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A Guide to Collecting Delinquent Illinois Condo and HOA Assessments

Condominium and homeowners associations throughout Illinois are frequently forced to deal with owners have not paid assessments or fines levied for violations of the declaration or the HOA bylaws. In many cases, an owner will be pay delinquent HOA assessments after receiving an initial demand letter. However, there are other situation when the unit owner refuses to pay delinquent HOA assessments, and the condominium or homeowners association must decide what steps to take next. Typically, the decision involves a condominium association suing for eviction or recording a lien for unpaid assessments on the unit, or both. If the decision is made to record a lien on the unit, and the delinquency is still not cleared up, the condominium or homeowners association can then decide whether to proceed to foreclosure. This article will discuss the process for evicting a unit owner in an Illinois condominium and foreclosing on HOA liens for unpaid assessments in Illinois.

Chicago Condominium Assessment Collections

Under the Illinois Condominium Property Act, 765 ILCS 605/1 et seq., and more specifically, Section 9(g) of the Illinois Condominium Property Act, a condominium association has a lien for: (1) the amount of common expenses unpaid; (2) the amount of any unpaid fine; and (3) interest, late charges, reasonable attorney fees and costs of collection incurred enforcing the condominium instruments, rules and regulations of the board, or any applicable statute or ordinance. Because the condominium lien is automatic, it does not need to be recorded, and is senior to all other liens and encumbrances other than taxes and previously-recorded encumbrances (including mortgages). 735 ILCS 605/9(g). The foreclosure process for condominium associations is the same as the process for foreclosing a mortgage in Illinois. 765 ILCS 605/9(h).

If a lender with a senior mortgagee forecloses on a condo unit, or if that lender takes title to the unit by a deed in lieu of foreclosure, it is responsible to pay the condominium assessments from and after the first day of the month after the date of the foreclosure sale or the recording of a deed in lieu of foreclosure. The amount is higher if someone other than the lender takes title through the foreclosure process. The condominium association is a necessary party to the foreclosure proceeding, but if the proceeding ends in a transfer of title, the condo association’s lien will be extinguished subject to the responsibility to pay certain assessments as outlined above.

Section 9.2 of the Illinois Condominium Property Act also provides that a condominium association may file an eviction action in the case of a delinquency. More specifically, that section provides the condo association can evict a unit owner, or any tenant of the unit owner, if there is a default in the performance of obligations set forth in the declaration, bylaws, or the rules and regulations of the board of managers. The eviction action is then handled in the manner prescribed by Article IX of the Code of Civil Procedure. Importantly, an eviction order in a condominium assessment situation is meant to be “temporary” with possession eventually returning to the unit owner. See, Knolls Condominium Ass’n v. Harms, 202 Ill. 2d 450, 454 (2002). The unit owner maintains title to the unit and the condominium association has the right to possession of the unit until the judgment for possession is vacated after the amount owed is paid, and in the interim, the condominium association can rent the unit and apply any funds received to the delinquency. 735 ILCS 5/9-111(a).

Illinois HOA Assessment Collections

In Illinois, many homeowners associations are governed by the Illinois Common Interest Community Association Act, 765 ILCS 160/1, et seq. Unlike the Illinois Condominium Property Act, the Illinois Common Interest Community Association Act does not include specific provisions regarding the placement or foreclosure of liens or evicting an owner or tenant. Therefore, in order for a homeowners association to be able to record and foreclose on a lien, it must be a right granted in the HOA declaration or the HOA bylaws. If the HOA bylaws do permit a lien foreclosure, the process will be the same as it is for condominium associations.

Although the Common Interest Community Association Act does not describe evicting an owner, Illinois’ Eviction Act provides that an eviction action may be maintained by a homeowners association pursuant to 735 ILCS 5/9-102(a)(8). In order for a homeowners association to evict an owner, three conditions must be met: (1) the HOA must be a not-for-profit corporation or a limited liability company; (2) the unit owners must be authorized to attend meetings of the board of directors or board of managers of the association in the same manner as provided for condominiums under the Condominium Property Act; and (3) if the HOA declaration was recorded before 1985, the board must have voted to have the provisions of the Eviction Act apply to such homeowners association and delivered or mailed notice of such action to the unit owners.

Illinois Condo and HOA Eviction Lawsuits

An eviction action is the preferred collection remedy for many community associations as it is generally the fastest and most efficient way to collect delinquent HOA assessments. HOA eviction lawsuits in Illinois are brought under the Eviction Act (formerly known as the Forcible Entry and Detainer Act), 735 ILCS 5/9-101, et seq. Illinois law does not allow for self-help evictions, and therefore, changing of locks or taking other actions that would constitute a “constructive eviction” (such as cutting off utilities or blocking entry) are not allowed.

Eviction actions in Illinois are considered summary proceedings. In other words, in most cases, the case is handled in an expeditious manner. After notice is provided to the owner and/or the tenant (which is, in most cases, a 30 day notice for associations), a complaint is filed. At the time of filing, the community association will be given a “return date” usually between 21 and 28 days after filing wherein the owner/tenant will have to appear in court. If service of process is properly obtained and no one appears on the return date, the court will typically enter an order of possession in favor of the community association at the first hearing date. If the owner/tenant appears on the return date, the case will be set for trial, usually in a week or two unless the owner/tenant files a jury demand. The filing of a jury demand can significantly lengthen the time and cost of an eviction suit. In most instances, eviction cases go to trial without even a responsive pleading filed by the owner/tenant because, if an appearance is filed, the allegations in the complaint are deemed denied pursuant to Supreme Court Rule 181(b)(2).

