Illinois Court Rules that Unit Owner Lacked Standing to Bring Construction Defect Claims Against Condo Developer

Illinois Court Rules that Unit Owner Lacked Standing to Bring Construction Defect Claims Against Condo Developer

Construction defects are a frequent problem in new construction condominiums in Illinois.  When the developer’s appointees control the board of directors, they rarely will take action to hold the developer responsible for construction defects.  However, after control of the board of directors is transitioned to the owners, the owner controlled board of directors typically investigates potential construction defect claims related to the common elements to hold the developer accountable.  If the developer fails to repair common element construction defects, the condominium association has the option of filing a lawsuit to hold the developer accountable.

While individual owners can pursue construction defect claims related to their units, the question arises as to whether the owner can pursue claims against the developer related to the common elements.  A recent Illinois Court of Appeals case answers this question.  In Majerle v. Winona 1302 LLC, 2024 IL App (1st) 231339-U, ¶ 2, 2024 WL 3103915, the Court held that an owner of a condominium unit did not have standing to pursue a claim against the developer related to common element construction defects when the condominium association had already initiated a lawsuit.  Accordingly, this case demonstrates the key role that the board of directors plays in bringing construction defect claims against a condominium developer.

Facts

Jared Majerle owned one of six condominium units in the 1302 Winona Street Condominium in Chicago.  Winona 1302 LLC was the developer of the condominium and controlled the board of managers until 2019.  In 2020, the new board filed a lawsuit against the developer on behalf of the condominium association alleging claims of breach of contract, breach of warranty, violation of the Consumer Fraud Act, fraudulent concealment, and piercing the corporate veil related to various common element construction defects.  In 2022, Majerle filed a separate complaint, alleging nearly the same claims.  The trial court dismissed Majerle’s complaint because there was another action pending and Majerle lacked standing and Majerle appealed.

Analysis

735 ILCS 2-619(a)(3) provides for dismissal of a claim if there is another action pending between the same parties for the same cause.” 735 ILCS 2-619(a)(3). The “same parties” requirement is satisfied when the parties interests are sufficiently similar, even though the litigants differ in name or number. A lawsuit presents the “same cause” when the relief requested is based on substantially the same set of facts. The crucial inquiry is whether both arise out of the same transaction or occurrence, not whether the legal theory, issues, burden of proof, or relief sought materially differs between the two actions.

In applying the above standard, the Court of Appeals held that Majerle’s lawsuit and the condominium association’s lawsuit involved the same parties.  Specifically, the Court of Appeals states that Section 9.1(b) of the Illinois Condominium Property Act, states in pertinent part: “[t]he board of managers shall have standing and capacity to act in a representative capacity in relation to matters involving the common elements or more than one unit, on behalf of the unit owners, as their interests may appear.” 765 ILCS 605/9.1(b). Accordingly, the court held that since the condominium association brought a claim on behalf of all the unit owners, including Majerle, that the same parties requirement was satisfied.  Similarly, the Court of Appeals concluded that the claims in both cases arose out of the same facts, as they both related to common element construction defects in the condominium.

Majerle also argued that it was inequitable and that he was prejudiced if he never had an opportunity to bring his own claims against the defendants.  However, the Court of Appeals noted that if the condominium association had not pursued construction defect claims on the owner’s behalf, that an individual owner always has the option of pursuing a derivative action.  Specifically, the Court of Appeals held that:

 …in Kennelly Square Condominium Ass’n v. MOB Ventures, LLC, 359 Ill. App. 3d 991, 995-96 (2005), individual condominium owners “have the remedy of filing a derivative action against the Board if the Board fails to assert their claim against [third-party] defendants.” Id. at 995. See also Poulet v. H.F.O., L.L.C., 353 Ill. App. 3d 82, 100 (2004) (“[O]ur finding in this case does not bar individual unit owners from obtaining relief in the event that the [Board] fails to take action against the third parties.”).

Accordingly, while a unit owner can bring individual claims related to their unit, the Court of Appeals recognized that the condominium association is in the best position to bring claims related to the common elements.

Conclusion

Majerle v. Winona 1302 LLC underscores the importance of a condominium association asserting construction defect claims on behalf of the owner related to the common elements. The court’s decision makes it clear that while individual unit owners have the right to pursue claims related to their own units, it is the condominium association that holds the primary responsibility for asserting claims related to the common element. If your Illinois condominium association is facing similar construction defects, it is important to understand the condominium association’s role in comparison to individual unit owners in resolving construction defects. Engaging with an experienced condominium attorney can help a new board navigate construction defects and maximize the chances of holding the developer accountable.

Kevin Hirzel is the Managing Member of Hirzel Law, PLC. Mr. Hirzel is licensed to practice law in state and federal courts in Illinois. He concentrates his practice on community association law, condominium law, homeowners association law, and real estate law. Mr. Hirzel is a fellow in the College of Community Association Lawyers, a prestigious designation given to less than 175 attorneys in the country. Mr. Hirzel has been recognized as a Super Lawyer in Real Estate Law by Super Lawyers Magazine, a Leading Lawyer in Condominium & HOA law by Leading Lawyers Magazine, and as a Best Lawyer in Real Estate Law by U.S News and World Report’s Best Lawyers Publication. Hirzel Law, PLC represents community associations, condominium associations, cooperatives, and homeowners associations in Michigan and Illinois. He may be reached at 312-552-7669 or kevin@hirzellaw.com.