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The Illinois Condominium Property Act (765 ILCS 605) requires a condo association to collect assessments from owners. Failure to do this could result in a lawsuit against the association. Sometimes, an owner might fail to pay due to a hardship. In this case, the association must still collect assessments regardless of the board’s personal feelings about the owner’s situation.

It is still possible to offer a 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 condo owner fails to pay assessments to the association, the association has several options. It can:

1. Send a 30-day notice;
2. File a lien on the property; or
3. File an eviction action.

The association does not have to send notice before filing a lien. However, it must send a notice before filing an eviction action.

A 30-day notice

The first step toward collecting assessments is to prepare and send a 30-day notice. The notice should state:

• The total amount owed;
• When the amounts were initially due; and
• A deadline for the full payment.

The letter should be addressed to the unit owner. It may be written by either the association or its attorney. The association or its attorney must also sign the letter. The association can confirm the unit owner by performing a title search with the county’s recorder of deeds.

In order to comply with the Eviction Act, the letter should include the following language:

"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.

Lien

If a unit owner does not respond to the notice, the next step is to file a lien against the unit. You should speak with an attorney to assist you with this process.

A lien allows the association to force the sale of the unit. The proceeds of the sale then pay off what the unit owner owes.

A lien also makes it very difficult for the unit owner to sell their condo. Even if a new owner buys the condo, the association can still force a sale until the original owner pays off the debt. Typically, a buyer will ask the condo seller to pay the lien as a condition of the purchase.

The Condominium Property Act allows an association to file a lien against a unit owner if the owner fails to pay:

• Common expenses (assessments);
• Fines;
• Interest;
• Late charges; and
• Reasonable attorneys fees incurred enforcing:
  • Covenants of the declaration;
  • Rules and regulation of the association;
  • Applicable statute or ordinance; or
  • Costs of collection.

  Eviction Action

  If the unit owner still does not pay their assessment, the association should file an eviction action in court. The Eviction Act allows the association to ask a court for a money judgment and possession of the owner's unit. The Act only allows the association to take possession of the unit. The owner will still own the unit. This is similar to the eviction of a tenant who has not paid rent.

  Once the association possesses the unit, they may rent it out and use the money to pay the past-due assessments. The Eviction Act permits the association to rent out the unit for 13 months. If necessary, the association may petition for more time.

  What happens when the unit owner who owes assessments enters [no-lexicon] foreclosure [/no-lexicon] ?

  In this situation, the association should contact their attorney. Numerous issues can arise when a delinquent unit owner enters foreclosure.

  If there is a foreclosure, an association can collect up to 6 months of assessments. However, the association can only collect assessments owed before the filing date of a collection action, like an eviction action. The association can also collect the legal fees incurred to recover the delinquent assessments.

  Unless the purchaser is a mortgage holder (i.e., the bank), the purchaser of the foreclosed unit pays the delinquent assessments and legal fees. It has recently become more common for the mortgage holder to purchase the unit. If this happens, the association will have to wait until the mortgage holder sells the unit. At that time, the association 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 after the date of purchase.

  If the association has not yet filed a action to collect assessments when it is served with a foreclosure complaint, it can still file a collection action.

  By law, any lien covering condo expenses owed by the foreclosed owner will be wiped out after:

  1. The sheriff's foreclosure sale is confirmed; AND
  2. The new owner makes a payment for condo expenses that arose after the sale.

  What if the unit owner petitions for bankruptcy?

  Unless the association has filed a lien against the unit for the amount due, any pre-petition amounts due will be discharged in bankruptcy. However, the association may file a Proof of Claim before the discharge. This means that 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
  • Under a Chapter 13 payment plan.

  However, the unit owner is still responsible for paying assessments that come due after the bankruptcy petition. If the owner fails to pay their post-petition assessments, the association may ask the court to lift the Automatic Bankruptcy Stay.

  An Automatic Bankruptcy Stay is an order of the bankruptcy court put in place in every case. It prohibits 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 concerning these amounts.