Is your office finding the day-to-day demands of managing property have, in a short period of time, changed dramatically as we all navigate these unique times?  This short-term shift in the demands on our time presents opportunities to address matters for our clients that may not always be high on the priority list, but which are critical to the long-term strength and viability of a community.   Cross checking the association’s delinquent accounts against foreclosure and bankruptcy records in order to determine the collectability of those accounts can be a daunting task.  Fortunately, our firm can help.  We now offer a comprehensive review of an association’s entire delinquency report. 

Our office charges $650.00 for this service, which includes a review of all delinquent accounts against foreclosure and bankruptcy records and a recommendation of options available to the association on each account.  The board can then use our review and recommendations to make informed decisions on how to proceed with each account.  In some situations, an old balance previously viewed as uncollectable might be available through post-judgment collection.  In other situations, a balance must be deemed uncollectable due to a bankruptcy discharge.  Whatever the particular circumstance of each account, the review will give the board the tools it needs to fulfill its obligation to reduce assessment delinquencies and promote the financial stability and creditworthiness of the community.

Let us help you review your community’s accounts. We are here to help you resolve those pesky delinquencies and clean up your accounts receivable. 



In 2017, Illinois had the fourth highest rate of foreclosure filings in the United States. While the overall number of foreclosures being filed is decreasing, foreclosures continue to present issues for condominium associations throughout the state.

Generally speaking, a mortgage foreclosure of a condominium unit is a straight forward process.  When a condominium unit owner fails to pay his or her mortgage, the bank files a lawsuit asking that the condominium unit be sold at public auction and that the funds from the sale be applied to the unpaid mortgage.  Over the past decade, it has been a near certainty that a condominium unit sold at foreclosure auction would fetch a price less than what was owed to the bank.  While the condominium association was named as a defendant in the foreclosure action, there was typically no need for it to expend time and money participating, as there was no money left over from the foreclosure sale to go towards unpaid common expenses.

Now, however, this is not always the case for condominium associations.  Rising home values have resulted in an increasing number of condominium units being sold at foreclosure auction for an amount greater than what the bank is owed.  This results in a “surplus,” which is to be used to pay other lien holders, including condominium associations, which have a lien for unpaid common expenses pursuant to Section 9(g)(1) of the Illinois Condominium Property Act and their respective Declaration.

Unfortunately, it’s not always as easy as just asking a court to turn over the surplus funds to the Association.  Assuming the condominium association was named as a defendant in the lawsuit (as Section 9(g)(1) of the Illinois Condominium Property Act requires), by the time the association realizes a surplus exists it is likely the association has been held in default for failing to take action once served with the foreclosure suit.  Some judges have found that a condominium association that has been held in default is not entitled to recover unpaid common expenses from the surplus funds.  Even more frustrating, it is possible these surplus funds will be turned over to the former owner of the condominium unit, despite the fact that this owner failed to pay their proportionate share of the common expenses during their period of ownership!

Beyond preserving its right to collect any surplus funds, there is another reason for a condominium association to strongly consider participating in the foreclosure of a unit.  Section 9(g)(4) of the Illinois Condominium Property Act provides that the purchaser of a condominium unit at a foreclosure sale (or, in the event the unit is purchased by the foreclosing bank, the subsequent purchaser) must pay any unpaid common expenses for the unit which became due during the 6 months “immediately preceding institution of an action to enforce the collection of assessments.”  In short, while the foreclosure of a condominium unit extinguishes the association’s lien for unpaid common expenses, the association is still able to collect 6 months of unpaid common expenses provided it instituted an action to collect them.  One option a condominium association has is to institute their collection action by filing a counter-claim against the owner in the foreclosure case itself.  While instituting a collection action may seem onerous, the Illinois Condominium Property Act also affords a condominium association the right to collect the attorney’s fees and costs form this future owner, along with the 6 months of unpaid common expenses.

To summarize, increasing home values are causing a dramatic increase in frequency and amount of surplus funds being available after foreclosure sales.  In the event a condominium association fails to appear and file a responsive pleading in the foreclosure, it could be precluded from collecting unpaid common expenses from the surplus finds.  Further, and regardless of whether the foreclosure sale results in a surplus, a condominium association is able to collect 6 months of assessments, attorney’s fees, and costs from a future owner, provided that it has instituted an action to collect these unpaid common expenses.  This means that, except in limited circumstances, a condominium association should strongly consider filing an appearance and responsive pleading when served with a foreclosure, as doing so will entitle it to recover unpaid common expenses in the event of a surplus, obtain 6 months of assessments, attorneys, fees, and costs from a future owner of the unit, or both.


