Prompt payment of post-foreclosure condominium assessments to avoid liability for pre-foreclosure charges

Under Section 9(g) of the Illinois Condominium Property Act, the buyer at a foreclosure sale is responsible for the post-foreclosure assessments. What this means is the buyer 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. [1]

What the statue does not say is when the payment must be paid to “confirm” the extinguishment of pre-foreclosure assessments. The best practice is to pay a single assessment payment as soon as possible in order to extinguish any claim for pre-foreclosure assessments against the buyer.

In 2015, the Supreme Court of Illinois ruled in 1010 Lake Shore Assoc. v. Deutsche Bank National Trust Co. (Lake Shore) that a condominium association could enforce pre-foreclosure assessments on a foreclosing bank that had failed to pay post-foreclosure assessments. 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 if a payment had been made before judgment was entered in the trial court.

In Country Club Estates Condo. Ass'n v. Bayview Loan Servicing LLC (Bayview), the Court of Appeals for the First District of Illinois (Cook County) held that a foreclosure sale purchaser 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. … 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.

Note that the association’s failure to provide a clean “ledger” showing only post-foreclosure assessments is no excuse for delay. In Andersonville S. Condo. Ass'n v. Fed. Nat'l Mortg. Co., Fannie Mae claimed that it was not responsible for the pre-foreclosure assessments, arguing that the association failed to deliver 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 for $68,231.45. Fannie Mae appealed. The Appellate Court enforced a judgment, stating:

. . . Fannie Mae was responsible for the pre-foreclosure assessments, including the delinquent late charges, by virtue of the fact that it failed to pay any post-sale assessments so as to confirm the extinguishment of the condominium association's lien on the unit.

Prompt payment of a single month of condominium assessments would have confirmed the extinguishment of the entire lien at the cost of approximately $233.

Contact a Chuhak & Tecson attorney if you have questions about pre- and post-foreclosure assessments.

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 Summer 2018 Banking Focus newsletter.