Pembrook Condominium Association-One v. North Shore Trust & Savings (IL)

Summary: A mortgagee-purchaser of condominium property is not required to make association assessment payments until a sheriff’s deed conveys the property to the purchaser. Associations cannot enforce liens against the new purchaser in order to recover charges that amassed before the purchaser obtained title.

 

Pembrook Condo. Ass'n-One v. N. Shore Trust & Sav., 2013 IL App (2d) 130288 appeal denied.

 

Go to full opinion.

 

Facts: In 2007, North Shore Trust & Savings obtained a first mortgage against a condominium property held by Aimee Zeit. At that time, no other liens were pending or recorded against the property. This was also true on July 26, 2011, when North Shore field a complaint to foreclose its mortgage. However, on July 27, 2011, Pembrook Condominium Association-One recorded a claim for a lien against Zeit regarding unpaid association charges.

On October 7, 2011, North Shore received a judgment of foreclosure, and on April 13, 2012, North Shore purchased the property, gaining possession, at the sheriff’s sale. On April 17, 2012, the deed was recorded, conveying the property to North Shore. On August 30, 2012, Pembrook recorded another claim for a lien in association charges for March 2010 through July 2012, plus any subsequent charges. North Shore, in response, sent Pembrook checks for the May, June, and July’s association charges, but Pembrook did not accept them. However, starting August 2012, Pembrook began accepting North Shore’s payments.

Despite accepting payments, on November 27, 2012, Pembrook filed a complaint, seeking possession of North Shore’s condominium unit. North Shore countered, arguing in part that Pembrook’s complaint was defeated by 765 ILCS 605/9(g)(3) (Condominium Property Act). Specifically, North Shore asserted that Pembrook’s acceptance of North Shore’s checks for association charges, after the trial court confirmed the foreclosure sale, extinguished any lien that Pembrook had before April 13, 2012. North Shore also argued that Pembrook could not charge North Shore for charges accumulated before the foreclosure was complete (i.e. – before possession of or title to the property).

Pembrook responded by asserting that, under 765 ILCS 605/9(g)(1), a lien for overdue assessments accrued the instant that the assessments became due, and did not need to be recorded separately. North Shore’s failure to name Pembrook as a defendant in the foreclosure action meant that North Shore could not extinguish Pembrook’s lien. Further, Pembrook’s acceptance of North Shore’s payments of association charges starting August 2012 did not extinguish its lien; North Shore was still legally obligated to make the payments and Pembrook had a duty to collect them.

North Shore rebutted, asserting that no authority enabled a condominium association to enforce a lien against a foreclosing lender which arose before (1) the completion of a foreclosure and (2) a confirmed sheriff’s sale. Further, North Shore argued that it recorded its lien first and therefore had priority. Additionally, North Shore restated that Pembrook’s acceptance of North Shore’s association charge payments extinguished any lien.

The trial court dismissed Pembrook’s claims for assessments that accured before North Shore obtained either possession of or title to the property. However, the court did not dismiss the claim for “the May-July assessment amount.” Pembrook appealed.

 

Holding: Affirmed. On appeal, Pembrook argued the trial court erred in holding that Pembrook could not enforce its lien for assessments that accrued before North Shore acquired either possession of or title to the property. The court reviewed the issue de novo.

The appellate court summarily addressed Pembrook’s arguments, affirming the trial court’s ruling. The court began by citing Newport Condominium Ass'n v. Talman Home Federal Savings & Loan Ass'n of Chicago, 188 Ill.App.3d 1054, 136 Ill.Dec. 612, 545 N.E.2d 136 (1988). The court in Newport held that, under long-standing Illinois law, title remained with the previous owner until a sheriff’s deed conveyed the property to the purchaser. Therefore, an association could not enforce its lien against the purchaser to recover charges that accumulated before the purchaser obtained official title (constructive title was found insufficient). The appellate court held that the holding of Newport disposed of the appeal, because even if Pembrook’s lien survived the foreclosure judgment in favor of North Shore, charges that accrued before North Shore took formal title to, or possession of, the property could not be enforced.

The court also provided a second reason for affirming the judgment, citing 765 ILCS 605/9(g)(3). Under § 9(g)(3), the purchaser of a condominium unit at a judicial foreclosure sale was required to pay charges that were “assessed from and after the first day of the month after the date of the judicial foreclosure sale,” and, upon confirmation of the sale, the payment extinguished any lien created under § 9(g)(1) caused by the previous owner failing to pay their assessments. The court found that North Shore met the requirements under § 9(g)(3), by paying the May charges after the judicial foreclosure sale in April, as well as June and July. Although Pembrook asserted that North Shore did not make the May payment until June 18, thus not making the payments on the “first day of the month after the date of the judicial foreclosure sale,” the court found that the amount tendered in June, covering both the May and June payments as written in the check’s memo line, was sufficient. Therefore, the payments extinguished the lien created under § 9(g)(1), rendering Pembrook’s attempts to enforce the lien void.

Additionally, the court disagreed with Pembrook’s assertion that, because it was not named as a defendant in North Shore’s foreclosure action, under § 9(g)(1) it’s liens were still viable. Agreeing with North Shore, the court found that Pembrook was not a necessary party to the foreclosure action, and, further, Pembrook’s lien was not recorded when North Shore filed its action. Therefore, “the payment of the association charges meant that, under section 9(g)(3), the lien was no longer in effect. For [the court] to hold otherwise would read section 9(g)(3) out of the Act.”

 

Opinion Year: 
2013
Jurisdiction: 
Illinois
By: ATG Underwriting Department | Posted on: Mon, 09/22/2014 - 10:52am