CONDOMINIUMS. If the condominium declaration has been amended, add: AS AMENDED FROM TIME TO TIME. INTEREST" language. Condominiums 7/2000 Rev 10/2001

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1 CONDOMINIUMS The condominium method of holding the fee simple title to real property consists in the outright and exclusive ownership of a unit as well as ownership in common with others of an undivided interest in the common elements. The unit owner has the exclusive right to possession and WARNING IN MOST DOWNSTATE ILLINOIS COMMUNITIES THE DEVELOPERS, SURVEYORS AND ATTORNEYS HAVE LIMITED EXPERIENCE WITH CONDOMINIUMS. DON T ASSUME THEY KNOW WHAT THEY ARE DOING. enjoyment of his own unit as well as the sole responsibility for its maintenance, while he has a non-exclusive right to the use, enjoyment and support of the common elements as well as the joint responsibility, together with his co-owners, for the maintenance of those commonly owned elements. The unit consists of air space, or the interior of the building as shown on the survey. The common elements include the walls, floor and ceiling of the unit. This type of ownership is, of course, cooperative ownership in a very real sense. INSURING AN EXISTING CONDOMINIUM: Legal Description - Unless the customer specifically requests a more detailed description, an abbreviated legal description may be used, such as: UNIT NO. IN CONDOMINIUM AS DELINEATED ON A SURVEY OF THE FOLLOWING DESCRIBED REAL ESTATE: [insert a brief description of the underlying property], IN COUNTY, ILLINOIS; WHICH SURVEY IS ATTACHED AS EXHIBIT ' ' TO THE DECLARATION OF CONDOMINIUM RECORDED AS DOCUMENT NUMBER, TOGETHER WITH ITS UNDIVIDED PERCENTAGE INTEREST IN THE COMMON ELEMENTS. If the condominium declaration has been amended, add: AS AMENDED FROM TIME TO TIME Even if the legal description on the continuation file contains a stated specific percentage interest, it should be replaced with the more generic "UNDIVIDED PERCENTAGE INTEREST" language. 1

2 Reviewing the chain - Pay particular attention to: Those instruments and proceedings which specifically affect your unit; Amendments to the condominium declaration or plat; Instruments and proceedings by or against anyone in your unit s chain of title; Instruments and proceedings by or against the condominium association or the board of managers; Leases of portions of the common elements (such as for laundry rooms or parking garage management companies); and Mechanics lien claims and proceedings to foreclose mechanics lien claims. NOTE: Remember to add to exceptions (AFFECTS THE UNDERLYING PROPERTY), (AFFECTS THE LAND AND OTHER PROPERTY) or (AFFECTS THE COMMON ELEMENTS) as additional information, when appropriate. Raise the following exceptions: Terms Of The Declaration/Limitations Of Condominium Act (A) TERMS, PROVISIONS, COVENANTS, CONDITIONS AND OPTIONS CONTAINED IN AND RIGHTS AND EASEMENTS ESTABLISHED BY THE DECLARATION OF CONDOMINIUM OWNERSHIP RECORDED ~ AS DOCUMENT NO. ~, AS AMENDED FROM TIME TO TIME; AND (B) LIMITATIONS AND CONDITIONS IMPOSED BY THE CONDOMINIUM PROPERTY ACT. ~ Request For Current Assessment Letter* UPON ANY CONVEYANCE OR MORTGAGE OF THE LAND, A STATEMENT FROM EITHER THE BOARD OF MANAGERS OR THE MANAGING AGENT OF THE CONDOMINIUM THAT THERE ARE NO UNPAID ASSESSMENT LIENS ARISING BY REASON OF THE NONPAYMENT OF ASSESSMENTS SHOULD BE FURNISHED. NOTE: THE STATEMENT SHOULD COVER THE RECORDING DATE OF THE MORTGAGE OR, IF TITLE IS TO BE CONVEYED, THE RECORDING DATE OF THE DEED, WHICHEVER DATE IS LATER. ~ 2