Additionally, the jurisdiction of the court in an eviction action is limited to matters that are “germane” to possession and for a money judgment as to outstanding assessments or fines. In other words, if the default is simply non-payment, the owner/tenant should not be entitled to raise defenses regarding the actions or the inactions of the community association or the board. See, e.g., Spanish Court Two Condominium Ass’n v. Carlson, 2014 IL 115342. However, if the delinquency arose due to a default under declaration or HOA bylaws, the owner/tenant will be entitled to present evidence that there was no bylaw violation or that a hearing was not properly held as required under the declaration or bylaws. See, Bd. of Directors of Winnitt Park Condo. Ass’n v. Bourdage, 2021 IL App (1st) 192536.

Illinois Condo and HOA Lien Foreclosure

In Illinois, all HOA lien foreclosures must be done judicially and in accordance with the provisions of the Illinois Mortgage Foreclosure Law. Foreclosure cases can take a long time to get through the courts. The timing to complete a foreclosure has been reduced from after the real estate recession in 2008, but the process can still take 18 months to 2 years, depending on whether the foreclosure is contested or not.

After the lawsuit is filed and service of process is completed, one of two things will typically happen. If the unit owner does not file an appearance and an answer, the community association can move for a default judgment after a statutory waiting period. If the unit owner does file an appearance and an answer, the case will proceed towards summary judgment. Unlike other civil actions, in most foreclosure actions, there is usually little to no discovery and cases proceed to summary judgment relatively quickly.

The steps for a foreclosure in Illinois take time due to specific provisions related to redemption and a second publication requirement before the actual foreclosure sale. In most instances, the soonest that a HOA foreclosure sale can occur is about 8 months after the lawsuit is filed. After the sale occurs, a court then must approve the sale and order the transfer of title to the community association. This process can add another few months to the process as well.

As briefly mentioned above, one important consideration when a condominium or homeowners association is deciding whether to proceed with a foreclosure suit is that Illinois law provides that community association liens are junior to previously-recorded mortgage liens. Additionally, unpaid taxes are senior to the HOA’s lien. Finally, if the unit owner is not paying assessments, there is also a chance that the unit will have judgment or mechanic’s liens recorded against it that may have been recorded before the community association’s claim. Because all of these parties could be considered senior to the condominium or homeowners association, foreclosing a lien is generally only suggested if there is equity in the property over and above these other competing claims, because, if the community association ultimately is the credit bidder at the sale (which is likely, especially if there is no equity in the property), it will take the unit subject to these senior claims. Although the community association can then hold, lease, mortgage or sell the unit, those actions may not be viable based on the status of the unit itself and the competing encumbrances on title when the HOA takes into account that it will have to pay real estate taxes and keep up the mortgage to avoid it going into foreclosure again.  Finally, if there is a difficult owner/tenant that continually violates the HOA bylaws, foreclosure may be the preferred remedy as it would permanently remove the owner/tenant from the condominium, whereas an eviction for unpaid HOA dues is only temporary.

The Illinois Homeowners Assistance Fund

Illinois has a program for delinquent unit owners that provides assistance to those who have experienced a financial hardship related to COVID-19 and have fallen behind on the payment of HOA assessments. On April 11, 2022, the Illinois Homeowner Assistance Fund started to operate through the Illinois Housing Development Authority. The Homeowner Assistance Fund provides up to $30,000.00 in assistance to homeowners, and those funds can be used to pay, among other things, condominium, and homeowners association assessments. Information about the Homeowner Assistance Fund is located at https://www.illinoishousinghelp.org/.

Conclusion

Whenever a condominium or common interest community association is deciding what steps to take to recover against a delinquent unit owner, it is important that the result, as well as the cost and timing, be considered. Recording a lien on a unit is an inexpensive step, but taking a lien all the way through foreclosure, or filing an eviction action, can cost both significant dollars and time for a community association. However, there are situations where foreclosure is warranted, including cases where a tenant is paying monthly rent to a delinquent owner, when there is equity in the unit, or to permanently remove a problem owner/tenant from the property. Performing diligence on the unit (including obtaining a proper title report) and talking to a HOA attorney will allow that decision to be made with a full understanding of the risks, and potentially, the rewards, of going forward with either or both remedies.

Adam Toosley is a member at Hirzel Law, PLC and focuses his practice on real estate litigation, zoning and land use, construction, and financial services litigation. Over the course of his career, he has represented property owners, landlords, condominium associations, lenders, and all parties in the construction chain, handling all aspects of real estate-related disputes, including construction defect cases, payment and landlord-tenant disputes as well as real estate foreclosures, mechanic’s lien cases and fraud and business tort claims in state and federal court as well as in mediations and arbitrations throughout the United States. He is licensed in both Michigan and Illinois. He can be reached at (312) 626-4535 or at atoosley@hirzellaw.com.

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