INCLUSION OF AN ASSOCIATION AS A

DEFENDANT IN A FORECLOSURE ACTION It does not matter if an association has been included as a defendant in a foreclosure action. The obligation to promptly pay post-foreclosure assessments applies to all foreclosure actions, whether the association has been named as a defendant or not. Further, the Supreme Court also made it clear that if an association is not named as a defendant in the foreclosure action, the association’s lien is not extinguished, even if post-foreclosure assessments are paid and regardless of what an association’s declaration may say about the post-foreclosure obligation.

MATTERS LEFT UNRESOLVED

As a result of Deutsche Bank not paying any post-foreclosure assessments, the Supreme Court did not address the timing of when a foreclosure purchasers’ ability to extinguish the pre-foreclosure lien by paying the post-foreclosure assessments expires. The only statement the Supreme Court made on the issue is Section 9(g)(3) “provides an incentive for prompt payment,” but it did not include any definition of what “prompt” means. Therefore, the Court did not impose any set deadline for payment. Accepting a payment, regardless of when the payment is made, most likely eliminates an association’s ability to collect the pre- foreclosure balance. Without any additional guidance from the Court, the best recommendation than can be made is to be aggressive in turning accounts over post-foreclosure if the accounts have a pre-foreclosure balance, and once accounts are turned over for collection, do not accept any payments.

THE FUTURE

While the General Assembly has not been responsive to efforts made by advocates on behalf of condominium associations to afford some additional relief related to the loss of assessment revenue that usually accompanies a foreclosure, the Illinois Supreme Court has unanimously recognized the obligation of foreclosure purchasers to promptly make payments upon taking ownership of units. While the holdings in Spanish Court Two and 1010 Lake Shore are victories for condominium associations, there is still a lot of work to be done. There are many in the community association industry who are of the opinion that the obligation to pay assessments should never be impacted by a bankruptcy or foreclosure, i.e. the full amount of assessments charged to a unit must always be paid. Limiting condominium associations to only six months of recovery post-foreclosure and allowing a condominium association to only collect the entire balance of unpaid pre- foreclosure assessments when the new owner fails to make prompt post-foreclosure payments doesn’t go far enough. But, until our elected officials can be convinced of the critical importance of this issue, condominium associations must work within the current confines of the law. The 1010 Lake Shore case allows associations, if they act diligently, to recover all pre-foreclosure amounts that may have been thought to be lost once ownership of the unit transferred.

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