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 (1st) 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.