3 *This exception may be waived on the initial sale from the developer and when only a loan policy will be issued. Clearance Procedures: Upon receipt of a proper letter indicating that all assessments have been paid through and including the anticipated date of policy, the exception should be noted for continuation so that it may be raised again for future transactions. In the extremely rare event that an insured owner or lender will be taking policy subject to possible assessments, mark the exception for continuation and raise the following exception for the policy/ies: POSSIBLE LIENS FOR UNPAID ASSESSMENTS, NOT DISCLOSED BY THE PUBLIC RECORDS. ~ If the declaration contains a right of first refusal, raise the following exception when a conveyance is anticipated: Request For Right Of First Refusal Letter UPON ANY CONVEYANCE OR DEVISE OF THE LAND, A CERTIFICATE EXECUTED AND ACKNOWLEDGED BY THE BOARD OF MANAGERS OR THE MANAGING AGENT OF THE CONDOMINIUM SHOULD BE FURNISHED WHICH STATES THAT THE OWNER HAS COMPLIED WITH THE DECLARATION S RIGHT OF FIRST REFUSAL PROVISIONS OR THAT SAID PROVISIONS HAVE BEEN WAIVED BY THE BOARD AND THAT THE RIGHTS OF THE BOARD THEREUNDER HAVE TERMINATED. ~ If the declarant is in title and is exempt from the right of first refusal provisions, this exception should be marked for continuation on the new order examination for the initial sale from the declarant. ADD ON CONDOS Add-on condominiums are a method of staged development for a condominium project. An initial condominium declaration is recorded which identifies the tract of land currently made subject to the provisions of the condominium act, but also describes a larger tract of land which is subject to being added into the condominium at a later date, as units are constructed. Subsequently, when additional units are completed, the condominium declaration is amended to add the units in, record a new survey showing them, and changing the amount of undivided percentage interest assigned to each unit. For example, the original declaration might contain 4 units on one acre, each having a 25% interest in the 3

4 common elements. After the amendment there might be 8 units on 2 acres, each having a 12.5% interest in the common elements. Developer s Right to Add-On THE DEVELOPER HAS RESERVED THE RIGHT TO ADD PROPERTY TO THE CONDOMINIUM AND, IN THE EVENT OF SUCH ADDITION, TO REALLOCATE PERCENTAGE INTERESTS IN THE COMMON ELEMENTS. THE RIGHT TO ADD PROPERTY EXPIRES ~. ~ This exception should remain on the policy/ies and should be waived only after the final add-on has been completed or the time limit for add-ons has expired. Note: Remember that every time an add-on takes effect, the land underlying the expanded common elements must be searched and all underlying easements and other such matters must be raised accordingly. CONVERSION CONDOS A conversion condominium is an existing building which is being platted as a condominium. Thus, certain requirements must be met in order to provide notice to existing tenants. The following exceptions should be raised. Tenant s Statutory Option To Purchase/Right Of First Refusal RIGHTS OF ANY TENANT(S) TO EXERCISE THEIR STATUTORY OPTION TO PURCHASE AND RIGHT OF FIRST REFUSAL TO PURCHASE THE UNIT, AS SET FORTH IN SECTION 30 OF THE ILLINOIS CONDOMINIUM PROPERTY ACT. ~ This exception is appropriate for the first sale by the developer, not for subsequent re-sales. The exception may be waived if the initial deed for your unit from the developer recites that either there is no such tenant or that the tenant did not exercise the option to purchase or the right of first refusal. Recital in Developer s Deed Regarding Tenant s Right/Option THE FIRST DEED CONVEYING EACH UNIT IN A CONVERSION CONDOMINIUM MUST CONTAIN ONE OF THE FOLLOWING STATEMENTS: (A) THE TENANT OF UNIT ~ HAS WAIVED OR HAS FAILED TO EXERCISE THE RIGHT OF FIRST REFUSAL; (B) THE TENANT OF THE UNIT HAD NO RIGHT OF FIRST REFUSAL; OR 4

