The Appellate Court of Illinois echoes the message to mortgagee purchasers: Pay your condominium assessments promptly!

A foreclosing bank is responsible for post-foreclosure assessments due from a Condominium Unit. Section 9 of the Illinois Condominium Property Act (the Act) requires that a foreclosing bank must pay the assessments due and owing on a foreclosed condominium property from the first day of the month following the foreclosure sale of the Condominium Unit, transfer of a deed in lieu, entry of a judgment of strict foreclosure or taking possession pursuant to court order. “Such payment confirms the extinguishment…” of the Association’s lien for non-payment of pre-foreclosure assessments. What the statute does not say is when the payment must be paid for the “confirmation” to effectively wipe out pre-foreclosure assessments.

In 2015, the Supreme Court of Illinois ruled in 1010 Lake Shore Assoc. v. Deutsche Bank National Trust Co(1). that a Condominium Association could enforce pre-foreclosure assessments on a foreclosing bank where the bank failed to pay post-foreclosure assessments prior to the entry of the judgment in the Association’s suit to enforce its lien for unpaid assessments. 1010 Lake Shore left open the possibility that the bank may be able to confirm the extinguishment of the Association’s lien for unpaid pre-foreclosure assessments by making a payment of post-foreclosure assessments any time before judgment was entered. Now, Country Club Estates Condo. Ass'n v. Bayview Loan Servicing LLC (2) appeal denied attempts to answer that question – the bank must pay its post-foreclosure assessments “promptly” after the confirmation of the sale or be held responsible for the pre-foreclosure assessments.

The Bayview Court provided the following guidance for what “prompt” means in this context:

Courts can and should take such circumstances into account when determining whether a buyer’s payment of assessments is “prompt.” Thus, for instance, if a buyer’s prompt tender of all post-sale assessments is unreasonably refused by a condominium association, any further delay in payment would clearly be the fault of the association rather than the buyer. See State Bank of Geneva v. Sorenson, 167 Ill. App. 3d 674, 680 (1988) (a party seeking equitable relief cannot take advantage of its own wrongdoing). Similarly, if it takes months for a judicial sale to be confirmed by the court, but the buyer pays its assessments shortly after the confirmation order (dating back to the month following the sale), the buyer’s payment could be deemed prompt under the circumstances.

In Andersonville S. Condo. Ass'n v. Fed. Nat'l Mortg. Co (3), Fannie Mae claimed that it was not responsible for the pre-foreclosure assessments, arguing that the Association failed to deliver it a separate ledger showing only the post-foreclosure assessments – instead the Association sought more than $60,000 including more than $40,000 in late fees due on the pre-foreclosure assessments. Fannie Mae refused to pay, the Association brought suit and won a judgment and Fannie Mae appealed. The Appellate Court enforced a judgment, stating:

Applying our supreme court's decision in 1010 Lake Shore, 2015 IL 118372, 398 Ill.Dec. 95, 43 N.E.3d 1005, to the present case, we find no error in the trial court's conclusion that Fannie Mae was responsible for the preforeclosure assessments, including the delinquent late charges, by virtue of the fact that it failed to pay any postsale assessments so as to confirm the extinguishment of the condominium association's lien on the unit.

Regarding Andersonville S. Condo. Ass'n, if Fannie Mae had paid the single month of assessments promptly upon taking possession of the property, the entire lien would have been extinguished at the cost of approximately $233.

While each case presents a different factual circumstance that may alter the recovery of assessments against a foreclosing mortgagee who takes the property back, the message to the mortgagee (not third party) foreclosure purchasers in unmistakably clear: Pay your assessments promptly!

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client Alert authored by: Adam K. Beattie, Associate

This alert originally appeared in the Condominium & Community Association Focus newsletter.

(1) 1010 Lake Shore Assoc. v. Deutsche Bank National Trust Co., 2015 IL 118372
(2) Country Club Estates Condo. Ass'n v. Bayview Loan Servicing LLC, 2017 IL App (1^st) 162459Appeal denied 122687
(3) Andersonville S. Condo. Ass'n v. Fed. Nat'l Mortg., 2017 IL App (1^st) 161875