175 East Delaware Place HOA

How a flagship community earned a PATScore of 15/100

For more than fifty years, Sudler Property Management has managed the homeowners' association at 175 East Delaware Place, the residential portion of Chicago's iconic John Hancock Center. Sudler's own website describes the building as its “flagship property.” Management offices are located within the building itself.

In September 2024, Common Interest Advisors completed a forensic investigation of the association on behalf of a group of concerned owners. The investigation reviewed 109 board meeting packets, minutes, and meeting recordings dating to July 2016, along with general ledger detail, budgets, audits, and two decades of board election records.

The association received a Property Asset Transparency Score (PATScore) of 15 out of 100. A score this low is not the result of a single accounting error, disputed contract, or controversial board decision. It reflects systemic weaknesses in transparency, oversight, financial reporting, and governance accumulated over many years.

If this is what a flagship property looks like, owners should ask what is happening elsewhere.

The Numbers

• Nearly $500,000 in compensation increases and bonuses paid to management personnel for which no board review, discussion, or approval could be located in association records from September 1, 2015, through August 31, 2025

• Approximately $23 million of association funds were held in bank accounts where every authorized signatory was a management company employee, and no board member was a signatory

• Eight consecutive years reporting no federal income tax liability despite substantial taxable interest income; formal complaints submitted to professional regulatory organizations allege more than $2.5 million of taxable interest income was improperly shielded over a ten-year period

• More than $20.5 million in Operating Fund profits accumulated since 2009, despite an anti-profit provision in the association's governing documents

• Approximately $30 million in current unfunded reserve obligations, projected to exceed $100 million by 2052 — a projection that assumes the association makes the reserve study's recommended annual contributions, which it does not

• Twenty-one months during which the management company operated without the Community Association Management Firm license required by Illinois law (June 2023 through March 2025)

• At least twenty documented instances in which association practices appeared inconsistent with the Declaration, Bylaws, or governing documents

• Forty-eight directors governing a multimillion-dollar enterprise without regular access to tax returns, complete reserve studies, auditor deliverables, full budget details, or settlement agreements

What the Investigation Found

The Structure

The investigation found a governance structure in which management exercised substantial control over financial operations while board oversight was limited. Association funds were maintained in accounts controlled exclusively by management company employees. The management agreement authorized the management company to pay amounts owed to itself from association funds “at any time without prior notice to the Board,” subject only to the terms of a budget that directors received only in condensed summary form. The contract itself was renewed twice without evidence that directors reviewed competing proposals or conducted a competitive bidding process.

The License

Illinois law has required community association management firms to hold a Community Association Management Firm license since June 3, 2023. According to the Illinois Department of Financial and Professional Regulation's own records, the management company did not obtain that license until March 11, 2025 — a period of approximately twenty-one months during which it continued to manage the association, collect management fees, and exercise control over association funds.

The Money

The investigation identified compensation increases and bonuses that were not separately disclosed to directors. Budget materials frequently summarized expenses at a high level, limiting visibility into underlying transactions. Financial reporting errors exceeding $1.5 million were identified despite repeated assurances that the accounting records had been balanced “for decades.”

One budget communication informed owners that assessments would increase 3.25 percent, while the supporting budget schedules reflected an increase of approximately 3.9 percent. The discrepancy passed through every level of review without correction.

The investigation also identified inadequate monitoring of investment performance. The gap between the reserve fund's assumed investment returns and assumed inflation projects to a loss of approximately $48.7 million in reserve purchasing power over the 30-year reserve study period — roughly $69,000 per owner.

The Late Fees

The association's governing documents and the board's own fine resolutions provide for interest at eight percent per year. The late fee, as applied, can carry an effective interest rate of up to 100 percent per month — a structure inconsistent on its face with the governing documents and with Crooks v. Hidden Grove Condominium Association, the controlling Illinois authority on condominium late fee practices.

The fee's history compounds the problem. The late fee was increased from $100 to $250 across a series of board actions without the owners' meeting that the Illinois Condominium Property Act requires before rules governing the property may be adopted or amended. The threshold that triggers the fee was later lowered to a flat $250 without board authorization. And the majority of late fee waivers are granted not by the board but by the management company — including waivers extended as a benefit of the management company's own payment program, a benefit that appears in no association rule and was never approved by the board.

The Reserves

The waiver of reserve contributions is recurring. The FY 2024-25 approved budget waived approximately $1.29 million; the FY 2025-26 budget waived approximately $1.35 million; and the FY 2026-27 proposed budget contemplates waiving approximately $1.29 million more — funding $1.16 million against a reserve study recommendation of $2.45 million. The governing documents permit reserves to be waived only by a two-thirds vote of owners. No evidence of such a vote was located for any of these years. The same proposed budget allocates a subsidy of approximately $684,000 to ancillary operations — secondary programs that consistently operate at a loss — an amount exceeding half of the reserve contribution being waived. The projected $100 million shortfall assumes these recommended contributions are made in full; each year's waiver pushes the realized figure higher.

