IL condo owner board alleges fraud, failure to disclose construction defects

By Deborah Goonan, Independent American Communities

I have said it before, and I will say it again.

Modern association-governed communities are created by and for real estate developers and their affiliated investor stakeholders. Not only are the governing documents written to the clear legal and economic advantage of the Declarant, but state laws also enable a developer to control the association for several years – or many years – by appointing board members.

And when the developer and co-investors control a condo board (or the board of any planned homeowners association or cooperative), they also control communication, as well access to bank accounts and official records and reports. Therefore it is incredibly easy for a developer to shield his or her company from legal liability for construction defects and poor workmanship.

The conflict of interest is so blatantly obvious.

So why do laws in every state and U.S. Territory allow developer control of common interest communities? And why is the majority of new construction and redevelopment in the U.S. organized as an association-governed common interest community? How does this benefit taxpayers and consumers?


Fountain Square Condo owners, who recently took over control of the association from developers, recently filed a lawsuit that claims RSC-ElginLLC, Novak Construction, and agents from First American Bank deliberately hid reports of construction defects from the owners of the condo association.

Now condo owners are stuck with expensive repairs, and at least 8 years of hidden damages caused by water leaks. Developers allegedly knew about the defects as early as 2009.

Of course, not wanting to pay for repairs, a developer-conrolled board might be motivated to conceal the truth from condo owners. But to prove their claims, condo owners must pay for their association to engage in a costly lawsuit.


Elgin condo board sues developer, claiming shoddy work, hidden defects

updated: 8/24/2017 5:00 PM

By Harry Hitzeman, The Daily Herald

The association of a prominent redevelopment project in downtown Elgin has sued the original developer, construction firm and bank, arguing that they purposefully hid defects in construction work until the Fountain Square Condominium Association took possession of the property.

The association’s lawsuit argues RSC-Elgin LLC, Novak Construction and agents of First American Bank breached their fiduciary duty and engaged in fraud by hiding or not disclosing five consultant reports from 2009 about construction defects and other damages from the association.

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