Exercise Caution When Buying A Condo In A Short Sale - You May Owe Assessments

Short sales are presently dominating the real estate sales market and many buyers are electing to purchase these properties because of the often substantially reduced prices. However, buyers of these properties should exercise caution and consult with an attorney before buying. One often overlooked pitfall for the unwary buyer is a provision of the Illinois Condominium Property Act that was put in place in 2007. This change can make the buyer responsible for paying up to six month's of the seller's liability for the assessments levied against the property and remaining unpaid after foreclosure. Thus know what you are getting into before you sign that purchase contract.  Set forth below is the referenced change.

Public Act 094-1049
 SB2570 EnrolledLRB094 18528 AJO 54463 b
    AN ACT concerning condominium property. 
     Be it enacted by the People of the State of Illinois,represented in the General Assembly: 
     Section 2. The Code of Civil Procedure is amended bychanging Section 15-1507 as follows:
     (735 ILCS 5/15-1507)  (from Ch. 110, par. 15-1507)    Sec. 15-1507. Judicial Sale.    (a) In General. Except as provided in Sections 15-1402 and15-1403, upon entry of a judgment of foreclosure, the realestate which is the subject of the judgment shall be sold at ajudicial sale in accordance with this Section 15-1507.    (b) Sale Procedures. Upon expiration of the reinstatementperiod and the redemption period in accordance with subsection(b) or (c) of Section 15-1603 or upon the entry of a judgmentof foreclosure after the waiver of all rights of redemption,except as provided in subsection (g) of Section 15-1506, thereal estate shall be sold at a sale as provided in thisArticle, on such terms and conditions as shall be specified bythe court in the judgment of foreclosure. A sale may beconducted by any judge or sheriff.    (c) Notice of Sale. The mortgagee, or such other partydesignated by the court, in a foreclosure under this Articleshall give public notice of the sale as follows:        (1) The notice of sale shall include at least the    following information, but an immaterial error in the    information shall not invalidate the legal effect of the    notice:            (A) the name, address and telephone number of the        person to contact for information regarding the real        estate;            (B) the common address and other common        description (other than legal description), if any, of        the real estate;            (C) a legal description of the real estate        sufficient to identify it with reasonable certainty;            (D) a description of the improvements on the real        estate;            (E) the times specified in the judgment, if any,        when the real estate may be inspected prior to sale;            (F) the time and place of the sale;            (G) the terms of the sale;            (H) the case title, case number and the court in        which the foreclosure was filed; and            (H-1) in the case of a condominium unit to which        subsection (g) of Section 9 of the Condominium Property        Act applies, the statement required by subdivision        (g)(5) of Section 9 of the Condominium Property Act;        and            (I) such other information ordered by the Court.        (2) The notice of sale shall be published at least 3    consecutive calendar weeks (Sunday through Saturday), once    in each week, the first such notice to be published not    more than 45 days prior to the sale, the last such notice    to be published not less than 7 days prior to the sale, by:    (i) (A) advertisements in a newspaper circulated to the    general public in the county in which the real estate is    located, in the section of that newspaper where legal    notices are commonly placed and (B) separate    advertisements in the section of such a newspaper, which    (except in counties with a population in excess of    3,000,000) may be the same newspaper, in which real estate    other than real estate being sold as part of legal    proceedings is commonly advertised to the general public;    provided, that the separate advertisements in the real    estate section need not include a legal description and    that where both advertisements could be published in the    same newspaper and that newspaper does not have separate    legal notices and real estate advertisement sections, a    single advertisement with the legal description shall be    sufficient; and (ii) such other publications as may be    further ordered by the court.        (3) The party who gives notice of public sale in    accordance with subsection (c) of Section 15-1507 shall    also give notice to all parties in the action who have    appeared and have not theretofore been found by the court    to be in default for failure to plead. Such notice shall be    given in the manner provided in the applicable rules of    court for service of papers other than process and    complaint, not more than 45 days nor less than 7 days prior    to the day of sale. After notice is given as required in    this Section a copy thereof shall be filed in the office of    the clerk of the court entering the judgment, together with    a certificate of counsel or other proof that notice has    been served in compliance with this Section.        (4) The party who gives notice of public sale in    accordance with subsection (c) of Section 15-1507 shall    again give notice in accordance with that Section of any    adjourned sale; provided, however, that if the adjourned    sale is to occur less than 60 days after the last scheduled    sale, notice of any adjourned sale need not be given    pursuant to this Section. In the event of adjournment, the    person conducting the sale shall, upon adjournment,    announce the date, time and place upon which the adjourned    sale shall be held. Notwithstanding any language to the    contrary, for any adjourned sale that is to be conducted    more than 60 days after the date on which it was to first    be held, the party giving notice of such sale shall again    give notice in accordance with this Section.        (5) Notice of the sale may be given prior to the    expiration of any reinstatement period or redemption    period.        (6) No other notice by publication or posting shall be    necessary unless required by order or rule of the court.        (7) The person named in the notice of sale to be    contacted for information about the real estate may, but    shall not be required, to provide additional information    other than that set forth in the notice of sale.    (d) Election of Property. If the real estate which is thesubject of a judgment of foreclosure is susceptible ofdivision, the court may order it to be sold as necessary tosatisfy the judgment. The court shall determine which realestate shall be sold, and the court may determine the order inwhich separate tracts may be sold.    (e) Receipt upon Sale. Upon and at the sale of mortgagedreal estate, the person conducting the sale shall give to thepurchaser a receipt of sale. The receipt shall describe thereal estate purchased and shall show the amount bid, the amountpaid, the total amount paid to date and the amount still to bepaid therefor. An additional receipt shall be given at the timeof each subsequent payment.    (f) Certificate of Sale. Upon payment in full of the amountbid, the person conducting the sale shall issue, in duplicate,and give to the purchaser a Certificate of Sale. TheCertificate of Sale shall be in a recordable form, describe thereal estate purchased, indicate the date and place of sale andshow the amount paid therefor. The Certificate of Sale shallfurther indicate that it is subject to confirmation by thecourt. The duplicate certificate may be recorded in accordancewith Section 12-121. The Certificate of Sale shall be freelyassignable by endorsement thereon.    (g) Interest after Sale. Any bid at sale shall be deemed toinclude, without the necessity of a court order, interest atthe statutory judgment rate on any unpaid portion of the saleprice from the date of sale to the date of payment.(Source: P.A. 86-974.) 
     Section 5. The Condominium Property Act is amended bychanging Section 9 as follows:
     (765 ILCS 605/9)  (from Ch. 30, par. 309)    Sec. 9. Sharing of expenses - Lien for nonpayment.    (a) All common expenses incurred or accrued prior to thefirst conveyance of a unit shall be paid by the developer, andduring this period no common expense assessment shall bepayable to the association. It shall be the duty of each unitowner including the developer to pay his proportionate share ofthe common expenses commencing with the first conveyance. Theproportionate share shall be in the same ratio as hispercentage of ownership in the common elements set forth in thedeclaration.    (b) The condominium instruments may provide that commonexpenses for insurance premiums be assessed on a basisreflecting increased charges for coverage on certain units.    (c) Budget and reserves.        (1) The board of managers shall prepare and distribute    to all unit owners a detailed proposed annual budget,    setting forth with particularity all anticipated common    expenses by category as well as all anticipated assessments    and other income. The initial budget and common expense    assessment based thereon shall be adopted prior to the    conveyance of any unit. The budget shall also set forth    each unit owner's proposed common expense assessment.        (2) All budgets adopted by a board of managers on or    after July 1, 1990 shall provide for reasonable reserves    for capital expenditures and deferred maintenance for    repair or replacement of the common elements. To determine    the amount of reserves appropriate for an association, the    board of managers shall take into consideration the    following: (i) the repair and replacement cost, and the    estimated useful life, of the property which the    association is obligated to maintain, including but not    limited to structural and mechanical components, surfaces    of the buildings and common elements, and energy systems    and equipment; (ii) the current and anticipated return on    investment of association funds; (iii) any independent    professional reserve study which the association may    obtain; (iv) the financial impact on unit owners, and the    market value of the condominium units, of any assessment    increase needed to fund reserves; and (v) the ability of    the association to obtain financing or refinancing.        (3) Notwithstanding the provisions of this subsection    (c), an association without a reserve requirement in its    condominium instruments may elect to waive in whole or in    part the reserve requirements of this Section by a vote of    2/3 of the total votes of the association. Any association    having elected under this paragraph (3) to waive the    provisions of subsection (c) may by a vote of 2/3 of the    total votes of the association elect to again be governed    by the requirements of subsection (c).        (4) In the event that an association elects to waive    all or part of the reserve requirements of this Section,    that fact must be disclosed after the meeting at which the    waiver occurs by the association in the financial    statements of the association and, highlighted in bold    print, in the response to any request of a prospective    purchaser for the information prescribed under Section    22.1; and no member of the board of managers or the    managing agent of the association shall be liable, and no    cause of action may be brought for damages against these    parties, for the lack or inadequacy of reserve funds in the    association budget.    (d) (Blank).    (e) The condominium instruments may provide for theassessment, in connection with expenditures for the limitedcommon elements, of only those units to which the limitedcommon elements are assigned.    (f) Payment of any assessment shall be in amounts and attimes determined by the board of managers.    (g) Lien.        (1) If any unit owner shall fail or refuse to make any    payment of the common expenses or the amount of any unpaid    fine when due, the amount thereof together with any    interest, late charges, reasonable attorney fees incurred    enforcing the covenants of the condominium instruments,    rules and regulations of the board of managers, or any    applicable statute or ordinance, and costs of collections    shall constitute a lien on the interest of the unit owner    in the property prior to all other liens and encumbrances,    recorded or unrecorded, except only (a) taxes, special    assessments and special taxes theretofore or thereafter    levied by any political subdivision or municipal    corporation of this State and other State or federal taxes    which by law are a lien on the interest of the unit owner    prior to preexisting recorded encumbrances thereon and (b)    encumbrances on the interest of the unit owner recorded    prior to the date of such failure or refusal which by law    would be a lien thereon prior to subsequently recorded    encumbrances. Any action brought to extinguish the lien of    the association shall include the association as a party.        (2) With respect to encumbrances executed prior to    August 30, 1984 or encumbrances executed subsequent to    August 30, 1984 which are neither bonafide first mortgages    nor trust deeds and which encumbrances contain a statement    of a mailing address in the State of Illinois where notice    may be mailed to the encumbrancer thereunder, if and    whenever and as often as the manager or board of managers    shall send, by United States certified or registered mail,    return receipt requested, to any such encumbrancer at the    mailing address set forth in the recorded encumbrance a    statement of the amounts and due dates of the unpaid common    expenses with respect to the encumbered unit, then, unless    otherwise provided in the declaration or bylaws, the prior    recorded encumbrance shall be subject to the lien of all    unpaid common expenses with respect to the unit which    become due and payable within a period of 90 days after the    date of mailing of each such notice.        (3) The purchaser of a condominium unit at a judicial    foreclosure sale, or a mortgagee who receives title to a    unit by deed in lieu of foreclosure or judgment by common    law strict foreclosure or otherwise takes possession    pursuant to court order under the Illinois Mortgage    Foreclosure Law, shall have the duty to pay the unit's    proportionate share of the common expenses for the unit    assessed from and after the first day of the month after    the date of the judicial foreclosure sale, delivery of the    deed in lieu of foreclosure, entry of a judgment in common    law strict foreclosure, or taking of possession pursuant to    such court order. Such payment confirms the extinguishment    of any lien created pursuant to paragraph (1) or (2) of    this subsection (g) by virtue of the failure or refusal of    a prior unit owner to make payment of common expenses,    where the judicial foreclosure sale has been confirmed by    order of the court, a deed in lieu thereof has been    accepted by the lender, or a consent judgment has been    entered by the court.        (4) The purchaser of a condominium unit at a judicial    foreclosure sale, other than a mortgagee, who takes    possession of a condominium unit pursuant to a court order    or a purchaser who acquires title from a mortgagee shall    have the duty to pay the proportionate share, if any, of    the common expenses for the unit which would have become    due in the absence of any assessment acceleration during    the 6 months immediately preceding institution of an action    to enforce the collection of assessments, and which remain    unpaid by the owner during whose possession the assessments    accrued. If the outstanding assessments are paid at any    time during any action to enforce the collection of    assessments, the purchaser shall have no obligation to pay    any assessments which accrued before he or she acquired    title.        (5) The notice of sale of a condominium unit under    subsection (c) of Section 15-1507 of the Code of Civil    Procedure shall state that the purchaser of the unit other    than a mortgagee shall pay the assessments and the legal    fees required by subdivisions (g)(1) and (g)(4) of Section    9 of this Act. The statement of assessment account issued    by the association to a unit owner under subsection (i) of    Section 18 of this Act, and the disclosure statement issued    to a prospective purchaser under Section 22.1 of this Act,    shall state the amount of the assessments and the legal    fees, if any, required by subdivisions (g)(1) and (g)(4) of    Section 9 of this Act.    (h) A lien for common expenses shall be in favor of themembers of the board of managers and their successors in officeand shall be for the benefit of all other unit owners. Noticeof the lien may be recorded by the board of managers, or if thedeveloper is the manager or has a majority of seats on theboard of managers and the manager or board of managers fails todo so, any unit owner may record notice of the lien. Upon therecording of such notice the lien may be foreclosed by anaction brought in the name of the board of managers in the samemanner as a mortgage of real property.    (i) Unless otherwise provided in the declaration, themembers of the board of managers and their successors inoffice, acting on behalf of the other unit owners, shall havethe power to bid on the interest so foreclosed at theforeclosure sale, and to acquire and hold, lease, mortgage andconvey it.    (j) Any encumbrancer may from time to time request inwriting a written statement from the manager or board ofmanagers setting forth the unpaid common expenses with respectto the unit covered by his encumbrance. Unless the request iscomplied with within 20 days, all unpaid common expenses whichbecome due prior to the date of the making of such requestshall be subordinate to the lien of the encumbrance. Anyencumbrancer holding a lien on a unit may pay any unpaid commonexpenses payable with respect to the unit, and upon payment theencumbrancer shall have a lien on the unit for the amounts paidat the same rank as the lien of his encumbrance.    (k) Nothing in Public Act 83-1271 is intended to change thelien priorities of any encumbrance created prior to August 30,1984.