search.noResults

search.searching

saml.title
dataCollection.invalidEmail
note.createNoteMessage

search.noResults

search.searching

orderForm.title

orderForm.productCode
orderForm.description
orderForm.quantity
orderForm.itemPrice
orderForm.price
orderForm.totalPrice
orderForm.deliveryDetails.billingAddress
orderForm.deliveryDetails.deliveryAddress
orderForm.noItems
to approve them. Rules and regulations are recorded as board resolutions. Resolutions must be consistent with the declaration or proprietary lease, the bylaws and state law.


Association governing documents are almost always trumped by state law. But, when association documents conflict among themselves, the declaration usually carries the greatest weight, followed by the bylaws and then the rules and regulations.


Other Basic Legal Forms Annual Report – In Illinois, a corporation or LLC must file


an annual report with the Secretary of State’s office. This registration and yearly renewal carries a small fee and requires a listing of members of the board of directors as well as the association’s agent and contact information.


Section 22.1 Disclosure – This refers to a section of the Illinois Condominium Property Act that requires specific information to be provided by the seller of a unit (through the board of directors/management) to the purchases of a unit. This information includes, but is not limited to, the amount of the association’s reserve funds, legal or litigation matters, special assessments, insurance coverage, liens, and upcoming significant projects or capital expenditures.


Financial Documents


Budgets – A budget is an estimate or projection of expected revenue and expenses for a given period (usually a year). It should contain all anticipated repair, maintenance, operating, administration costs, recurring and standard expenses as well as those for projects or costs that do not always occur every year (such as mulching or painting). It should delineate between operating and capital/reserve activity and the portion of assessments earmarked for each. Budgets are usually developed and approved by board, and are required to be provided to all homeowners a specified period before year-end to allow owners opportunity to review and ask questions.


Financial statements – These should be produced on a monthly and annual basis, either by the association’s management company or accountant. Financial statements will show the results of the association’s operations: how much money and other assets the association has, how much money it owes, what income and expenses it had, and how much money it has and is putting into its reserve funds. More detailed financial statement packages may also include reports showing receivable balances, check registers, aged payable reports, and others.


Year-end audit, review or compilation – Similar to the financial statements produced internally, these include a


report that signifies an outside auditor or accountant has performed some level of service on the numbers reflected therein. An audit is the highest level of service


16 | COMMON INTEREST®


and concludes with the auditor’s opinion that the financial statements are fairly presented. A review is a lower level of service and indicates that the accountant has performed some procedures on the numbers and that they are not significantly misstated. A compilation is the lowest level of service and typically means the accountant has gathered the data and presented it in a standard format, without giving any assurance or opinion on the data. One of these reports may be required by an association’s declarations or bylaws. Or, if an association has a loan, the bank may require an annual audit, review or compilation to be performed by an independent auditor or accountant as a condition of the loan.


Income Tax Returns – A common misconception is that since most residential common interest associations are not-for-profit, they do not have to pay income taxes. That’s not necessarily the truth. Most associations established as corporations are only subject to income tax on nonmember (think “non-homeowner”) income such as


interest and investment income, rental income, sales of inventory or merchandise, and some forms of ancillary revenue. Income sources such as homeowner assessments, special assessments, late fees and the like are exempt from income taxes. Even if an association does not have any taxable income to report, or does not owe tax on its income subject to tax, it still has to file annual federal and state income tax returns. The two main tax forms available to associations are the Form 1120-H, which is a form specifically designed for homeowners/condominium associations and is shorter and much quicker to complete; or the Form 1120, which is a longer form that most C-corporations file and requires much more detailed information. These forms are usually due on the 15th day of the 4th month following the year-end (April 15th for a December year-end).


1099 Forms – Perhaps an association hired an independent contractor to paint the lobby, an individual to perform some professional or consulting services, or an attorney to handle general legal matters. The IRS requires all entities who pay individuals, independent contractors, unincorporated companies, attorneys and any other “non- employees” amounts of $600 or more in a calendar year to prepare and file 1099 Forms. One set of 1099 Forms will be filed with the IRS along with a summary Form 1096, and one copy is required to be issued to each of the payees. 1099 Forms are usually due by January 31st each year for reporting on a calendar-year basis, regardless of whether the association has a fiscal year-end or a calendar year- end. An association’s management company or accounting firm may usually aid in the tracking of payees and amounts required to be reported, and may be involved in preparing and issuing the forms.


• Summer 2021 • A Publication of CAI-Illinois Chapter


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60