The reserve study itself raised independent concerns. CIA's review of the 2022 Full Reserve Study identified more than $67.7 million in critical deferred maintenance and replacement projects — the substantial majority designated high priority — excluded from the 30-year study, representing more than half of total anticipated expenditures. The study also attributed twenty-five separate directives to the Board of Directors and management, although no evidence was located that the board made those decisions or issued written instructions. The study projected reserves at 9.4 percent funded as of August 31, 2052; professional reserve study standards consider anything below 30 percent weak.

The board's visibility into its own reserve planning was similarly limited. Of the 154-page draft 2022 reserve study, directors were provided 18 pages.

The Taxes

For eight consecutive years (2015–2022), the association reported no federal income tax liability despite earning more than $1.3 million in interest income. Across the full ten-year period from 2015 through 2024, the association earned approximately $3.07 million in interest income and paid $143,226 in federal income taxes — an effective rate of 4.7 percent. Formal complaints filed with the AICPA and the Illinois CPA Society in February 2026 allege that more than $2.5 million of that income was improperly shielded from taxation, with an estimated tax deficiency of approximately $535,704.

Industry guidance permits an association to deduct roughly five percent of interest income for indirect overhead without detailed substantiation. The returns at issue excluded one hundred percent of interest income from taxation for eight consecutive years, and fifty-eight percent in the most recent year.

The association also never made the Revenue Ruling 70-604 election available to it for tax years 2009 through 2022 — the standard mechanism for deferring tax on year-end membership surpluses — even as Operating Fund profits accumulated past $20 million.

Tax returns were signed and filed without evidence of formal board authorization. Correspondence from the association's own attorney confirmed that the tax preparer created the expense allocation methodology later used to prepare the returns — the same professional designed the system that produced the tax positions, then certified the results.

Following a September 2023 press release publicly raising the allegations, reported tax liability rose from $0 to $114,363 over a three-year period, despite no material change in the association's underlying economic activity. The association's FY 2026-27 proposed budget again includes no provision for income taxes, while projecting approximately $800,000 in reserve interest income.

The Records

Owners seeking access to financial records were forced to pursue litigation. One owner ultimately prevailed on cross-motions for summary judgment, compelling production of records under Illinois law. During subsequent requests, the association asserted that certain records either did not exist or could not be located.

A newspaper requested minutes allegedly authorizing management compensation increases. Rather than produce the records, Sudler initiated litigation against the publication. A sitting director was denied access to records concerning a six-figure fund operating within the building he had been elected to help govern.

The Holiday Fund

The investigation examined a holiday fund that distributed more than $100,000 annually to building personnel.

The fund operated outside the association's audited financial statements and tax reporting processes. No evidence was located that payments were reported on Forms W-2 or 1099. The association maintained that the fund was independent and not controlled by the association, despite the association's resources being used to support its operations, including mailing costs, owner databases, accounting support, and a documented $5,000 advance to cover an overdraft.

The Elections

Governance concerns extended beyond financial reporting.

In Cohen v. 175 East Delaware Place Homeowners Association, 2024 IL App (1st) 230516, the Illinois Appellate Court concluded that the board breached its fiduciary duty of candor to owners. The investigation also documented concerns regarding ballot access, board-endorsed candidate slates, and election practices that concentrated control within a small group of long-serving directors.

The practice underlying these concerns continues: for more than twenty years, board presidents have endorsed slates of director candidates in a purported personal capacity — meaning each sitting director owes their place on the ballot to a president's endorsement.

The role of the association's accounting firms extended into election administration. The board approved resolutions to pay the association's auditor up to $25,000 to administer and tabulate the board election — exceeding the $18,300 annual fee under the same firm's audit contract. The firm controls the owner voting list, distributes election packets, holds custody of and the key to the ballot box, tabulates the ballots, and certifies the results. In the most recent election, ballots were tabulated by that firm beginning hours before the annual meeting convened.

The Litigation Continues

The disputes surrounding transparency and access to records remain ongoing.

Mattis v. 175 East Delaware Place Homeowners Association (2026 CH 04843), filed on May 20, 2026, seeks inspection of Holiday Fund records under the Illinois Condominium Property Act.

Why This Case Matters

Institutional capture does not require bad intent.

It requires only relationships that become too comfortable, oversight that becomes too informal, and directors who gradually lose access to the information necessary to exercise independent judgment.

Every mechanism documented in this case is common within the community association industry: condensed budget presentations, management-controlled financial processes, incumbent-supported election slates, and limited transparency surrounding contracts, taxes, and reserves.

What makes 175 East Delaware significant is not that these issues occurred. It is that they are unusually well documented.

The public record includes court rulings, financial statements, accounting records, reserve studies, contracts, attorney correspondence, board communications, regulatory complaints, and years of investigative reporting. Together, they provide a rare opportunity to examine how governance systems can deteriorate when accountability mechanisms fail.

For boards, owners, managers, attorneys, accountants, and regulators, this case offers lessons extending far beyond a single Chicago high-rise.

The Published Record

Complete coverage from The Governance Ledger, most recent first.