Successor Developer Liable to City for Predecessor’s Promises
Long before the real estate market crashed, developer Kimball Hill signed an agreement with the City of Elgin to develop land. Kimball Hill was to improve the land at its expense, and Elgin would then annex the land into the City of Elgin. Kimball Hill obtained bonds from two separate insurance companies to guarantee its performance of the Annexation Agreement it had signed with Elgin. Back in 2003, when all of this was done, the real estate market was booming.
Unfortunately, by the time the property was developed, the economy had crashed; Kimball Hill filed bankruptcy in 2008. A company called TRG purchased the property out of bankruptcy, and subsequently refused to make the improvements Kimball Hill had promised to make in the Annexation Agreement. As a result, in 2012 Elgin sued TRG and both insurance companies that had issued bonds.
Eventually, the case was appealed, and in City of Elgin v. Arch Insurance Company, 2015 IL App (2d) 150013 (December 10, 2015), the court found in favor of the city. The Court noted the Annexation Agreement was clear in stating that the agreement ran with the land, and bound the successors and assigns of both the property itself and the developer Kimball Hill. The Annexation Agreement also stated that if the Property was sold or conveyed, the purchase or grantee of the property would be bound to the Annexation Agreement.
While a large part of the court’s opinion was focused on the relationship between TRG and the insurance companies and why TRG was responsible for the improvements vis-à-vis its relationship with the insurance companies, the contractual obligations imposed by the Annexation Agreement could not be ignored.
Even if you purchase a property out of bankruptcy (or some other way, like through foreclosure), make sure there are no outstanding obligations out there that you could be bound to!