MikeJ8 (Illinois)
Posts: 45
Posts: 45
Posted:
Does anyone know if Illinois requires a "volunteer" HOA manager to be licensed if they are not required to pay dues/assesments as an incentive to serve on the board? Is that seen as compensation?
A service of:
Community123.com
Professional websites for HOAs & condos, since 2004
Professional websites for HOAs & condos, since 2004
🎁 1st year FREE for HOATalk members! →
Illinois license Req
Started by MikeJ8 • 7 replies • 1527 views
💬 Join us to post & get advice from 50,000 HOA & Condo leaders.
Create Free Account →
⚡ Takes 30 seconds
Already a member? Log in
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Mike,
I don't know about the State of IL. However, the IRS would see the waiver of a debt owed as compensation and it should be declared on the individuals income tax form. Additionally, depending on the amount of funds involved, the IRS requires 1099-misc to be filed for each Director. see IRS webpage - Instructions for
Form 1099-MISC
Typically a Board of Directors is not authorized to waive assessments. If the members want to compensate their Directors for serving, then the Directors should still pay the assessments and a check cut for the same amount given to the Director.
I don't know about the State of IL. However, the IRS would see the waiver of a debt owed as compensation and it should be declared on the individuals income tax form. Additionally, depending on the amount of funds involved, the IRS requires 1099-misc to be filed for each Director. see IRS webpage - Instructions for
Form 1099-MISC
Typically a Board of Directors is not authorized to waive assessments. If the members want to compensate their Directors for serving, then the Directors should still pay the assessments and a check cut for the same amount given to the Director.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
It is good business practice to be licensed and insured. We had a rule that anyone doing work for HOA had to be licensed and insured unless it was for a minimal amount or job under 100 dollars. Your HOA is a corporation and needs to do business with only those qualified by meeting those requirements.
NEVER EVER compensate ANY member by dismissing their fees. The HOA can cut a check for the exact amount of the dues/assessment but NEVER EVER EVER subsitute/trade out for those dues. It is BAAAAAD business practice and some cases can effect taxes/budget. Think about it. If you let a member to be a maintenance person in leiu of paying their dues, what happens when they become disgruntle and stop paying dues altogether? How is this going to be presented in court to place a lien or foreclose on them if this type of arrangment exists? It also doesn't show up quite right on the collection reports of the HOA either. Kind of a logistical nightmare for a non-profit if they practice this.
It's best to set up a new policy of requiring licensed and insured contractors, no subsitution for dues, and 3 bids on each job/contract. It will save you and your HOA a world of hurt later..
NEVER EVER compensate ANY member by dismissing their fees. The HOA can cut a check for the exact amount of the dues/assessment but NEVER EVER EVER subsitute/trade out for those dues. It is BAAAAAD business practice and some cases can effect taxes/budget. Think about it. If you let a member to be a maintenance person in leiu of paying their dues, what happens when they become disgruntle and stop paying dues altogether? How is this going to be presented in court to place a lien or foreclose on them if this type of arrangment exists? It also doesn't show up quite right on the collection reports of the HOA either. Kind of a logistical nightmare for a non-profit if they practice this.
It's best to set up a new policy of requiring licensed and insured contractors, no subsitution for dues, and 3 bids on each job/contract. It will save you and your HOA a world of hurt later..
Former HOA President
MikeJ8 (Illinois)
Posts: 45
Posts: 45
Posted:
A friend & president of his HOA suggested waiving dues to attract board members. He has done this for many years. But, IL now requires any HOA manager to be licensed by the state board and exempts self managed volunteers. I
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
MikeJ,
You should read your governing documents to see if the Board had the authority to waive the assessments. Typically, the CC&Rs specify that Assessments are to be applied a certain way (per lot or % of property owned).
A Board may typically waive late charges but not assessments. If the governing documents allow compensation, the Board (or membership, which ever is applicable) may decide to compensate a Director the amount of the Assessment charged, but that doesn't mean they don't pay the Assessment. This means the Association cuts a check in the same amount and "pays" the volunteer for their service.
If your on the Board, I urge you to get a legal opinion on how to properly provide compensation for serving. Otherwise, it's possible that the Board is opening up a huge can of potential legal issues.
