Condominium Assessments When Buying Foreclosures
As more and more of my clients are buying foreclosed properties, the question of who is responsible for paying unpaid condo assessments keeps coming up. Buyers feel that it should not be their problem; after all, they didn’t own the property when the assessments became due. Associations, on the other hand, want their money; they don’t particularly care where it comes from. Because homeowners’ associations require payment of assessments by all unit owners in order to meet their budget and keep their property in good repair, the Illinois legislature has sided with them on this issue.
The Illinois Condominium Property Act states that if you buy foreclosed property from the bank, you are responsible for assessments for the six months immediately prior to when the association instituted legal action to collect the assessment, assuming that such assessment is still unpaid. Take note: if the homeowner did not pay assessment for more than six months before the association took legal action, you are still only liable for six months’ assessments. If the association never took legal action, you are not responsible for the assessment at all. In fact, I’ve had a few clients benefit because they were purchasing a foreclosed condo in an association that never filed suit for past due assessments.
The bank that foreclosed the condo is liable for assessments from the first day of the month after the month in which the foreclosure took place, through the date you close on your purchase from the bank.
What happens if the condominium association has instituted a special assessment? Well, your attorney can negotiate with the bank’s attorney and try to get you the best possible deal. Unfortunately, many lenders have form contracts they require buyers to sign, which state that the buyer shall be responsible for all special assessments. Some lenders are willing to negotiate some of the terms of the sale; others are not. When a bank does not have its own form, the buyer benefits because the buyer’s offer typically is on a standard realtor form, and those forms state that the seller is responsible for special assessments.
Make sure you understand how much assessment you will owe at closing if you’re purchasing foreclosed property from a bank!