5 (C) THE PURCHASER OF THE UNIT WAS THE TENANT OF THE UNIT PRIOR TO THE CONVERSION OF THE BUILDING TO A CONDOMINIUM. ~ As noted above, this exception should be waived if the declarant s deed contains the above language. Developer's Certificate Should Be Appended To Declaration THE DEVELOPER S CERTIFICATE, REQUIRED BY SECTION 30 OF THE CONDOMINIUM PROPERTY ACT AS A PREREQUISITE TO THE SUBMISSION OF A CONVERSION CONDOMINIUM TO THE PROVISIONS OF THE ILLINOIS CONDOMINIUM PROPERTY ACT, SHOULD BE APPENDED TO THE PROPOSED DECLARATION OF THE CONDOMINIUM. SAID CERTIFICATE SHOULD RECITE THE DATE THAT THE REQUIRED NOTICE OF INTENT WAS GIVEN. ~ This exception should be raised on a blanket file that covers a conversion condominium. Consult with an underwriter in the event that this exception has not been waived or if the declaration does not contain the required certificate. "New Construction" Exception For Condominium Conversions ANY LIEN OR RIGHT TO A LIEN FOR SERVICES, LABOR OR MATERIAL HERETOFORE OR HEREAFTER FURNISHED IMPOSED BY LAW AND NOT SHOWN BY THE PUBLIC RECORDS INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LIENS OR RIGHTS TO A LIEN ARISING FROM CONTRACTS LET IN CONNECTION WITH THE CONSTRUCTION OF IMPROVEMENTS OR CONVERSION OF THE EXISTING BUILDING OR BUILDINGS ON THE LAND TO A CONDOMINIUM. ~ This exception may be waived once the final owner's/contractor's statements, lien waivers and affidavits have been examined and found satisfactory or proper indemnifications, such as title indemnities, have been signed, accepted and funded. CREATION OF EASEMENTS/COVENANTS Easement Language On Developer s Initial Deeds THE FIRST DEED OF EACH INDIVIDUAL UNIT SHOULD CONTAIN THE FOLLOWING LANGUAGE: 5

6 GRANTOR ALSO HEREBY GRANTS TO THE GRANTEE, ITS SUCCESSORS AND ASSIGNS, AS RIGHTS AND EASEMENTS APPURTENANT TO THE ABOVE DESCRIBED REAL ESTATE, THE RIGHTS AND EASEMENTS FOR THE BENEFIT OF SAID PROPERTY SET FORTH IN THE DECLARATION OF CONDOMINIUM AFORESAID, AND GRANTOR RESERVES TO ITSELF, ITS SUCCESSORS AND ASSIGNS, THE RIGHTS AND EASEMENTS SET FORTH IN SAID DECLARATION FOR THE BENEFIT OF THE REMAINING PROPERTY DESCRIBED THEREIN. THIS DEED IS SUBJECT TO ALL RIGHTS, EASEMENTS, COVENANTS, CONDITIONS, RESTRICTIONS AND RESERVATIONS CONTAINED IN SAID DECLARATION THE SAME AS THOUGH THE PROVISIONS OF SAID DECLARATION WERE RECITED AND STIPULATED AT LENGTH HEREIN. ~ This exception should be waived if the declarant s deed for the individual unit contains this required proper language. Each initial deed for each individual unit should contain this language in order to properly create easement rights appurtenant to the particular unit. MATTERS AFFECTING THE COMMON ELEMENTS Typically, a lot of Schedule B exceptions (notably easements) will affect only the common elements as opposed to the insured unit itself. It is extremely rare that any easement would exist within a unit unless it is created by the Condominium Declaration, for which we have an exception noted earlier. But as to easements affecting only the common elements, our past practice has been to show all such matters as separate Schedule B exceptions and then add information that the exception affects only the common elements. This often results in a Schedule B running several pages long and then customers, of course, often want copies of all of these exceptions that they can t do anything about anyway. Therefore, in an effort to reduce the number of Schedule B exceptions on commitments and policies insuring the sale or mortgage of an existing individual condominium unit (as opposed to the condo project as a whole, or a large portion thereof), the following procedure is recommended. Whenever you have easements which affect only the common elements (even if they are blanket in nature), instead of showing all of them as separate exceptions, you may describe them by the following generic exception: EASEMENTS OF RECORD AFFECTING ONLY THE COMMON 6

