Tax Deeds; Condominiums

In re Application of the County Treasurer, 373 Ill App 3d 679, 869 NE2d 1065, 312 Ill Dec 74 (2nd D 2007).

Facts: On February 11, 2003, the circuit court of Carroll County issued tax deed orders (orders) to AAM/US Bank LLC (bank) for various properties in a condominium complex run by the Lake Carroll Association (association). Each order required the Carroll County Clerk (clerk) to deliver a tax deed to the Bank upon receiving a Certificate of Purchase for the applicable property. The clerk delivered all deeds to the Bank between July 3, 2003 and November 4, 2003. The bank recorded each deed on the day it received it.

The association had recorded a declaration governing the condominium complex in 1972. One provision in a covenant in that declaration authorized the association to levy assessments against all lots in the complex. Another provision in the same covenant stated that unpaid assessments would become a lien on the applicable property after the association recorded notice of the amount due. A different section of the declaration stated that all of the declaration's provisions were enforceable for an initial period of twenty-two years and seven months. A third section of the declaration contained a severability clause.

The bank petitioned the circuit court to declare that it was not liable for any assessments authorized by the covenant on the condominium properties it purchased for the following reasons: (1) all assessments were eliminated when the deeds were issued; (2) the bank did not assert its right to the assessments during the tax deed proceedings, thus, it either waived or was estopped from collecting those assessments; and (3) the covenant was void because it violated the rule against perpetuities by creating a future interest in the association to create liens on the condominium properties that could vest after 21 years.

Alternatively, the bank asked the court to declare that the bank was responsible only for assessments levied against a property after it recorded the deed for that property. The association contended that the bank was required to pay fees levied against all fifteen condominium properties beginning on February 11, 2003, when the court entered the orders.

The circuit court granted summary judgment in favor of the association, finding that the bank was responsible for assessments levied against all fifteen properties beginning on the date the court entered the orders.

Holding: Affirmed in part and reversed in part. The bank was responsible only for assessments levied against a property after it received the deed for that property.

The bank was not obligated to pay assessments levied against the properties after the circuit court issued the orders but before the clerk delivered the deeds. Assessments are binding on only title holders. According to the plain language of applicable Illinois statutes, the bank did not hold title to any condominium property until the redemption period for the property expired and the clerk delivered the property deed to the bank. Because the bank recorded each deed the day it received it, the effect of recording dates was not discussed.

However, the bank was liable for assessments levied against each property after the bank received the deed to that property.

First, the assessments were not eliminated when the deeds were issued. Although the deeds granted independent title free from most prior liens, 35 ILCS 200/22-70 provides that a tax deed purchased at a judicial sale does not extinguish any pre-existing covenant running with the land. Before the judicial sale, the assessment fees were covenants running with the land. This is because the declaration demonstrated that the original grantor and grantee intended such fees to run with the land; the fees touched and concerned the land because they affected the use, enjoyment, and value of the property; and privity of estate existed between the original and previous owners.

Second, the association did not waive, nor was it estopped from collecting, assessments. It did not voluntarily and intentionally relinquish its right to the assessments by failing to assert that right at the tax deed proceedings. Furthermore, the association had no duty to assert the right at the proceedings. This is because the assessments survived the sale under 35 ILCS 200/22-70 regardless of the association's actions. Moreover, the association recorded the covenant of assessments long before the bank purchased the properties. Therefore, the bank could not demonstrate that it relied on the association's failure to disclose the fees when making the purchases.

Third, the covenant of assessments did not violate the rule against perpetuities (Rule). The Illinois Supreme Court has held that a covenant running with the land does not violate the Rule if it runs longer than 21 years. In addition, the rule applies only to future interests, and the covenant was a present right in the land. This is because it imposed a burden for the benefit of other land. Furthermore, a lien that could have arisen pursuant to the covenant was distinct from the covenant as a whole. Thus, whether a lien itself violated the rule was not considered. Finally, even if the declaration's lien provision was void, its severability clause would have allowed the assessments provision to remain in effect.

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