May a condominium owner refuse to pay monthly and/or special assessments, in whole or in part, on the grounds that the condominium board had failed to maintain and repair the common elements of the condominium property? In the vast majority of jurisdictions around the country, the answer is simple: No. Last summer, in what the Chicago Tribune called a “ground-breaking decision” that “has stunned the condominium community nationwide,” the Appellate Court for the Second District answered the question “sometimes.” Yesterday, the Illinois Supreme Court agreed to review the decision, granting leave to appeal in Spanish Court Two Condominium Association v. Carlson [pdf].

The plaintiff in Spanish Court Two sued the defendant in early 2010 under the Forcible Entry Act. Plaintiff alleged that the defendant had stopped paying monthly assessments in August 2009. Plaintiff allegedly hadn’t paid special assessments either. The plaintiff sought possession of the defendant’s unit and a monetary award.

The defendant filed a combined answer, affirmative defenses and counterclaim. She admitted that she had stopped paying the assessments, but denied that they were owed; according to the defendant, the plaintiff’s failure to repair damage to the roof and certain brickwork directly above her unit had led to water damage to the unit itself. The defendant also alleged that the plaintiff had failed to make certain repairs inside the unit. Based on these factual allegations, defendant pled two affirmative defenses: (1) that the plaintiff was estopped from seeking the assessments because of its breach of the duty to maintain and repair; and (2) that the cost of repairing the damage to her unit should be deducted from any award of the past-due assessments. Defendant’s counterclaim was based on the same allegations.

Section 9-106 of the Forcible Entry Act, 735 ILCS 5/9-106, provides that matters which are “not germane to the distinctive purpose of the proceedings” may not be raised by a defendant. The plaintiff moved to strike the defendant’s defenses and counterclaim, citing Section 9-106, the Circuit Court granted the motion, and the defendant appealed.

The Appellate Court reversed, holding that the defendant’s defenses were potentially viable. The Court reached this conclusion by analogizing the duty to pay assessments to the obligation to pay rent: Illinois law permitted renters to defend a claim for unpaid rent by alleging that the landlord had breached the duty to maintain and repair, and by analogy, condominium owners should be permitted to raise the same defense with respect to non-payment of assessments. Plaintiff sharply challenged this conclusion, arguing that under the Condominium Act, the right of the board to collect assessments is absolute. 735 ILCS 605/18.4(d). However, the Court disagreed. Rather, the Court concluded that the Condominium Declaration and Bylaws should be seen as contracts where the parties exchanged promises: a promise to pay assessments in return for a promise to maintain and repair.  The Court cautioned that relatively minor problems, such as “overgrown bushes and unrepaired sidewalk cracks” might “rarely” constitute material breaches, but otherwise seemed to suggest no limitations to the defense. Continuing its analogy between renters and condominium owners, the Court then affirmed the severance of the defendant’s counterclaim from the Forcible Entry Act action, noting that only counterclaims for overpaid rent were considered germane in such actions involving renters.

In its petition for rehearing, the plaintiff predicted significant adverse effects from the Court’s decision, a concern echoed in the Chicago Tribune’s article on the case. Plaintiff argued that establishing a right to withhold assessments – a condominium board’s only source of income – would make it even less likely that common areas would be repaired, but the Court observed that the same concern could be applied to multiunit rentals, where the defense was established. In response to plaintiff’s prediction of “a crippling of condominium associations” as a result of the Court’s decision, the Court observed: “we question how well a condominium association is currently functioning if one of its unit owners suffers such neglect as defendant has alleged.”

Spanish Court Two is certain to be a spirited battle at the Supreme Court, with multiple amicus applications from entities within Illinois and perhaps outside the state as well. The Supreme Court will likely decide the case in late 2013.