New owner not responsible to pay prior owner’s unpaid 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 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 does come up from time to time. 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.

So, the scenario that you describe indicates that one of a few things may have happened here. The title commitment may have inadvertently omitted the exception I described above. 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 nonpayment 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. Immediately following our condominium association’s recent annual owners meeting, the board met in private and elected officers. Was this appropriate?

A. No, this was not appropriate. A condominium board elects officers (president, secretary, treasurer) from among the members of the board. However, this election must take place at an open meeting of the board that has been properly called and noticed. The board of your association needs to do this.

Q. Minutes of board meetings are not prepared or maintained for our association. Is an association required to maintain minutes of board meetings?

A. It is fundamental corporate law that board action be memorialized in minutes of its meetings. The secretary of the association is charged with maintaining the minutes of meetings of the association and of the board; although the secretary does not have to be the person actually preparing the minutes. The failure of the board to prepare and maintain minutes exposes the board and association to liability, and is a breach of the board members’ fiduciary duty. The secretary of the board may be especially exposed to this liability, given the secretary’s specific duty to maintain the minutes.

Further, the statutes that govern Illinois condominium associations, master associations and common interest community associations require minutes of board meetings to be available for inspection and copying by owners. Failure to maintain such documents for inspection is another potential source of liability.

The board should strongly consider hiring a person to take minutes of the meetings, if their own involvement in the meetings prevents them from taking minutes.

Q. Is the board of our association required to post the agenda when it posts the notice of the board meeting?

A. The board is required to post notice of board meetings, stating the date, time, place, and purpose of the board meeting. However, the board is not required, unless required by the association’s declaration or bylaws, to post the agenda for the board meeting. That said, many boards do post the proposed agenda with the notice of board meeting. This is a matter of personal preference, often based on the desire of the owners.

Ÿ David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in Buffalo Grove. 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.