ILLINOIS APPELLATE COURT RULES IN FAVOR OF FRA ASSOCIATION CLIENT

In a case concerning payment of assessments by a foreclosing mortgage lender, the Illinois Appellate Court has made an important ruling favorable to Illinois condominium associations. On August 8, 2017, the Illinois Appellate Court issued its opinion in Country Club Estates Condominium Association v. Bayview Loan Servicing LLC, 2017 IL App (1^st) 162459. The Country Club Estates case clarifies the 2015 Illinois Supreme Court decision in 1010 Lake Shore Association v. Deutsche Bank National Trust Co., and the Country Club Estates decision can be cited as binding precedent applicable in other condominium association assessment collection cases. A brief summary of the facts in the Country Club Estates case and the Appellate Court’s decision follows.

Mortgage lender Bayview Loan Servicing LLC foreclosed on a condominium unit located within Country Club Estates Condominium. The mortgage foreclosure sale was confirmed in November 2014. In March 2015, Country Club Estates Condominium Association sent the mortgage lender a Notice and Demand for Possession. In April 2015, the association filed a forcible entry and detainer lawsuit against the mortgage lender. The previous owner of the unit had not paid assessments dating back to January 2011, and, as of the filing of the forcible lawsuit, the mortgage lender had failed to make any payments whatsoever. In light of these facts, and based on the precedent of the 1010 decision, the association sought both the pre-foreclosure sale and post-foreclosure sale assessments from the mortgage lender. These pre- and post-foreclosure sale assessments totaled $18,659.26 as of the filing of the forcible lawsuit.

In June 2015, while the forcible lawsuit was pending in the trial court, the mortgage lender tendered to the association a partial payment in the amount of $4,771.85. This partial payment represented only the post-foreclosure sale assessments. The association rejected the partial payment. In the trial court, the mortgage lender argued that the partial payment extinguished the association’s lien for pre-foreclosure sale assessments. The association argued that, under Illinois Condominium Property Act Section 9(g) and the 1010 decision, a foreclosure purchaser is required to make prompt payment of post-foreclosure sale assessments in order to extinguish a condominium association’s lien for pre-foreclosure sale assessments. Granting partial summary judgment to the mortgage lender, the trial court ruled in favor of the mortgage lender on this point. The association appealed the trial court’s ruling.

Reversing the trial court, the Appellate Court agreed with the association’s interpretation of Section 9(g) and the 1010 decision. Noting that the mortgage lender refused to pay any assessments – past or present – for seven months after the foreclosure sale, the Appellate Court held that a foreclosure purchaser must make prompt payment of assessments in order to extinguish pre-mortgage foreclosure sale assessments.

While the Appellate Court did not establish a precise definition of what constitutes “prompt” payment in this context, it did state that, in the absence of extenuating circumstances, it would expect commencement of assessment payments during the month following the foreclosure sale as required by Section 9(g). So although the Country Club Estates decision makes it clear that a foreclosure purchaser’s payments must be prompt, we would advise associations to exercise reasonable judgment based on the totality of the particular circumstances in deciding when to pursue pre-foreclosure sale assessments from a foreclosure purchaser. As always, the attorneys at FRA will continue to assist our association clients and their community managers in evaluating how to move forward under these circumstances, taking into consideration the facts of any particular case.

FRA attorneys Stuart Fullett and Jeff Swanson handled the appeal on behalf of the association.