Under the Illinois Condominium Property Act (765 ILCS 605), members of a condominium association are legally obligated to collect assessments from the condominium owners. Failure to collect assessments from a condominium owner, regardless of the reason, could result in a lawsuit against the association. This means that when an owner is delinquent in their assessments the association must collect assessments from the owner, regardless of the board’s personal feelings with respect to the owner’s individual situation.
This does not eliminate the possibility of offering a consistent payment plan to someone who has a financial hardship.
What steps can a condominium association take to collect assessments when an owner fails to pay on time?
Once a condominium owner has failed to pay assessments to the condominium association, the association has several options for collecting the assessments. It can:
The association does not have to send a notice before filing a lien, but they must send one prior to filing under the Forcible Act.
30 day notice
The first step toward collecting assessments is to prepare and send a 30 day notice. It should state:
- The total amount that is owed
- When the amounts were originally due
- A deadline for the full payment
Either a condominium attorney or the association may write the letter, but it must be signed by them or their attorney. The letter should be addressed to the unit owner. The association can confirm the unit owner by performing a title search with the county’s recorder of deeds.
The letter should as have the following language in order to comply with the Forcible Act:
Only full payment of all amounts demanded in this notice will invalidate the demand, unless the person claiming possession or his or her agent or attorney, agrees in writing to withdraw the demand in exchange for receiving partial payment.
When writing the collection letter, the association should be careful not to violate the Fair Debt Collection Practices Act.
If a unit owner does not respond to the notice, the next step is to file a lien against the unit. A lien allows you to force the sale of the unit to pay off what the unit owner owes. A lien also makes it very difficult for the unit owner to sell their condominium because until the delinquent unit owner pays off the money they owe, you will be able to force the sale of the condo, even if there is a new owner, to collect the money owed by the previous owner. Typically, a buyer will insist that the condo seller pay the lien as a condition of the sale. You should speak with an attorney to assist you in filing the lien.
The Condominium Property Act allows a condominium association to file a lien against a unit owner if the owner fails to pay:
- Common expenses (assessments)
- Late charges
- Reasonable attorneys fees incurred enforcing:
Forcible Entry and Detainer Act (the Forcible Act)
If the unit owner still does not pay their assessment to the condominium association, the association should file for the Forcible Act. The Forcible Act allows the condominium association to ask a court for a money judgment and possession of the unit for which assessments have not been paid. The Act only allows the condominium association to take possession of the unit; the owner will still own the unit. This is similar to an eviction of a tenant who has not paid rent. Once the condominium association has possession of the unit, they may rent out the unit and use the rent money to pay the past due assessments. The Forcible Act permits the association to rent out the unit for 13 months, though the association may petition for more time if necessary.
What happens when the unit owner who owes assessments enters foreclosure?
In this situation it is very important for the association to contact their attorney. Numerous issues can arise when a delinquent unit owner enters foreclosure. Even in a foreclosure, a condominium association can collect up to 6 months of assessments. The association can only collect assessments owed before the date of the filing of a collection action such as a forcible act. In addition to the delinquent assessments, the association can also collect the legal fees incurred to collect the delinquent assessments.
The purchaser of the unit pays the potential 6 months of delinquent assessments and legal fees that the association can collect, unless the purchaser is a mortgage holder (i.e. the bank). If the mortgage holder purchases the unit, which has recently become more common, the association will have to wait until the mortgage holder sells the unit. At that time, it will be able to collect the delinquent assessments and legal fees from the person that purchases the unit from the mortgage holder. However, the mortgage holder will be responsible for paying the assessments beginning the month following the date that it purchases the unit.
You can file a collection after a foreclosure action has begun. If the association had not filed a legal action to collect delinquent assessments when it is served with a foreclosure complaint, it can still file a collection action.
By law , any lien filed by the association will be extinguished at the sheriff’s foreclosure sale.
What if the unit owner petitions for bankruptcy?
Unless the association has filed a lien against the unit for the amount of the delinquency, any pre-petition amounts due to the association will be discharged in bankruptcy. However, the association may file a Proof of Claim prior to the discharge, so its claim for pre-petition assessments is at least partially paid either:
- From the debtor’s liquidated assets in a Chapter 7 bankruptcy action, or
- Pursuant to a Chapter 13 payment plan
However, the unit owner is still responsible for paying assessments that come due after the owner has petitioned for bankruptcy. If the owner fails to pay their post-petition assessments, the association may petition the court to lift the Automatic Bankruptcy Stay. An Automatic Bankruptcy Stay is an order of the bankruptcy court in place in every case, prohibiting creditors from taking any actions against the debtor or the debtor’s property while the bankruptcy is pending. Once the court lifts the Stay, the association should follow its regular collection procedures with respect to these amounts.