What’s Bad News for Buyers of Foreclosed Condos is Good News for Condo Associations
Most buyers looking at foreclosed condominiums in Illinois have been told that they could be liable for up to six months of back assessments and related fees. They are also typically told that the foreclosing bank is liable for the association assessments from the first day of the month following the month in which the condominium is foreclosed, all the way through when the bank sells the unit. But what happens when the bank doesn’t pay those fees? A new ruling from the Illinois Supreme Court answers that question, and it turns out the buyer could be liable for a lot more than just six months worth of assessments and fees.
In 1010 Lake Shore Association v. Deutsche Bank National Trust Co., 2015 IL 118372, the bank failed to adhere to the Illinois Condominium Property Act, and did not pay the assessments for a condominium even in the months after they foreclosed it. As a result, the Illinois Supreme Court ruled that the condominium association’s lien against the unit would not be extinguished by the new buyer’s payment of six-months’ past due assessments and fees. In order for the lien to be extinguished, the bank would have had to keep up its end of the bargain, and pay the assessments from the first day of the month following the month in which it foreclosed the unit. Since it did not, the condominium association could maintain a valid lien for the assessments accrued by the original owner, and the buyer would be liable for all of the prior unit owner’s unpaid assessments and fees.
If you’re the buyer of that unit, where incidentally the prior owner owed approximately $43,000, all I can say is “ouch”. On the other hand, this is good news for many condominium associations, who may be entitled to collect more than they think they can!