or not the unit could be leased. A year later, when she wanted to lease it, the board refused to let her. To my recollection, they did not actually have a formal written policy about not allowing rentals, and it certainly wasn’t in their condominium declaration either. Rather, they had developed some formula which basically amounted to “classes” of ownership, whereby some people could lease their units and others couldn’t; it wasn’t even written down. It didn’t appear that certain units were grandfathered, but the association was so vague about the whole thing that there was no way of knowing. The whole setup seemed improper and probably wouldn’t stand a chance if it went to court. My client decided to sell her unit rather than get into a long legal battle with the association. The point is, even if you do your diligence, the association might be providing you information that is just blatantly wrong. Be as diligent as possible when dealing with condominium associations!