Case Law Update: Payment of Less than All Outstanding Condo Assessments Does Not Extinguish an Association's Lien

The Illinois appellate court’s decision in Hometown Condominium Association No. 2 v. Saleem Mohammed, 2018 IL App (2nd) 171030, provides further insight into the steps needed to be taken by a judicial foreclosure sale purchaser to exterminate a condominium association’s assessment lien. Specifically, the court held that failure to pay the entire balance of post-sale assessments will not extinguish the association’s lien, even if the amount tendered would cover all of the past-due, pre-sale assessments.

Under Section 9(g)(3) of the Condominium Property Act (765 ILCS 605/9 (the “Condo Act”)), which states:

The purchaser of a condominium unit at a judicial foreclosure sale . . . shall have the duty to pay the unit's proportionate share of the common expenses for the unit assessed from and after the first day of the month after the date of the judicial foreclosure sale . . . . Such payment confirms the extinguishment of any lien created . . . by virtue of the failure or refusal of a prior unit owner to make payment of common expenses, where the judicial foreclosure sale has been confirmed by order of the court.

In Quadrangle House Condominium Association v. U.S. Bank, 2018 IL App (1st) 171713, the Illinois Appellate Court for the First District held that “on the face of the statute, section 9(g)(3) does not contain any time limit for confirming the extinguishment of an association’s lien.” The court followed the Illinois Supreme Court’s ruling in 1010 Lake Shore Ass’n v. Deutsche Bank National Trust Co., 2015 IL 118372, and explained that in order to extinguish any pre-foreclosure sale assessment lien, mere “payment of post-purchase assessments, whenever made, is the step necessary to confirm the extinguishment of any lien created under section 9(g)(1) . . . .” (emphasis added). The appellate court held that U.S. Bank’s payment of the post-sale assessments ten months after the sale occurred was sufficient to extinguish any pre-sale assessment lien.

The court in Hometown added another requirement in order to extinguish the lien. In this matter, the purchaser of the condo at the foreclosure sale failed to make an assessment payment for seventeen months after he bought it. When he did make his first payment, it was only for the one month immediately following the sale and failed to include the assessments and late fees that had accrued during this time. The owner argued that a foreclosure purchaser need only make the single month’s assessment following the sale to extinguish any lien. The court held that it did not need to rule on the merits of whether the payment of the assessments was “prompt.” Instead, it held that since the owner only made a partial payment – one month of assessments and late fees – the association’s lien would not be extinguished.

With the court’s ruling, it is important to understand that there are two actions that need to be taken to extinguish a condo association’s pre-foreclosure sale assessment lien - prompt payment of the entire balance of post-sale dues.

By: Blake A. Strautins & Michael R. Schumann