Example: A future board discovers that one owner, who happened to serve as director, didn't pay assessments as required by the CC&Rs. That board could bring legal action against them for nonpayment of assessments. If the Board hasn't been issuing 1099-misc for the compensation, the Association may be subject to fines and penalties. If the board members who received this compensation didn't report it as income, they may be facing fines, interest and penalties from the IRS. If a disgruntled member came across this info, the disgruntled member could gain some cash in their pocket and feel vindicated by reporting the issue to the IRS.
You should read your governing documents to see if the Board had the authority to waive the assessments. Typically, the CC&Rs specify that Assessments are to be applied a certain way (per lot or % of property owned).
A Board may typically waive late charges but not assessments. If the governing documents allow compensation, the Board (or membership, which ever is applicable) may decide to compensate a Director the amount of the Assessment charged, but that doesn't mean they don't pay the Assessment. This means the Association cuts a check in the same amount and "pays" the volunteer for their service.
If your on the Board, I urge you to get a legal opinion on how to properly provide compensation for serving. Otherwise, it's possible that the Board is opening up a huge can of potential legal issues.
Example: A future board discovers that one owner, who happened to serve as director, didn't pay assessments as required by the CC&Rs. That board could bring legal action against them for nonpayment of assessments. If the Board hasn't been issuing 1099-misc for the compensation, the Association may be subject to fines and penalties. If the board members who received this compensation didn't report it as income, they may be facing fines, interest and penalties from the IRS. If a disgruntled member came across this info, the disgruntled member could gain some cash in their pocket and feel vindicated by reporting the issue to the IRS.
MikeJ8 (Illinois)
Posts: 45
Posts: 45
Posted:
No disrespect intended, I see so many issues with my & other HOA's that do not follow the acts, laws, and CCR's that my head spins sometimes. Does any entity really check up and enforce any of the written requirments?
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Mike,
Some States have established ombudsman offices to try and address these issues. Unfortunately, most of them are limited in the authority to correct anything. Even if there is an Ombudsman office, it's up to the members to initiate any action.
Therefore, as I previously posted, it's the membership that must do the checking and enforce any written requirement.
Some States have established ombudsman offices to try and address these issues. Unfortunately, most of them are limited in the authority to correct anything. Even if there is an Ombudsman office, it's up to the members to initiate any action.
Therefore, as I previously posted, it's the membership that must do the checking and enforce any written requirement.
TimB4 (Tennessee)
Posts: 21,059
Posts: 21,059
Posted:
Quote:
Posted By TimB4 on 04/21/2012 4:36 AM
Therefore, as I previously posted, it's the membership that must do the checking and enforce any written requirement.
Therefore, as I previously posted, it's the membership that must do the checking and enforce any written requirement.
I realized that it wasn't this thread where I had previously posted this sentiment.
It was actually in this thread and this is what I had posted:
In general, the CC&Rs (deed restrictions) are considered a civil contract between all owners of the properties that have the same deed restrictions attached. Associations are formed to maintain and/or operate the common area and fulfill any services (trash/recycling, snow removal, street lighting, etc.) required by the CC&Rs. Per the CC&Rs, the Association is also given the authority (in addition to the owners) to enforce the covenants, restrictions and conditions of the deed restrictions (contract). Typically, Associations are incorporated (usually as a nonprofit) as this provides them certain advantages. As a corporation they must comply with corporate laws in addition to any HOA/COA laws.
As you know there are civil laws and criminal laws. Criminal laws are usually enforced by the State. Civil laws are usually enforced by the individuals involved and they do this through the court system. Since contracts, hoa/coa laws and corporate laws are considered civil laws, there is typically limited governmental authorities to "oversee" or enforce those laws.
Sure the State corporation commission may fine for not filing the annual report on time. The IRS will certainly go after the Association for failing to file taxes. The District Attorney will prosecute if criminal laws are broken (example embezzlement). However if the Association doesn't comply with the Bylaws or a civil law, it's up to the membership to hold the Board accountable. The easiest way would be to recall the board or not reelect them to the Board. The more expensive option is to go through the court system.
This is why it's imperative that the members remain active in the development and actually take an interest in how the Association is governed. If apathy sets in (and, unfortunately it does), it becomes that much more difficult to change things when issues are discovered.
🎯 You've read this entire discussion
Join the conversation with 50,000 HOA & Condo Leaders:
- ✓ Ask follow-up questions
- ✓ Share your experience
- ✓ Get expert advice
- ✓ Access 350,000 discussions
Create Free Account →
⚡ Takes 30 seconds
Already a member? Log in here