Q. I signed a contract to buy a foreclosure property. The seller was Fannie Mae. The property was a condominium. I did not have an attorney.
At the closing, I was told for the first time that I had to pay six months of back homeowners association dues, which came to around $1,200. The lady at the title company told me it is the law, though she could not provide me with anything to support that.
I paid it but have been seething about it ever since. Why didn't anyone tell me about this? Is there actually such as law? People warned me I should get an attorney and now I wish I did. Did I get robbed for $1,200?
A. The section of the Illinois statutes that addresses this issue is 765 ILCS 605/9(g)(4). This section states that "a purchaser who acquires title from a mortgagee (the bank/Fannie Mae/Freddie Mac) shall have the duty to pay the proportionate share, if any, of the common expenses for the unit … during the six months immediately preceding institution of an action to enforce the collection of assessments."
This section of the Condominium Property Act has stirred much debate in the legal world. I have had many bank-owned transactions where the association dues were paid in full by the seller through the date at closing. I have had some deals where the seller has charged the purchaser for the six months; however, it was clear in the contract that the purchaser was liable for up to six months association dues. And, I have had deals where there is no mention of outstanding association dues in the contract and we first become aware of this expense at or immediately prior to closing.
In my attorney review correspondence to the seller, I attempt to include a provision providing that association dues will be paid through closing. Unfortunately, on many of these bank-owned/Fannie Mae/Freddie Mac deals, the seller never responds to the attorney review letter. Upon demand, the seller is further required to provide what is known as a 22.1 disclosure, which, among other things, must disclose any outstanding dues. Unfortunately, we often first see the paid assessment letter and/or the 22.1 disclosure immediately prior to or at the closing, leaving the purchaser in the dark as to what, if anything, is owed for association dues.
Further clouding the issue is the provision in the statute "during the six months immediately preceding institution of an action to enforce the collection of assessments." If an action to enforce the collection of assessments was never instigated by the seller or the association, it appears from the language of the statute that the seller would have no right to pursue reimbursement of these outstanding dues from the purchaser. In addition, what constitutes "institution of an action?" Some attorneys argue correspondence from the association to the homeowner satisfies this provision. Others argue a lawsuit for the collection of past due assessments is required. Either way, some action is required; however, when you demand proof this action was taken, well, let's just say the next time I get the proof will be the first time.
In an attempt to calm your seething, review your contract, in particular the often voluminous addendum that is attached to the form contract. It is likely that this issue is addressed in the addendum. In a further attempt to calm your seething, it is likely that even in the event you had an attorney at the closing, you still would have paid the outstanding dues.
I have argued with sellers on many of these deals and their response generally is, pay it or don't close. In most circumstances, the purchaser thinks he or she got a pretty good deal on the property and is not willing to walk away over this relatively small amount, which is apparently the decision you made.
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