Condo sale closed without board’s knowledge: Who should pay assessments?
Q. The closing of a unit in our association occurred without the board’s knowledge, and without the seller requesting an assessment status letter. There were unpaid assessments due and owing by the prior owner at the time of closing. Usually, the seller requests an assessment status letter from us, and this has not happened to our association before. Is the new owner responsible for the prior owner’s unpaid assessments?
A. This situation arises often — particularly in older, single-family homeowner associations. The standard title commitment, where there is a recorded declaration for an association, refers to the potential lien of the association for unpaid assessments and other charges. The assessment status letter is provided to the title company in order to waive this exception. The exception is waived either when the assessment status letter shows there are no unpaid assessments or other charges through the date of closing or, when the amount shown as due and owing as of the date of closing is paid by the title company to the association with the proceeds of the sale of the unit.
The scenario you describe indicates that one of a few things may have happened here. The title commitment may have inadvertently omitted the association assessment lien exception. Or, the closing officer may have overlooked requiring the assessment status letter. Or, this may have been a cash transaction, and the parties did not close the transaction through a title company — not particularly smart, but it happens.
Regardless, the typical declaration provides that the owner of the unit at the time an assessment or other charge is due is personally responsible for them, and that the association’s lien for non-payment of assessments survives the closing. Therefore, the new owner would not be responsible to pay the prior owner’s unpaid assessments.
However, the association’s lien survives and is an encumbrance against the title of the new owner. The association can file a lien for the unpaid assessments unpaid by the prior owner and can even foreclose the lien. That usually isn’t necessary, though, to resolve an issue of this type. Usually, such a claim is resolved when the association advises the new owner of the blunder and the new owner’s title company pays the claim (and then seeks reimbursement from the seller). Sometimes, the association has to file the lien, before the new owner’s title company pays the claim. The title company should pay the claim because the title policy insures against association liens accruing prior to the closing of the sale from one owner to the next.
Q. Our condominium association board does not always prepare or maintain minutes of the their board meetings. Are condominium associations required to maintain minutes of all their open board meetings?
A. Yes. The Illinois Condominium Property Act requires that board action must be contained in written minutes of its meetings. The secretary of the association is charged with producing the minutes of unit owner and board meetings.
The secretary does not have to be the person actually preparing the minutes. If the secretary or other board members are unable or unwilling to take meeting minutes, the board should consider hiring a person or service to take minutes of the meetings.
The Condominium Act also requires the board to keep the minutes for the seven preceding years and must be available for inspection and copying by owners, upon a proper request. The failure of the condominium board to prepare and maintain minutes exposes the board and association to liability and is a breach of the board members’ fiduciary duty.
• Matthew Moodhe 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.