CONDO DEVELOPER ON THE HOOK FOR ASSESSMENTS FOR UNDEVELOPED COMMERCIAL CONDOMINIUM UNITS
Many condominium associations face uncertainty regarding whether a developer is responsible for paying assessments on units the developer still owns. It becomes even more ambiguous when those units are vacant or undeveloped. This issue often arises after developer turnover, when a developer may leave an association with limited reserves and an operating budget that falls short. In Holtgren v. 260 Jamie Lane Condominium Association (Appellate Court of Illinois, Second District, 2022), the court found that the developer was obligated to pay assessments on four undeveloped commercial condominium units he continued to own. This case serves as an important reminder that: (a) even unimproved units are typically subject to assessments if the governing documents and the Illinois Condominium Property Act impose that obligation; and (b) the developer may be required to pay assessments for units the developer owns, regardless of whether the units are developed.
Background: Examining the Condominium Declaration
Fredric J. Holtgren was the developer and owner of commercial property, which ultimately became known as the 260 Jamie Lane Condominium. In early 2001, Mr. Holtgren (the “Developer”), drafted, executed, and recorded the “Easements, Restrictions And Covenants For 260 Jamie Lane Condominiums And Declaration Of By-Laws For The 260 Jamie Lane Condominium Association” (“Declaration”). The language of the Declaration provided that the property would be “improved with a nine (9) unit commercial/industrial building” and would be subject to the provisions of the Condo Act.
The plat of survey attached to the Declaration showed the division of the property into nine condominium units: Units A, B, C, D, E, F, G, H, and I. Also attached to the Declaration was an inventory of the nine condominium units, which identified each unit’s respective square footage in the building and the calculated percentage of total unit ownership of the building and its common elements. In addition, the inventory stated that each unit’s percentage of ownership “will be used for General repairs of building, common areas and taxing purposes.”
In June 2001, the Developer sold five of the nine units. He retained ownership of the remaining four units, which all remained undeveloped, vacant lots. As the owner of four units within the condominium association, the 260 Jamie Lane Condominium Association (the “Association”) began to levy assessments against the Developer. However, the Developer refused to pay assessments to the Association for his four units and the Association recorded a lien against the Developer’s units. As a result of the recorded lien, the Developer’s attempts to sell his four units were unsuccessful.
In 2019, the Developer filed a lawsuit against the Association claiming that he was not required to pay assessments for his four units because the units were undeveloped and that the intent of the Declaration was to create an assessment for “improved real estate only.” After dismissing his original complaint and amended complaint, the trial court granted the Developer leave to file a second amended complaint. The Association filed a motion to dismiss the second amended complaint with prejudice, arguing that despite the Developer’s four units being undeveloped, the language of the Association’s Declaration and the Illinois Condominium Property Act make it clear that the Developer is still responsible for paying assessments for his four units. The trial court agreed with the condominium association’s interpretation of its governing documents and the Illinois Condominium Property Act and granted the Association’s motion to dismiss the second amended complaint with prejudice. The Developer appealed the trial court’s ruling.
The Appellate Court Rules in Favor of the Condominium Association
The issue on appeal was whether the Developer’s four undeveloped units were subject to assessments. To make that determination, the Appellate Court reviewed and analyzed the relevant portions of the condominium association’s Declaration and the Illinois Condominium Property Act. In reaching its opinion, the Appellate Court cited to and relied upon the following language of the Association’s Declaration and the Illinois Condominium Property Act:
Pursuant to the Declaration:
Each Unit Owner shall pay his proportionate share of the Common Expenses *** in the same ratio as his percentage of ownership interest in the Common Elements ***. If any Unit Owner shall fail or refuse to make any such payment of the Common Expenses when due, the amount thereof shall constitute a lien on the Unit Ownership of such Unit Owner as provided in the Act.
Pursuant to Section 605/9(a) of the Illinois Condominium Property Act:
All common expenses incurred or accrued prior to the first conveyance of a unit shall be paid by the developer, and during this period, no common expense assessment shall be payable to the association. It shall be the duty of each unit owner, including the developer, to pay his proportionate share of the common expenses commencing with the first conveyance. The proportionate share shall be in the same ratio as his percentage of ownership in the common elements set forth in the declaration.
In addition, the Declaration also stated as follows:
No Unit Owner may waive or otherwise escape liability for the assessments provided herein by non-use of the Common Elements or abandonment of his Unit.” Moreover, …the association has “no authority to forebear the payment of assessments by any Unit Owner.
Moreover, the Appellate Court pointed out that the Declaration identified all nine units, whether improved or unimproved, as “units” and “granted all nine units identical rights and obligations, and assigned all nine units unique identifiers, square footages, and percentages of common elements.” The Appellate Court further noted that “there is also nothing in the declaration stating that only improved or dwelling units are subject to assessments. Rather, all units are treated identically in the declaration.”
Therefore, the Appellate Court found that the language of the Declaration, in conjunction with the language of the Illinois Condominium Property Act, made it clear that the Developer was responsible for paying assessments to the Association for his four units, regardless of those units being undeveloped. As such, the Appellate Court affirmed the trial court’s ruling.
Why This Case Matters for Condominium Associations and Common Interest Community Associations
Holtgren v. 260 Jamie Lane Condominium Association serves as a valuable reminder for Illinois condominium associations and common interest community associations: assessments apply to all units, whether developed or not, unless the governing documents specify otherwise. Associations must understand their rights and obligations under the Illinois Condominium Property Act and ensure their governing documents clearly define who is liable for assessments.
Key takeaways for board members and property managers:
- Developers are not exempt from paying assessments simply because their units are unimproved or vacant.
- Governing documents and the Illinois Condominium Property Act control assessment liability, and courts will enforce them as written.
At Hirzel Law, PLC, we regularly advise and assist condominium associations and common interest community associations in reviewing their governing documents to determine who is liable for paying assessments. In addition, we regularly take legal action on behalf of condominium associations and common interest community associations to collect unpaid assessments. If your condominium association or common interest community association needs help with collecting unpaid assessments or pursuing a developer that has failed to fulfill its financial obligations to your condominium association or common interest community association, please contact Hirzel Law, PLC.
