CONDO OWNERS FIGHT HEFTY DOCUMENT FEES WITH CLASS-ACTION LAWSUITS
By Don DeBat
Several Chicago and Illinois condominium owners who are fed up with being ripped off by management companies who charge excessive fees to access legal documents are fighting back with class-action lawsuits, legal experts say.
On November 20th, CondoCerts.com Inc., a national web database that sells statutorily mandated certification documents to owners selling condos in Illinois, was hit with a $5-million punitive class-action lawsuit from sellers who claim it’s illegal for the website to charge “more than the reasonable cost of copying those documents.”
Condo owner Robert Ahrendt, the plaintiff in the class-action lawsuit, said he paid $370 for the documents he needed from CondoCerts. However, Ahrendt and other sellers say based on how easy and fast the documents were downloaded, CondoCerts is charging far more than the cost of providing them.
CondoCerts is marketed by Mutual of Omaha as an online document management service. It electronically stores the real estate documents related to condominium transactions and provides copies upon request, tasks typically handled by a property manager.
The class-action suit accuses CondoCerts of violating Illinois’ Condominium Property Act, fraud, unjust enrichment and deceptive business practices.
The suit seeks refunds of monies paid to the company as well as punitive damages and court costs for owners who paid a fee to the company for documents related to the sale of a condo in Illinois over the past five years.
Arendt is represented by Elizabeth M. Al-Dajani and Karnig S. Kerkonian of Kerkonian Dajani LLC, James X. Bormes and Catherine P. Sons of the Law Office of James X. Bormes PC, and Kasif Khowaja of The Khowaja Law Firm LLC.
Another three Illinois condominium owners filed a similar class-action lawsuit over allegations that they were charged unlawful and excessive fees for the documents needed to close on the sales of their condos by a property management company.
Condo owners John Murphy, Cecil Mathew and Nirupa Mathew, on behalf of themselves and all Illinois condo property owners, filed suit on October 5th in the Cook County Circuit Court against Foster/Premier Inc., Homewise Service Corp. and Next Level Association Solutions Inc. for alleged violations of the Illinois Consumer Fraud Act and Illinois Condominium Property Act.
According to the complaint, the plaintiffs allege that they contacted the companies for copies of their condo disclosure documents in order to sell their properties.
To obtain the documents, the plaintiffs were allegedly charged hundreds of dollars, an amount that was greatly in excess of the “reasonable fee” covering the direct-out-of-pocket costs of providing such information and copying permitted by law.
The condo owners are seeking an award for damages, pre-and-post-judgment interest, attorneys’ fees, expenses, costs of suit, punitive damages, and further relief as the court deems appropriate. They are represented by Charles R. Watkins of Guin, Stokes & Evans LLC in Chicago and David Fish, Kim Hilton and John Kunze of The Fish Law Firm, PC in Naperville, Illinois.
Often, sellers, buyers, brokers, attorneys, appraisers and lenders are referred to an on-line website portal to access the documents they need, which are provided in an electronic format by a third-party servicer or management company for a hefty fee.
However, legal experts say the sales of the documents often are then recycled multiple times in a single transaction and each party requesting them pays the fees.
A resale disclosure package, which includes documents and mandatory disclosures listed in Section 22.1 of the Illinois Condominium Property Act, could range in cost from as little as $200 to a whopping $1,250 or more for each party requesting the documents. Additional “rush” fees may add hundreds of dollars to the cost of obtaining the documents—even if they are stored on-line.
“How is it legal for a for-profit management company to resell documents that belong to unit owners in a not-for-profit condo association?” asked condo owner Sara E. Benson, managing broker of Benson Stanley Realty, and president of Association Evaluation, LLC, a Chicago-based real estate data-analytics firm. “The money is not going to the condo association. It’s paid to the management company or third-party provider—entities that do not own the documents.”
Benson believes that providing documents should be included in the management contract’s scope of services. Also, governing documents and resale information should be posted on a password-protected website for all owners, so they can be shared with prospective buyers at no cost, she said.
Because failing to provide documents to the seller as required by the Illinois Condominium Property Act (ICPA) can kill the sale of a condo, Ahrendt, one of the class-action law suit plaintiffs, argues that sellers are stuck paying the unfairly high fees or risk the sale of their real estate.
Ahrendt said he was charged a total of $370 for access to the documents, including two unexplained $20 service fees. Within minutes of receiving confirmation that the transaction went through, Ahrendt said, he received an email saying the documents were ready for download.
The suit claims that obtaining copies of the documents filed with the Recorder of Deeds office typically costs about $2.50 and calls CondoCert’s fees “unreasonable” in light of the fact that they are digital and were immediately accessible.
“Plaintiff, and other similarly situated individuals, had no choice or option but to pay the unreasonable fees and costs charged by defendant to obtain and access the ICPA documents in order to comply with the statute and the terms of the real estate sales contract,” Ahrendt’s complaint stated.
According to the suit, the document-servicing company’s conduct caused Ahrendt and other similarly situated individuals to suffer harm by depriving them of a choice—charging an unlawful and unreasonable fee for the documents, forcing them to pay the unlawful and unreasonable fees in order to comply with the Illinois Condominium Property Act—in order to convey the condominium unit.
Necessary documents also include a statement of any liens or other unpaid assessments against the unit, insurance information, rules and regulations, outstanding association loans, and other information common to the sale of a condo, some of which should be publicly available.
Ahrendt said that after he received a written purchase offer for his condo in May of 2017, he was instructed to use CondoCerts to obtain the documents, and was forced to pay the $370 in fees or risk losing the sale.
“To be clear: a selling unit owner’s failure to turn over the Illinois Condominium Property Act (ICPA) documents to the potential buyer will terminate a real estate sale and the selling unit owner could be precluded from selling his own real property,” the complaint said. “This can cause litigation, monetary and nonmonetary damages for seller.”
Among the four counts in the complaint, Ahrendt and the sellers said CondoCerts violated the ICPA, as the statute caps the “reasonable fee” associated with copying and providing the documents to the direct out-of-pocket cost incurred by the provider.
Ahrendt alleged CondoCerts has basically no cost on its end to provide the documents, as evidenced by the speed with which the documents are provided, the suit claims the $370 is not “reasonable.”
Other counts in the suit include allegations CondoCerts violated the Illinois Consumer Fraud and Deceptive Business Practices Act and that it unjustly enriched itself.
The complaint asks the court to certify a class including anyone who paid CondoCerts for the Illinois Condominium Property Act documents dating back to November 20, 2012. The complaint also seeks more than $5 million in damages, interest and court costs for the case.