Special assessment resolutions must be drafted properly

Q. Our condominium association levied a large special assessment a couple of years ago, payable over multiple years. A purchaser of a recently foreclosed unit is alleging that the outstanding special assessment balance has been extinguished because the original date the special assessment was levied predates the six month "look back" period under the Illinois Condominium Property Act. Our association is under the impression that, since the special assessment is payable in monthly installment payments, the buyer remains responsible for the six months special assessment payments, which accrued during the "look back" period, along with all future monthly installments of the special assessment remaining following the buyer's closing date. Please help explain how to best address this dilemma.

A. This question really involves two separate issues, both of which are complicated.

The first issue deals with the liability of a purchaser from the foreclosing lender for unpaid assessments of the former foreclosed owner, under what is commonly referred to as the "six month" rule. Section 9(g)(3) of the Illinois Condominium Property Act does permit an association to collect up to six months of certain unpaid assessments from the new owner after the judicial sale in a foreclosure. More specifically, the successful purchaser at the judicial sale in the foreclosure (if a third party other than the lender) or the person who buys the unit from the lender after the judicial sale, will be responsible for up to six months of "common expenses" (that includes regular assessments, special assessments, late charges, attorney's fees, for example) that were due and remain unpaid from the foreclosed owner at the time the association initiates a collection action against the foreclosed owner. It's not the six months prior to the judicial sale in the foreclosure, as many incorrectly understand.

However, the association must have initiated a collection action against the foreclosed owner in order to trigger the obligation under the "six month" rule. As the result of trial court experience, a collection action is deemed initiated by the filing of a complaint in forcible entry and detainer, and not merely the issuance of the 30-day notice letter required under the Code of Civil Procedure. If the association has not initiated such an action, it is not legally entitled to collect the up to six months of assessments amount described above.

I'll address, in a future column, under what circumstances the purchaser at the judicial sale may be responsible for all unpaid sums due from the foreclosed unit owner. There is some recent case law on that issue.

The second issue deals with whether the association's lien for the entire special assessment was extinguished by the judicial sale in the foreclosure. A foreclosure sale generally extinguishes the association's lien for unpaid common expenses through the date of the judicial sale.

When and how the special assessment is due and payable is an important issue that needs to be set forth in the resolution by which the board adopted the special assessment. This decision, and how it is described in the minutes, will impact whether all or a portion of the special assessment is payable by the current owner or a subsequent purchaser of a unit, and what portion may be at risk if there is a unit owner foreclosure.

A properly prepared and adopted special assessment motion will obligate subsequent purchasers of a unit after a foreclosure to pay installments that accrue from and after the first day of the month after the judicial sale.

Whether or not the foreclosure extinguished the lien for the entire special assessment and whether the purchaser of the unit here is responsible for any portion of the installments payable after the foreclosure sale will depend on the specific language of the association's minutes.

If properly drafted, the purchaser of a unit at the judicial sale in the foreclosure will be responsible for future installments of the special assessment due and payable from and after the first day of the month after the judicial sale. If the motion is not properly stated, the entire unpaid amount of the special assessment could be extinguished.

• David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in the Chicago suburbs. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.