According to Section 9(g)(4) of the Illinois Condominium Property Act, any purchaser of a condominium unit who acquires a property either at a foreclosure sale or by post-foreclosure purchase from the mortgagee must pay the last six months’ worth of delinquent assessments on the unit. 765 ILCS 605/9(g)(4).

So where the wholly-owned subsidiary of the original mortgagee buys the property at the foreclosure sale and subsequently sells to a third party, is that subsidiary a “mortgagee” under the statute, triggering the duty to pay back assessments? That’s the question which the Illinois Supreme Court agreed to decide in the final days of the January term, allowing a petition for leave to appeal in Wing Street of Arlington Heights Condominium Association v. Kiss the Chef Holdings, LLC, a decision from Divison Three of the First District.

Wing Street began in 2010, when the condominium association filed an action to recover past-due assessments. The following year, the bank filed an action to foreclose the mortgage on the property. At the foreclosure sale, a wholly-owned subsidiary of the bank bought the property. The subsidiary paid the current assessments on the unit from January 2012 until it was sold on March 29, 2013. Neither the subsidiary nor the third-party buyer requested or obtained a paid assessment letter from the condominium association before the sale.

Nine months after the property was sold, the condo association sued the third party buyer, alleging under the Condominium Property Act that because the subsidiary was a “mortgagee” within the meaning of Section 9(g)(4), the new owner had an obligation to pay six months’ worth of back assessments. The trial court originally found for the subsidiary after a bench trial, but subsequently granted reconsideration and concluded that the subsidiary wasn’t a “mortgagee” for purposes of the statute after all.

The Appellate Court unanimously reversed. Citing the Supreme Court’s decision in 1010 Lake Shore Association v. Deutsche Bank National Trust Company, the Court concluded that the legislature’s intent in enacting Section 9(g)(4) was to provide that condo associations would at least be able to recover a portion of the prior owner’s unpaid assessments when the unit is sold. The Appellate Court concluded that the subsidiary was a “mortgagee” within the meaning of the Condominium Property Act, citing to the Illinois Mortgage Foreclosure Law. Because the third-party buyer failed to pay the past six months of unpaid assessments upon its purchase of the property, a lien for that amount arose, which the subsidiary was free to foreclose via a direct action against the buyer.

We expect Wing Street to be decided by next winter.

Image courtesy of Flickr by John Picken Photo (no changes).