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Illinois Supreme Court Affirms 1010 Lake Shore Association

Posted By USFN, Tuesday, January 5, 2016
Updated: Tuesday, January 19, 2016

January 5, 2016

 

by Lee S. Perres and Kimberly A. Stapleton
Pierce & Associates, P.C. – USFN Member (Illinois)

The Illinois Supreme Court has affirmed the appellate court in 1010 Lake Shore Association v. Deutsche Bank National Trust Company (Ill. Dec. 3, 2015), holding that a lien created for unpaid assessments by a previous owner is not fully extinguished following a judicial foreclosure sale until the purchaser at the foreclosure sale makes a payment for current assessments incurred after the sale.

As a result of the appellate ruling, condominium associations became much more aggressive about collecting past-due assessments from the purchaser at sale when the purchaser did not promptly pay the current assessment. The Illinois Supreme Court ruling has given condominium associations carte blanche to seek payment of the prior owner’s unpaid assessments — if the purchaser of the condominium unit following a foreclosure does not pay the assessments for which they are liable (i.e., from the first day of the month following the foreclosure sale).

Unfortunately, the Supreme Court did not recognize that a foreclosure sale is not final until the order approving sale is confirmed. As the law currently stands, the failure to make timely condominium assessment payments the month following the foreclosure sale can be very costly to servicers. As a result, servicers and lenders are urged to pay condominium assessment payments as soon as possible beginning the first day of the month following the date of the foreclosure sale.

A party who becomes the owner of a condominium unit following a foreclosure should immediately pay the assessments for which they are liable; i.e., from the first day of the month after the sale. Although a foreclosure sale in Illinois does not become final until after the sale is approved by the court, the foreclosing party should still pay the assessments after becoming the successful purchaser. If the sale is approved, the payment of these assessments will confirm that any lien by the condominium association for past-due assessments is extinguished. If the sale is not approved, the payment can be charged to the borrower as a cost necessary to protect the plaintiff’s interest in the foreclosed property upon a resale, payoff, or reinstatement.

The only guidance provided in 1010 Lake Shore Association by the Illinois Supreme Court is in ¶ 34 of its decision, which states as follows: “Additionally, the Act allows an encumbrancer ‘from time to time [to] request in writing a written statement *** setting forth the unpaid common expenses with respect to the unit covered by his encumbrance.’ 765 ILCS 605/9(j) (West 2008).” Thus, a mortgagee may protect its interest by requesting notice of unpaid assessments, joining the association as a party to a foreclosure action, and paying assessments that accrue following its purchase of a property at a foreclosure sale.

Servicers and lenders should request, after judgment but prior to sale, “a written statement” setting forth the unpaid assessments with respect to the unit being foreclosed on and to document all activities taken to that end. This way, the amount of the assessment will be known and the payment can be made promptly after the sale to avoid the possibility of being liable for all past-due assessments. In the event that an association is not cooperative and refuses to provide that information, servicers and lenders will have an opportunity to seek relief from the court.

Hopefully, future case law will clarify when these payments have to be made in a manner that comports with Illinois law.

©Copyright 2016 USFN and Pierce & Associates, P.C. All rights reserved.
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