7 ELEMENTS APPURTENANT TO THE INSURED UNIT, AND WHICH ARE NOT LOCATED WITHIN THE BOUNDARIES OF SAID UNIT. Remember, do this only on the sale or mortgage of an existing, individual unit. Do not follow this procedure for commitments or policies covering a base exam for an entire condo project or an add-on portion thereto, as customers may have a legitimate need for such easements to be shown individually at this stage. Do not follow this procedure for covenants or restrictions or other matters which may affect the underlying ground (including the unit) and which are not locatable of record or on the ground itself by physical inspection or otherwise. If you have any questions about following this procedure in any individual case, contact an underwriter of the Company. ALTA ENDORSEMENT FORM 4 ALTA ENDORSEMENT FORM 4 may be approved upon request - at the standard premium - for either owner s or loan policies which cover individual condominium units. The endorsement need be modified only in the following rare instances: If the condominium unit encroaches onto the common elements or the common elements encroach onto the unit and the encroachment is so significant that the Company is unwilling to issue an Encroachment Endorsement. In such an instance, paragraph 6 should be deleted; If the insured is taking the policy subject to the assessment letter exception, in which case paragraph 4 should be deleted; and If the insured is taking the policy subject to the right of first refusal letter exception, in which case paragraph 7 should be deleted. 7

8 ENDORSEMENT ATTACHED TO AND FORMING A PART OF POLICY NUMBER ISSUED BY CHICAGO TITLE INSURANCE COMPANY ALTA ENDORSEMENT FORM 4 THE COMPANY INSURES THE INSURED AGAINST LOSS OR DAMAGE SUSTAINED BY REASON OF: 1. THE FAILURE OF THE UNIT IDENTIFIED IN SCHEDULE A AND ITS COMMON ELEMENTS TO BE PART OF A CONDOMINIUM WITHIN THE MEANING OF THE CONDOMINIUM STATUTES OF THE JURISDICTION IN WHICH THE UNIT AND ITS COMMON ELEMENTS ARE LOCATED. 2. THE FAILURE OF THE DOCUMENTS REQUIRED BY SAID CONDOMINIUM STATUTES TO COMPLY WITH THE REQUIREMENTS OF THE STATUTES TO THE EXTENT THAT SUCH FAILURE AFFECTS THE TITLE TO THE UNIT AND ITS COMMON ELEMENTS. 3. PRESENT VIOLATIONS OF ANY RESTRICTIVE COVENANTS WHICH RESTRICT THE USE OF THE UNIT AND ITS COMMON ELEMENTS AND WHICH ARE CONTAINED IN THE CONDOMINIUM DOCUMENTS. SAID RESTRICTIVE COVENANTS DO NOT CONTAIN ANY PROVISIONS WHICH WILL CAUSE A FORFEITURE OR REVERSION OF TITLE. 4. THE PRIORITY OF ANY LIEN FOR CHARGES AND ASSESSMENTS PROVIDED FOR IN THE CONDOMINIUM STATUTES AND CONDOMINIUM DOCUMENTS OVER THE LIEN OF ANY INSURED MORTGAGE IDENTIFIED IN SCHEDULE A. 5. THE FAILURE OF THE UNIT AND ITS COMMON ELEMENTS TO BE ENTITLED BY LAW TO BE ASSESSED FOR REAL PROPERTY TAXES AS A SEPARATE PARCEL. 6. ANY OBLIGATION TO REMOVE ANY IMPROVEMENTS WHICH EXIST AT DATE OF POLICY BECAUSE OF ANY PRESENT ENCROACHMENTS OR BECAUSE OF ANY FUTURE UNINTENTIONAL ENCROACHMENT OF THE COMMON ELEMENTS UPON ANY UNIT OR OF ANY UNIT UPON THE COMMON ELEMENTS OR ANOTHER UNIT. 7. THE FAILURE OF TITLE BY REASON OF A RIGHT OF FIRST REFUSAL TO PURCHASE THE UNIT AND ITS COMMON ELEMENTS WHICH WAS EXERCISED OR COULD HAVE BEEN EXERCISED AT DATE OF POLICY. THIS ENDORSEMENT IS MADE A PART OF THE POLICY AND IS SUBJECT TO ALL THE TERMS AND PROVISIONS THEREOF AND OF ANY PRIOR ENDORSEMENTS THERETO. EXCEPT TO THE EXTENT EXPRESSLY STATED, IT NEITHER MODIFIES ANY OF THE TERMS AND PROVISIONS OF THE POLICY AND PRIOR ENDORSEMENTS, IF ANY, NOR DOES IT EXTEND THE EFFECTIVE DATE OF THE POLICY AND PRIOR ENDORSEMENTS, NOR DOES IT INCREASE THE FACE AMOUNT THEREOF. 8

