How association boards can collect unpaid charges

Q. Our condominium association has a lot of owners with delinquent charges on their unit account. Not all of the charges are monthly assessments, but some are fines, late fees, repair expenses and even old attorney’s fees from prior collection cases.

How can our association collect these types of other charges. Our manager says we can collect for assessments by evictions and liens, but does not have any advice for collection of non-assessment expenses. Is there any way for management or the board to collect other charges from an owner?

A: An owner can be responsible to an association for a variety of expenses, including assessments, limited common element chargebacks, repairs, late fees, fines and attorney's fees, for example.

The most common legal procedure to collect sums due and owing from an owner to the association is through an eviction action. In such a case, the association obtains possession, not ownership, of a unit. The unit is then leased, and rents received are applied to the sums due the association until the account is brought current. Possession of the unit is then returned to the owner.

However, if the bulk of what is owed by an owner to an association is made up of items other than assessments, many courts are not willing to issue an eviction order. In those situations, an association would pursue a breach of contract action against the owner. The association's declaration is the contract. The association would obtain a judgment against the owner for the sums due. A judgment allows the association to take additional legal steps.

That is, unless the owner voluntarily pays the judgment, the association can pursue postjudgment collection through, for example, wage garnishment or bank garnishment. The association typically has a lien for all these unpaid sums, which may be collectible at a closing of the sale of the unit.

Filing of a lien is a rather passive approach, and does not, itself, generate funds. Not used very often by associations in Illinois, foreclosure of an association’s lien for unpaid sums is also available. However, this is often reserved for when the sums due the association are quite substantial. Such an action results in a sale of the unit, and the association needs to be prepared to be the “successful bidder” at the judicial sale.

Q: We are a common interest community association composed of detached single-family homes. Our bylaws state we cannot waive or forgive any payment owed by an owner. But we continue to write-off our receivables. Our treasurer states that we are not forgiving any debt because the write-offs are due to foreclosures and bankruptcy. Can we put a lien on the property and collect our past due assessments at the sale of the property?

A: The association has lien rights and can file a lien for unpaid assessments. However, the association’s lien would be extinguished by the judicial sale in a mortgage foreclosure. The association could nonetheless pursue collection of unpaid assessments from a former owner.

Whether or not to do so depends on a variety of factors, the most important of which is whether the former owner has assets that are sufficient to satisfy any judgment the association may obtain.

While an owner’s personal obligation to pay assessments may be extinguished in the owner's bankruptcy, the association’s lien against the unit for unpaid assessment typically is not. Therefore, an association may still be able to collect unpaid assessments from the proceeds of the sale of the “bankrupt” owner’s unit.

• 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.