15380775232_3983f76d77Can the person or entity buying a condominium in a foreclosure sale ever be held liable for condominium assessments which accrued prior to the sale? This morning, a unanimous Illinois Supreme Court held in 1010 Lake Shore Association v. Deutsche Bank National Trust Company that the answer was “yes.” Our detailed summary of the facts and underlying court opinions in 1010 Lake Shore is here. Our report on the oral argument is here.

1010 Lake Shore began in 2010 when the defendant bought a condominium unit at a judicial foreclosure sale. A year and a half later, the plaintiff Association mailed the defendant a demand for more than $62,000 in unpaid assessments on the unit. Roughly $43,000 of the total had accrued before the defendant bought the unit. Two months after sending the bill, the plaintiff filed a forcible entry and detainer action against the the defendant, seeking possession of the unit and a judgment for its unpaid assessments. The plaintiff moved for summary judgment, which the Circuit Court granted. The First District of the Appellate Court affirmed.

In an opinion by Justice Kilbride, the Supreme Court affirmed as well. The Court began by considering the defendant’s first argument – that plaintiff’s proper remedy was an action to foreclose its lien, rather than an entry and detainer action. The Court held that the argument had been waived, since the defendant had raised it for the first time in a petition for rehearing after the Appellate Court had affirmed the judgment.

The Court then turned to the central issue in the case, which involved the construction of Section 9(g)(3) of the Condominium Act (765 ILCS 605/9) and its conflict – if any – with the Foreclosure Act. The Court explained that the first sentence of Section 9(g)(3) requires a buyer in foreclosure to pay all assessments against the unit beginning in the month following the foreclosure sale. If the buyer (1) names the Association as a party to any action to extinguish the lien; and (2) pays all assessments accruing after the sale, then the lien the Association has to secure payment of assessments accruing before the sale is extinguished. The Court rejected the defendant’s argument that the two steps of the process were specified in the alternative, meaning that a buyer could extinguish the liens by paying post-sale assessments only.

The Court noted that although the Condominium Act doesn’t require notice to a buyer of the prior owner’s unpaid assessments, a mortgagee is entitled to request written statements setting forth the unpaid assessments on the unit under 765 ILCS 605/9.

Defendant argued that if Section 9(g)(3) of the Condominium Act required it to take the two-step process to extinguish the lien, it conflicted with Section 15-1509(c) of the Foreclosure Act, which provides that foreclosure of a mortgage automatically extinguishes junior lien interests of parties joined in the action. The Court disagreed, holding that because Section 9(g)(3) speaks of “confirming” the extinguishment of the lien, it presumes that the lien has been extinguished in the foreclosure action. Construing the two statutes in harmony, Section 9(g)(3) simply adds an additional step for foreclosing mortgagees of condominium units.

Although the defendant claimed to have joined the Association as a party to the foreclosure action, the Court noted that the underlying foreclosure papers were not in the record. Nevertheless, even if the defendant had done so, it failed to confirm the extinguishment of the Association’s lien by paying assessments on the unit as they came due following the sale. As a result, the lien remained viable and the defendant was liable for the pre-sale assessments.

Image courtesy of Flickr by DennisM2 (no changes).