9 The Plat of Condominium CONDOMINIUM EXAM CHECK LIST CREATING THE CONDOMINIUM 1. For condominium properties, the Condominium Property Act requires the following be shown on the plat of condominium: a. all angular and linear data along the exterior boundaries of the property; b. the location of all improvements on the parcel in relation to the exterior boundaries of the parcel (i.e., the distance from the exterior lot lines to the corners of the condo building); c. the elevations at, above, or below official datum (an arbitrary reference point from which all elevations in a particular area are measured) of the finished or unfinished floors and ceilings of each unit; d. the location (by linear measurement) of the finished or unfinished interior walls of each unit in relation to the exterior boundaries of the condominium parcel; e. the elevation and location (by linear measurement) of the part of any unit located outside of any building; f. the unit number or distinguishing symbol of each unit; g. for add-on condominiums, or other alterations in the location of a unit or building, an amended plat containing all of the foregoing requirements. 2. The condominium plat need not also comply with the Plat Act or with the City Plan Act or the County Act B. The Declaration 1. Section 4 of the Condominium Property Act sets forth the minimum requirements for the contents of the declaration: a. The legal description of the parcel ( parcel means the property submitted to the provisions of the Condominium Act). b. The legal description of each unit, which may be the identifying number or symbol set forth on the plat; 9

10 c. The name of the condominium, which name shall include the word condominium or the appositive, a Condominium (e.g., Blackacre Condominium or Blackacre Town Homes, a condominium ); d. The name of the city and county(ies) in which the condominium is located; e. Each unit s percentage ownership in the common elements; f. Add-on condominium provisions, if any; g. A description of the common elements (and limited common elements, if any) and the manner in which they are assigned to the units; h. Condominium conversion provisions, if any; I. Any other lawful provision consistent with the Condominium Act. 2. The percentage of common elements assigned to each unit must be set forth and determined on the basis of the value of each unit compared with the value of the entire condominium property. No provision is made for how value is to be determined. 3. Allocation of the common elements must remain constant, except for changes allowed by the Condominium Act (e.g., add-on condominium) or by agreement of all the unit owners. 4. At a minimum, the declaration must establish the extent of the units and the common elements (and limited common elements, if any) because these items are the only things that cannot be supplied by statute. 5. The declaration must be recorded, and upon recording, the units may be conveyed, leased, mortgaged. C. The By-Laws Sections 18 and 18.4 of the Act control the contents of the bylaws. 10