The Appellate Court of Illinois, First District recently held that a foreclosing mortgagee’s payment of post-foreclosure sale assessments nearly a year after the sale date confirmed the extinguishment of a condominium association’s lien for pre-sale assessments created under the Illinois Condominium Property Act.

In so ruling, the First District found that the plain language of the Act did not place any “temporal requirement on the payment of post-purchase assessments in order for the payment to confirm the extinguishment of any lien created under subsection 9(g)(1) of the Act[.]”

A copy of the opinion in Quadrangle House Condominium Association v. U.S. Bank, N.A. is available at: Link to Opinion.

The defendant mortgagee foreclosed on its mortgage and purchased the condominium unit at the foreclosure sale on Nov. 13, 2015. The trial court in the foreclosure action confirmed that sale in January 2016.

On Aug. 30, 2016, the mortgagee requested verification of the amount of assessments due and owing from the condominium association. On Sept. 1, 2016, the association provided a ledger reflecting $5,411.31 in unpaid assessments accruing from Nov. 13, 2015 through Sept. 1, 2016.

The mortgagee sent a check to the association on Sept. 13, 2016 for the unpaid post-sale assessments. However, on Nov. 30, 2016, the association issued a notice and demand for possession of the unit to the mortgagee demanding $17,810.35 for unpaid assessments that accrued prior to the foreclosure sale. Thereafter, the association filed suit.

In response, the mortgagee filed a motion seeking dismissal of the complaint, or in the alternative, summary judgment. The mortgagee argued that its payment of $5,411.31 in post-sale assessments confirmed extinguishment of the association’s lien pursuant to section 9(g)(3) of the Act.

The association filed a cross-motion for summary judgment arguing, inter alia, that the mortgagee did not comply with section 9(g)(3)’s requirements by failing to pay monthly assessments for the unit in the month following the sale, and therefore, the lien created under section 9(g)(1) of the Act was not confirmed extinguished by the payment in September 2016.

The trial court granted the mortgagee’s motion for summary judgment and denied the association’s cross-motion for summary judgment. The association appealed.

On appeal, the only issue argued by the association was whether, pursuant to section 9(g)(3), the mortgagee’s $5,411.21 payment on Sept. 13, 2016 confirmed the extinguishment of the association’s lien for pre-sale assessments created under section 9(g)(1).

The association argued that section 9(g)(3) required the mortgagee to begin remitting payment for post-sale assessments immediately in the month following the sale to confirm extinguishment of the section 9(g)(1) lien. Thus, the association argued, the mortgagee’s payment in September 2016 did not extinguish the lien for pre-sale assessments.

However, the Appellate Court rejected the association’s argument that section 9(g)(3) provides for a rigid deadline of the month following the foreclosure sale to commence remitting post-sale assessments.

The Court noted that “it is clear that a foreclosure buyer’s duty to pay monthly assessments begins on ‘the first day of the month after the date of the judicial foreclosure sale.’ But on the face of the statute, section 9(g)(3) does not contain any time limit for confirming the extinguishment of an association’s lien.” See Country Club Estates Condominium Ass ‘n v. Bayview Loan Servicing LLC, 2017 IL App (1st) 162459, ¶ 14 (internal citations omitted).

The Appellate Court also cited heavily from the Illinois Supreme Court decision in 1010 Lake Shore Ass’n v. Deutsche Bank National Trust Co., 2015 IL 118372. In 1010 Lake Shore, the Illinois Supreme Court explained that “[t]he first sentence of section 9(g)(3) plainly requires a foreclosure sale purchaser to pay common expense assessments beginning in the month following the foreclosure sale.”

However, the Appellate Court did not interpret this phrase to mean that a purchaser at a foreclosure sale must commence remitting post-sale assessments in the month following the sale. Rather, the Court explained that “first sentence of section 9(g)(3) merely fixes the date when the purchaser’s liability for assessments begins.”

Thus, the Appellate Court held that the mortgagee was not required to immediately remit post-sale assessment payments in the month following the foreclosure sale to confirm the extinguishment of the association’s lien for pre-sale assessments.

It is important to note that the Illinois Supreme Court in 1010 Lake Shore advised that “[t]he second sentence [in section 9(g)(3)] provides an incentive for prompt payment of those [post-sale] assessments, stating ‘[s]uch payment confirms the extinguishment of any lien created’ under subsection 9(g)(1) by the prior unit owner’s failure to pay assessments.”

Thus, relying on 1010 Lake Shore, the association argued alternatively that the mortgagee did not “promptly” pay post-sale assessments for the unit, and therefore, the September 2016 payment did not confirm extinguishment of the section 9(g)(1) lien.

However, in rejecting the association’s argument, the Appellate Court noted that the Illinois Supreme Court in 1010 Lake Shore “did not hold that prompt payment is a condition precedent to confirmation of the extinguishment of any lien created under subsection 9(g)(1) of the Act.” Rather, the Appellate Court explained that the payment of post-sale assessments is an additional step necessary to confirm extinguishment of the section 9(g)(1) lien. However, prior to the confirmation of extinguishment by the post-sale payment, the section 9(g)(1) lien is enforceable. The “incentive for prompt payment” is taking the additional step required for extinguishment of the lien before the lien is enforced.

The Appellate Court explained that the ruling in 1010 Lake Shore supported the conclusion that “payment of post-purchase assessments, whenever made, is the step necessary to confirm the extinguishment of any lien created under section 9(g)(1)[.]” Indeed, the Court noted that the Illinois Supreme Court “never qualified its analysis by stating that, before the payment of post-purchase assessments could act to confirm the extinguishment of any lien created under subsection 9(g)(1) of the Act, the payment must be made promptly following the purchase of the condominium at a foreclosure sale.”

The Appellate Court further explained that the Illinois Supreme Court in 1010 Lake Shore “found no ambiguity in the provisions of the Act; rather, it found the language to be plain in its requirements.” Thus, the Court found that “the legislature did not place any temporal requirement on the payment of post-purchase assessments in order for the payment to confirm the extinguishment of any lien created under subsection 9(g)(1) of the Act; nor do we believe that the supreme court in 1010 Lake Shore found promptness of payment to be an implicit requirement in the statute.”

In light of the above, the Appellate Court found that the mortgagee’s payment on Sept. 13, 2016 satisfied all of the post-sale assessments that had accrued since the date of the sale. Therefore, the Court held that the mortgagee’s payment confirmed extinguishment of any lien held by the association for unpaid pre-sale assessments under section 9(g)(1).

Accordingly, the Appellate Court affirmed the trial court’s order granting summary judgment in favor of the mortgagee and denying the association’s cross-motion for summary judgment.