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Condominium Property Act Wins

Seal_of_the_Supreme_Court_of_Illinois

1010 Lake Shore Ass’n v. Deutsche Bank National Trust Co.
2015 IL 118372 Date: December 3, 2015

The Illinois Supreme Court recently ruled on the tricky interplay between the Illinois Condominium Property Act and Illinois Mortgage Foreclosure Law. Both pieces of legislation are meant to give real estate owners, investors, managers, and ultimately residents, confidence that their needs will be met through the legal process. In this case however, the Bank was ultimately trumped by the condo association – even after the Bank’s successful foreclosure. The implications of the decision are stark if not altogether surprising: the condominium association always gets its money. Always.

Facts

In 2010 Deutsche Bank National Trust Co. as Trustee for Loan Trust # 2004-1, Asset-Backed Certificates, Series 2004-1 (“Deutsche”) purchased a unit at a judicial foreclosure sale. On March 27, 2012 condominium association 1010 Lake Shore Assoc. (the “Management Association”) sent Deutsche a Demand for Payment referencing unpaid common area expenses incurred during the time the unit was owned by the former occupant. Deutsche filed an Answer and the Management Association moved for Summary Judgment; arguing that there was no question of material fact as to the amount owed or Deutsche’s failure to pay assessments.

Ciruit Court Opinion: MSJ

The Management Association argued in its Motion for Summary Judgment in the Circuit Court of Cook County that based on Sec.9(g)(3) of the Illinois Condominium Property Act (“Act”), 765 ILCS 605/9(g)(3), the lien arising from the former owner’s unpaid assessments was not extinguished by Deutsche’s foreclosure because Deutsche had failed to pay assessments accruing after the judicial sale.

For its part, Deutsche responded that it could not be held liable under Sec.9(g)(3) for unpaid assessments that accrued before it purchased the unit. Following a hearing the Trial Court granted Summary Judgment and awarded the Management Association possession of the property.

Appellate Opinion: Confirmed

On appeal Deutsche argued the Trial Court misconstrued Sec.9(g)(3) of the Act and that a buyer is only required to pay common area expenses accuring after the sale. But the Appellate Court affirmed the Trial Court, with one justice dissenting; he wrote that Sec.9(g)(3) of the Act and Sec.15-1509(c) of the IL Mortgage Foreclosure Law (“Foreclosure Law”),735 ILCS 5/15-1509(c), established “complementary procedures” to extinguish liens held by an HoA or condominium association. Specifically, he pointed out, the Foreclosure Law bars claims if the HoA or condominium association was a party to the foreclosure. In that case, the foreclosure extinguishes all such liens and the Court has jurisdiction over the HoA. The majority, however, did not share that opinion and

Supreme Court: Condo Association Wins

In the Illinois Supreme Court, Deutsche asserted again that Sec.9(g)(3) of the Act required that the Management Association’s lien be extinguished. In addition, for the first time, Deutsche argued that the Management Association could not treat the peronal judgment arising from its Forcible Detainer action as a perfected lien. For that purpose, Deutsche argued, the Management Association would have had to bring a lien foreclosure action.

The Supreme Court found no error in the reasoning of the Appeallate Court as to the first point, and as to the second point noted that arguments not presented at the Trial or Appellate Court levels may not be brought forth for the first time in the Supreme Court.

Ultimately, the Illinois Supreme Court affirmed.

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