For most condominium associations in Illinois, the idea of removing or “withdrawing” a portion of the condominium property is something they may never expect to confront. Yet when it does arise, often due to eminent domain or the partial condemnation of a building, condominium associations must comply with the Illinois Condominium Property Act (765 ILCS 605/1). 765 ILCS 605/14.1 of the Illinois Condominium Property Act sets out the statutory framework for withdrawing property from a condominium. Understanding these requirements is crucial for boards facing government takings, building damage, or redevelopment pressures.
While property withdrawal is uncommon, the consequences of mishandling the process can be significant. Misallocation of proceeds, failure to correctly reassign percentage interests, or improper treatment of assessments can expose a condominium association to litigation. This article provides an overview of the statutory requirements and practical considerations for condominium associations navigating property withdrawal under 765 ILCS 605/14.1 of the Illinois Condominium Property Act.
When Can Property Be Withdrawn from a Condominium?
Under 765 ILCS 605/14.1 of the Illinois Condominium Property Act, the withdrawal of a unit, a portion of a unit, or part of the common elements is permitted primarily in connection with eminent domain proceedings. In other words, the association or unit owners cannot unilaterally “withdraw” property simply because it is inconvenient, costly to maintain, or better suited for other uses. Withdrawal is tied to a governmental taking.
The Illinois Condominium Property Act permits condominium instruments to include procedures for property withdrawal in accordance with the Illinois Condominium Property Act. Because many older Illinois condominium declarations contain minimal or outdated eminent-domain provisions, boards should review their governing documents before a taking occurs.
Reallocating Percentage Interests After a Withdrawal
One of the most important legal duties under 765 ILCS 605/14.1 of the Illinois Condominium Property Act is the reallocation of percentage interests when a unit or portion of the property is withdrawn. The statute provides that:
- If an entire unit is withdrawn, its percentage interest in the common elements must be reallocated among the remaining units based on their existing percentage interests.
- If only part of a unit is withdrawn, the unit’s percentage interest is reduced in proportion to the diminution in market value. The board of managers is responsible for determining this diminution.
Because percentage interests directly affect assessments, voting rights, and ownership shares of common elements, these recalculations must be performed carefully and documented thoroughly. Boards should expect that affected unit owners may challenge how market value diminution was determined, making professional valuations advisable.
Allocation of Condemnation Proceeds
765 ILCS 605/14.1 of the Illinois Condominium Property Act also governs how condemnation awards or other proceeds must be distributed. The statute distinguishes between different types of takings:
- Withdrawal of a Unit or Portion of a Unit
Proceeds must be distributed on an equitable basis, and this basis does not have to match percentage interests. This flexibility allows condominium associations to account for factors such as:
- The value of the specific property taken
- Impact on the remaining unit
- Unique characteristics of the affected property
- Withdrawal of Common Elements
When common elements are taken, the proceeds must be allocated to unit owners according to their percentage interests, unless the declaration provides otherwise.
- Withdrawal of Limited Common Elements
If the portion taken involves limited common elements, the declaration may provide that proceeds be distributed among the owners who held rights to those areas.
- Leasehold Condominiums
In leasehold condominiums, the lessor must also receive an equitable allocation of proceeds, as required by 765 ILCS 605/14.1(b) of the Illinois Condominium Property Act.
Because condemnation proceeds can be substantial and may trigger disputes among owners, condominium associations should consult legal counsel early in the process and involve valuation experts when necessary.
Assessments and Responsibility After Withdrawal
765 ILCS 605/14.1 of the Illinois Condominium Property Act requires that condominium instruments include provisions addressing cessation of assessment obligations for any unit or portion withdrawn from the condominium. Once the property is withdrawn, the affected owner is no longer responsible for assessments tied to that portion.
Condominium associations must adjust their budgets and assessment schedules accordingly. This may require:
- Rebalancing assessments among remaining units
- Amending the annual budget
- Updating financial projections to account for the lost contribution
Boards should also consider how the loss of units, or portions of units, impacts reserve planning, especially if the taking reduces total ownership interests.
Procedural Considerations for the Board
When a governmental entity initiates eminent domain proceedings, the condominium association may be named as a defendant on behalf of all unit owners. 765 ILCS 605/14.1 of the Illinois Condominium Property Act confirms that, when this occurs, the allocation of proceeds must follow the statute unless the governing documents expressly provide alternative procedures.
Board responsibilities in a withdrawal scenario typically include:
- Coordinating with legal counsel immediately after receiving notice of a taking
- Notifying all unit owners
- Collecting and maintaining all appraisal, valuation, and market data
- Determining diminution in value (if only a portion of a unit is taken)
- Adopting resolutions to reallocate percentage interests
- Adjusting the condominium association’s assessment structure
- Amending condominium instruments if necessary
Because eminent domain often proceeds on a strict statutory timeline, boards must act efficiently and maintain detailed minutes documenting every decision.
Practical Tips for Illinois Condominium Associations
While eminent domain events are rare, boards should prepare by:
- Reviewing Governing Documents
Many condominium associations discover too late that their declarations lack modern eminent-domain provisions. Boards should work with counsel to ensure compliance with 765 ILCS 605/14.1 of the Illinois Condominium Property Act.
- Maintaining Updated Property Valuations
Keeping recent appraisals or reserve study valuations can help streamline calculations related to percentage interest adjustments.
- Engaging Professionals Early
Eminent domain cases often require:
- Appraisers
- Engineers
- Land-use consultants
- Attorneys experienced in condemnation law
Boards should not attempt to evaluate market value reductions independently.
- Communicating with Owners
Clear, consistent, and timely communication can prevent misunderstandings and reduce disputes regarding proceeds and reallocations.
Conclusion
Withdrawal of property from an Illinois condominium is a highly technical process governed by 765 ILCS 605/14.1 of the Illinois Condominium Property Act. When a unit, portion of a unit, or part of the common elements is taken through eminent domain, boards must appropriately reallocate percentage interests, distribute proceeds equitably, adjust assessments, and follow all statutory requirements. Given the complexity and high financial stakes involved, Illinois condominium associations should consult experienced legal counsel as soon as they receive notice of a governmental taking.
If your condominium association is facing an eminent domain action or has questions about 765 ILCS 605/14.1 of the Illinois Condominium Property Act, the condominium attorneys at Hirzel Law, PLC are available to help guide you through the process.
