What is Due and What is Not Due Under the Illinois Condominium Property Act: That is the Question

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December 15, 2014
Amber Michlig
SmithAmundsen Financial Services Alert

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Condominium Associations often struggle with what is or is not due under the Illinois Condominium Property Act (the Act). It is important to understand the rights of an association and the rights of a mortgagee. I have recently run into associations that include liens and past due association dues on their paid assessment letter that may not actually be due to them. It is always a good idea to review a closing letter carefully since the association may not be entitled to all of the money that it is seeking or an association may be entitled to more money than what they are claiming.

The Act is the statute that governs an association's rights and responsibilities. Under it, a mortgagee who receives title to a unit via deed in lieu, consent foreclosure, or regular foreclosure has the duty to pay the dues from the date of the judicial sale or taking possession and thereafter. However, the association should not and cannot include a lien for past due association dues from the prior owner once payment is made for the dues owed from time of possession to the present. The payment of the dues from the date of the judicial sale or taking possession confirms the extinguishment of any lien created by the Act for the failure or refusal of the prior owner where the sale is confirmed by the court, deed in lieu accepted by the lender, or consent judgment entered. Thus, payment of the dues from possession forward would establish that a prior lien created by this act no longer existed.

When a party is attempting to extinguish a lien in foreclosure, the association must be named in the action as a party. If an association’s rights are not eliminated in a foreclosure, the association has every right to include past due association dues and lien in a closing letter unless the dues or lien have been paid. Case law in the 2nd District has held that it is not necessary for an association to be named in a foreclosure to extinguish its lien because the payment of dues from the possession date forward extinguishes the prior lien of the association. Nevertheless, it is still good practice to name an association in a foreclosure action and pay the dues to ensure the lien is extinguished. In addition, the 1st District has held that despite an association being named in a foreclosure, the prior lien is not extinguished until the mortgagee pays the assessments incurred after the sale in order to confirm the extinguishment of the lien. Therefore, a foreclosure no longer automatically extinguishes a lien of a home owner’s association until association dues incurred after possession are paid.

If an association brings an action to place a lien on the real property for association dues or brings an action for payment of the past due association dues against the former owner, then a purchaser of a foreclosed property may get stuck with an obligation to pay association dues unpaid by the former owner. A purchaser who acquires title from a mortgagee shall have the duty to pay the proportionate share of the dues which would have become due during the 6 months immediately preceding an action to enforce the collection of the assessments. The statute is silent as to the obligations of a purchaser of an action to enforce the collection of the assessment has not been brought; thus, the purchaser would not have any obligation to pay the dues that became due in the 6 months immediately preceding an action.

The Illinois Condominium Property Act clearly lays out the rights of an association and the rights of a mortgagee. It is important for a mortgagee, seller, and purchaser to be familiar with the Act to prevent an association from taking advantage of an uninformed seller or buyer.