Condominium associations have an automatic statutory lien against a unit for all unpaid assessments. When a condominium unit gets sold at a judicial foreclosure sale to a third-party purchaser (“Purchaser”), the Purchaser is required to pay the condominium association all post-sale assessments that become due and owing (and potentially up to six (6) months of pre-sale assessments).
If those assessments are properly paid by the Purchaser, the condominium association’s statutory lien may be extinguished. However, if those assessments are not paid by the Purchaser, the condominium association may be able to collect all unpaid pre-foreclosure sale assessments from the Purchaser (not limited to six (6) months) in addition to all post-sale assessments.
Case Background
In the case of Andersonville S. Condo. Ass’n v. Fed. Nat’l Mortg. Co., 2017 IL App (1st) 161875, the condominium unit was originally owned by a unit owner named Steven Meyers (“Meyers”). The condominium unit was part of the Andersonville South Condominium Association (“Condominium Association”). Meyers’ unit went into foreclosure and was ultimately purchased by Fannie Mae at a judicial sale on July 21, 2015.
On April 13, 2016, the Condominium Association filed a forcible entry and detainer action (eviction case) against Fannie Mae, seeking possession of the condominium unit and damages exceeding $60,000.00 for unpaid assessments, late fees, and other charges, some of which accrued prior to the judicial sale date. The assessments and late fees were calculated in accordance with the language of the Condominium Association’s governing documents. Fannie Mae filed various defenses to the Condominium Association’s claims, including that the late fees were “unreasonably high” and the Condominium Association’s statutory lien had been extinguished.
On June 1, 2016, the matter proceeded to a bench trial. At trial, Fannie Mae conceded that it owed “some money” to the Condominium Association for assessments but disputed the amount of late fees. The Condominium Association argued that, pursuant to its declaration and bylaws, a late fee of 4% of the total balance due could be charged monthly to the delinquent account. Fannie Mae also argued at trial that the Condominium Association should not be able to recover damages (assessments and late fees) for the period prior to July 21, 2015 (the date Fannie Mae purchased the unit). However, the condominium association argued that it was permitted to recover the pre-foreclosure assessments because a statutory lien existed on the unit.
At the conclusion of the trial, the court entered judgment in favor of the condominium association in the amount of $68,231.45 for unpaid assessments, late fees, and other charges (including the period before Fannie Mae purchased the unit). Fannie Mae then filed an appeal.
The Appellate Court’s Decision
The Appellate Court affirmed the judgment of the trial court. In doing so, the Appellate Court acknowledged that under the Illinois Condominium Property Act (765 ILCS 605/9(g)), the Condominium Association was entitled to late charges for pre-foreclosure assessments. Specifically, the Appellate Court agreed with the trial court’s finding that pre-foreclosure assessments owed (including any late charges) were a statutory lien on the unit pursuant to the Illinois Condominium Property Act. In addition, the Appellate Court found that because Fannie Mae did not pay the Condominium Association any assessments after purchasing the unit, it failed to extinguish the statutory lien. In citing to the Illinois Supreme Court case 1010 Lake Shore Ass’n v. Deutsche Bank Nat. Trust Co., 2015 IL 118372, the Appellate Court stated that the Illinois Condominium Act conditions “the extinguishment of the association’s lien for presale assessments on the foreclosure purchaser’s payment of assessments due following the sale” and the “failure to confirm the extinguishment of the association’s lien by paying postforeclosure sale assessments renders” the purchaser “liable for the entirety of the association’s lien – i.e., the presale assessments, including the late charges.” Therefore, the judgment entered against Fannie Mae and in favor of the Condominium Association was proper.
Conclusion
The Illinois Appellate Court’s decision makes clear that after a delinquent unit owner’s unit is sold at a foreclosure sale, a condominium association’s statutory lien remains valid. For the statutory lien to be extinguished, the purchaser must timely pay any post-sale assessments that become due and owing. Otherwise, a condominium association may be entitled to collect from the purchaser all pre-foreclosure sale assessments and late charges due and owing.
Key Takeaways for Illinois Condominium Associations
- Keep detailed and accurate records of all assessments due from unit owners and all payments made.
- For any unit that is going through the foreclosure process, keep track of the status of the foreclosure case, when the unit is sold at a foreclosure sale, and who purchases the unit.
- Ensure that all post-foreclosure assessments are timely paid and keep adequate records of all assessments due and owing after the foreclosure sale.
- If post-foreclosure sale assessments are not timely paid, the condominium association may be entitled to seek all unpaid assessments and late charges on the account from the purchaser (even dating back to before the foreclosure sale).
At Hirzel Law, PLC, we regularly assist condominium associations with matters involving units that have gone into foreclosure, including guidance on the best steps to take to protect and enforce a statutory lien for unpaid assessments, late fees, and other charges. If your condominium association is dealing with a delinquent unit or a foreclosure purchaser who has stopped paying, contact the experienced Illinois community association attorneys at Hirzel Law, PLC.
