If you buy a foreclosure, can you be liable for costs incurred by the previous owner? According to a recent article in the Chicago Tribune, the Illinois Supreme Court ruled that “under certain circumstances a buyer of a foreclosed condominium unit may be responsible for unpaid common expenses not paid by the previous unit owner.” In other words, while Chicago neighborhoods continue along a path of recovery, the Illinois Supreme Court ruling could potentially limit recovery from the foreclosure crisis.
Condominium Act and Foreclosures
As the article notes, Section 9(g)(3) of the Condominium Act (765 ILCS 605/) states that someone who buys a foreclosed condo unit is “responsible for paying assessments beginning the first day of the month following the foreclosure sale.” Generally speaking, a condo association can collect fees for common expenses from a buyer on a foreclosed unit when the original owner has not made those payments. However, the ability for the condo association typically is limited to six months.
Yet that is not the conclusion that the Illinois Supreme Court recently came to when it decided the case of Lake Shore Association v. Deutsche Bank National Trust Co. back in December. To better understand how the court came to its decision and the impact the decision could have on foreclosure issues in Chicago, we should take a closer look at the facts of the case.
In this case, the defendant purchased a foreclosed condominium unit. Two years after the purchase, the defendant received a demand for payment from the plaintiff, the condo association. That demand for payment was for common expenses that had not been paid by the previous owner. The plaintiff filed a complaint seeking, among other things, more than $62,000 in unpaid assessments (in other words, the unpaid common expenses).
The defendant argued that, under Section 9(g)(3) of the Condominium Act, it “could not be held liable . . . for unpaid assessments that accrued before it purchased the unit at the judicial foreclosure sale.” Those assessments totaled more than $43,000 of the amount sought by the plaintiff.
Illinois Supreme Court Rules Against Foreclosure Buyers
After lower court rulings, the Illinois Supreme Court determined that the plain language of the Condominium Act “creates a lien in favor of a condominium association upon the failure or refusal of a unit owner to pay common expense assessments.” The Illinois Supreme Court made clear that if a buyer does not start paying assessments on the property at the beginning of the first month after the foreclosure sale (as required by the Condominium Act), that buyer can be “liable for all of the previous unit owners’ unpaid common expenses,” according to the Chicago Tribune article. To be sure, a buyer cannot rely on the Condominium Act to “extinguish the association’s lien on the foreclosed unit.”
The lesson, the article suggests, is that buyers and condominium associations need to have experienced attorneys to help contend with these complicated assessment issues.
If you have questions about buying a foreclosure or if you are having trouble making regular mortgage payments, an experienced Oak Park foreclosure defense attorney may be able to help. Contact the Emerson Law Firm today.
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