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Real Estate Law FLASHPOINTS January 2022

Hal R. Morris & Elizabeth A. Thompson, Saul Ewing Arnstein & Lehr LLP, Chicago
312-360-6499 | E-mail Hal Morris | E-mail Elizabeth Thompson

Second District: Homeowners’ Association Had Standing To File Property Tax Appeal on Behalf of Individual Property Owners

In Deerpath Consolidated Neighborhood Ass’n v. Lake County Board of Review, 2021 IL App (2d) 190985, the Second District of the Illinois Appellate Court (Justices Zenoff, Jorgenson, and Brennan) addressed the issue of associational standing in the context of property tax appeals in light of Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 53 L.Ed.2d 383, 97 S.Ct. 2434 (1977).

By way of background, Deerpath is a homeowners’ association subject to the Common Interest Community Association Act (CICAA), 765 ILCS 160/1-1, et seq. On July 6, 2017, the association, on behalf of all of the individual homeowners, filed a property tax appeal challenging tax assessments on individual association members’ properties. The Lake County Board of Review dismissed the appeal on the basis that the individual members did not authorize it. Subsequently, the association filed a complaint against the board and the clerk of the board seeking a finding that an “ ‘unpublished rule’ prohibiting tax appeals by homeowners’ associations on behalf of their members” was unenforceable. 2021 IL App (2d) 190985 at ¶3. The board moved to dismiss the complaint on the basis that the association lacked standing to appeal individual member assessments, and the trial court dismissed the association’s complaint. 2021 IL App (2d) 190985 at ¶4. On appeal, the Second District reversed on the basis that standing is an affirmative defense and the board did not establish that defense in the motion to dismiss. Deerpath Consolidated Neighborhood Ass’n v. Lake County Board of Review, 2018 IL App (2d) 180244-U. In doing so, the Second District specifically referenced the need to evaluate associational standing under the test enunciated by Hunt, as adopted by the Illinois Supreme Court in International Union of Operating Engineers, Local 148, AFL-CIO v. Illinois Department of Employment Security, 215 Ill.2d 37, 828 N.E.2d 1104, 293 Ill.Dec. 606 (2005). On remand, the parties moved for summary judgment on the associational standing issue and the circuit court, again, granted judgment in favor of the board.

On the second appeal, the Second District addressed the application of Hunt to a homeowners’ association’s standing to bring tax assessment claims and the interaction of the General Not For Profit Corporation Act (NFPCA), 805 ILCS 105/101.01, et seq., and the CICAA. In Hunt, the Supreme Court held:

[A]n association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. 2021 IL App (2d) 190985 at ¶10, quoting Hunt, 97 S.Ct. at 2441.

Illinois codified the Hunt test as §103.10(b) of the NFPCA, 805 ILCS 105/103.10(b), and the Illinois Supreme Court adopted the Hunt test in Operating Engineers, supra, 828 N.E.2d at 1111. The Second District discussed the manner by which each of the three elements of the Hunt test are applied. It also recognized that associational standing is not limited to pure questions of law but rather is applicable “[s]o long as the nature of the claim and of the relief sought does not make the individual participation of each injured party indispensable.” [Emphasis in original.] 2021 IL App (2d) 190985 at ¶18. The court also noted that it had recently held that a condominium association had standing to challenge property taxes on behalf of its individual members in Sunnyside Elgin Apartments, LLC v. Miller, 2021 IL App (2d) 200614. In Sunnyside, the court had recognized that the Hunt elements were met because “tax objections are germane to a condominium association’s purpose” and “[a]ll the evidence needed . . . is a matter of public record and easily proven with official documents.” 2021 IL App (2d) 190985 at ¶19, quoting 2021 IL App (2d) 200614 at ¶¶32 – 33.

As applied to the Deerpathassociation, the court first acknowledged that there was no dispute that each individual homeowner had standing to appeal his or her own property tax assessment. As to the second element of Hunt, the court reviewed the association’s operating declaration and found that although there was no mention of property tax matters, the broad statement of powers “encompasses matters related to property taxes. . . . Property taxes are also germane to the general welfare of the members.” 2021 IL App (2d) 190985 at ¶20. In reaching this conclusion, the court noted that the second prong is “undemanding” and the “association’s litigation interests must be truly unrelated to its organizational objectives” to find the element lacking. Id. The court also rejected the argument put forth by the board that individual owners would “point fingers” at one another, characterizing that argument as “meritless” because an owner does not benefit if taxes on another property are raised or lowered. 2021 IL App (2d) 190985 at ¶21. In addition, the CICAA provided support in that it grants standing to a homeowners’ association “in relation to matters involving the common areas or more than one unit.” 2021 IL App (2d) 190985 at ¶23.

With respect to the third element of Hunt, the court found that the nature of the relief requested would not necessarily require individual participation by members. Rather, as in Sunnyside, the tax appeal could be based on public documents, thereby limiting individual involvement. 2021 IL App (2d) 190985 at ¶22. In fact, the court noted that a multi-parcel tax appeal would promote judicial economy. Id.

Based on this analysis, the Second District not only reversed the grant of summary judgment in favor of the board but also remanded the case for entry of summary judgment in favor of the association and entry of a writ of mandamus requiring the board to reinstate and docket the tax appeal.

The effect of the Second District’s ruling is widespread as it reaffirms Illinois’ application of Hunt to determine associational standing and indicates that the standard is relatively easily met. Moreover, it clarifies the rights of homeowners’ associations to act on behalf of their individual members, putting those associations on common footing with condominium associations in Illinois. The Second District made clear that such associations can and do have standing to seek certain types of relief on behalf of their individual members even when there is no explicit grant of such authority, either by statute or by the association’s governing documents.

For more information on real estate law, see COMMERCIAL REAL ESTATE: PROPERTY-RELATED ISSUES (IICLE®, 2021). Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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