One of the two most anxiously awaited cases on the Illinois Supreme Court’s civil docket was handed down this morning, and it was a big win for Illinois condominium associations: a sharply divided Court reversed the controversial decision of the Appellate Court’s Second District in Spanish Court Two Condominium Association v. Carlson. Our detailed summary of the facts and underlying court decisions in Spanish Court is here. Our report on the oral argument is here. (If you’re wondering, the other major pending decision is Kanerva v. Weems, which relates to public employee pensions).
Illinois is apparently unique among the states in allowing condominium boards to file actions under the state Forcible Entry Act. In contrast to landlords’ actions against renters, a judgment against a condo owner under the Act doesn’t transfer title to the unit. The board gains a bare right to possession, along with the right to rent the unit if they choose to do so and apply the proceeds to the owner’s unpaid assessments.
Spanish Court Two began in early 2010 when the plaintiff association sued the defendant under the Forcible Entry Act. The plaintiff alleged that the defendant had failed to pay monthly assessments for the past six months. 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 “by joinder, counterclaim or otherwise.” 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 and remanded for partial reinstatement of the defendant’s affirmative defenses.
In an opinion for a four-Justice majority by Justice Mary Jane Theis, the Supreme Court reversed the Appellate Court. Although historically, the “distinctive purpose” of forcible entry proceedings has been to regain possession of the property, that purpose has expanded slightly in Illinois. Courts are permitted to enter judgments for unpaid rent in actions against tenants, and when condominiums were added to the statute, the legislature decided to permit money judgments for unpaid assessments. Nevertheless, the majority wrote, the issue of what was and was not “germane” remained closely tied to the central issue: possession.
The plaintiff’s action had been brought solely on the grounds that the defendant had failed to pay assessments. Therefore, the court found, whether or not she actually owed those assessments was clearly germane to the question of whether possession should be handed over to the condo board. But that wasn’t the end of the matter. The core issue was whether the defendant’s defense – that the board’s alleged failure to perform its duty to maintain the common areas excused the defendant’s duty to pay assessments – was legally sound.
The Appellate Court had reached its result by analogizing the relationship between the condominium board and a resident to the one between a landlord and a tenant. Here, the Supreme Court majority parted company with the Appellate Court. The relationship between landlord and tenant is primarily contractual, the Court wrote. The relationship between board and owner, on the other hand, is almost entirely a creature of the Condominium Act, which flatly provides that “it shall be the duty of each unit owner . . . to pay his proportionate share of the common expenses.” 765 ILCS 605/9. That duty exists independent of the governing documents of any particular association. The statute says nothing even suggesting that the duty to pay is contingent on the board’s performance of its duty to repair and maintain the common elements. An owner’s duties can’t be assigned, delegated, transferred, surrendered or avoided, and the Board may foreclose if the owner fails to pay.
The majority concluded:
These provisions, when read together, demonstrate that a unit owner’s liability for unpaid assessments is not contingent on the association’s performance . . . a unit owner’s claim that its obligation to pay assessments was nullified by the association’s failure to repair and maintain the common elements is contrary to the Condominium Act and is not a viable defense.
Besides, the majority concluded, allowing such disputes into the unique proceeding for forcible entry would transform what the legislature intended to be a speedy and relatively inexpensive remedy into a lengthy and expensive mess by injecting “a myriad of fact-based inquiries.” Not only would the court have to assess the adequacy of a board’s repair efforts, it would have to determine whether any unmade repairs were “material” – whatever that might mean in this context – and whether any breaches were a partial or complete defense to payment.
Allowing each condominium owner to set him- or herself up as an independent judge of the Board’s performance by withholding payments threatened the “financial stability” of Illinois condominium associations, the majority wrote. The condominium form of ownership is dependent on the timely compliance of all owners with assessments, and without it, the association may be faced with a choice between default on its obligations or curtailing services.
Justice Charles E. Freeman dissented, joined by Justices Anne M. Burke and Thomas L. Kilbride. The dissenters argued that the relationship between condominium board and owner was governed both by statute and contract, making the analogy to landlord-tenant law drawn by the Second District a better fit. The dissenters argued that the conflict with the Condominium Act relied upon by the majority was an illusion; the Act didn’t say anything at all about the situation where a board failed to repair and maintain common elements. Nor was the argument that allowing the defense would make forcible entry proceedings lengthy, expensive and unduly complex persuasive – as the dissenters pointed out, a landlord’s breach of duty is a germane defense in a forcible entry action against a tenant, and such proceedings still got adjudicated. Allowing the defense by an owner shouldn’t make much difference one way or the other.
The dissenters dismissed the potential threat to the financial stability of Illinois condominium associations from allowing a nullification defense. Only material breaches would have any effect on the obligation to pay, the dissenters pointed out. Moreover, withholding payment put the owner at “utmost peril” – the threat of eviction – and was therefore a powerful incentive to pay up. While condominium ownership only works if all owners cooperate, the dissenters argued that it also only works where the association board fulfills its obligations. The dissent concludes by inviting the legislature to get involved in the dispute by clarifying what defenses are and are not germane in the unique summary proceeding for forcible entry.