With the budgeting and annual meeting season in the rear-view mirror and with the opening of pool season still a couple of months away, now is the time to review your association’s assessment delinquencies.  There’s never a bad time to review delinquencies, but this is a particularly good time to determine if the owners are all carrying their fair share of the common expense.  I have never understood the thought that any percentage of owners who don’t pay as being acceptable or expected.  Setting an acceptable percentage of 10 or 10% of owners who are delinquent is really an arbitrary action.  Why should 20% of the owners be allowed to not pay their fair share?  The perfect storm of a mortgage foreclosure action coupled with a bankruptcy discharge could ultimately render an owner’s debt uncollectable, but absent the confluence of these events, very few delinquencies are uncollectable.

Recent Illinois Supreme Court decisions in Spanish Court Two and 1010 Lake Shore have recognized and respected condominium association lien rights.  Associations need to take advantage of the myriad of tools available to collect delinquent assessments.  Actions for possession under the Forcible Entry and Detainer Act, lien foreclosure and small claims actions all provide great opportunity to make associations whole.  While the landscape of community association governance has changed substantially over the past few years, one truth remains:  Diligent and aggressive assessment collection is a necessity.  Collection of assessments is the foundation of a board’s fiduciary obligation.  Associations cannot function properly when not fully funded.  In the competitive residential real estate market in which we now find ourselves, buyers are becoming more discriminating.  The financial health of a community is a much more substantial factor in determining whether a particular unit is desirable for purchase.  If a prospective owner has the choice between purchasing a unit in a well-funded community as opposed to one with substantial delinquencies and a looming large special assessment, what decision will this individual likely make?

Boards and management should not struggle with assessment collection.  A comprehensive assessment collection policy that affords the association’s counsel the opportunity to move files diligently without the need to constantly consult with the client will result in a greater success rate on delinquent files.  Regular reviews of an association’s delinquencies is also a must.  Boards and management should be reviewing their delinquencies minimally on a quarterly basis.  Our office also welcomes the opportunity to assist boards and management in reviewing delinquencies and making recommendations as to which accounts should be pursued and whether any debts should be written-off as uncollectable.  The jobs of board members and managers are complicated enough without having to be deeply engaged in the assessment collection process.  Utilize your professionals and allow your attorneys to take this important element of managing an association off your plate.  Don’t ignore your delinquencies.  The law provides great opportunity to minimize and eliminate them.


This article is being provided for informational purposes only.  This article does not constitute legal advice on the part of Keay & Costello, P.C. or any of its attorneys.  No association, board member or any other individual or entity should rely on this article as a basis for any action or actions.  If you would like legal advice regarding any of the topics discussed in this article and/or recommended procedures for your association going forward, please contact our office.

On December 3rd, the Illinois Supreme Court issued an opinion confirming the holding of the First District Appellate Court in the case of 1010 Lake Shore Association vs. Deutsche Bank National Trust Company. If you are reading this article, you probably know the facts of this case already. If not, in a nutshell, the case involved a foreclosed unit at 1010 Lake Shore that Deutsche Bank purchased at a foreclosure auction. The foreclosed-out owner owed a substantial balance to the Association at the time the foreclosure sale took place. Upon taking ownership of the unit, Deutsche Bank failed to pay any assessments. The Association ultimately sued Deutsche Bank in circuit court and the court entered judgment against Deutsche Bank for the pre-foreclosure balance. Deutsche Bank appealed the circuit court’s ruling and on appeal the First District Appellate Court held and the Illinois Supreme Court subsequently confirmed that under Section 9(g)(3) of the Illinois Condominium Property Act, a foreclosure purchaser must pay common expenses beginning the month after the sale. The Appellate Court and Supreme Court also held that if a foreclosure purchaser fails to pay assessments beginning the month after the foreclosure sale, the association’s lien for common expenses not paid by the foreclosed-out owner is not extinguished and the foreclosure purchaser then becomes obligated to pay the entire pre-foreclosure balance.

What does this mean for condominium associations and how should associations and management handle unpaid balances on foreclosed units?

  • Actively monitoring foreclosures continues to be important. Those associations that work with our office know how frequently we track foreclosure cases for our clients. We have consistently advised our clients the importance of knowing the status of pending foreclosure actions. The holding in this case makes knowing whether a unit has recently been sold at foreclosure auction more critical than ever as not being on top of the status of a sold unit could result in an association losing out on its right to collect pre-foreclosure amounts.
  • Don’t write off balances. Writing off a pre-foreclosure balance without consulting with counsel could result in an association walking away from money it is legally entitled to recover.
  • If the purchaser of a unit at foreclosure (a lending institution, a quasi-governmental agency, or a third-party investor) fails to timely pay the assessment due the month after the foreclosure sale is conducted, turn the account over to association counsel for collection. Do not wait 60, 90 or 120 days after confirmation of the foreclosure sale to turn the account over if there is a pre-foreclosure balance and the new owner has not paid any post-foreclosure assessments.
  • Once an account has been turned over to counsel for collection, do not accept any payments without first discussing the matter with counsel. Accepting a payment will most likely preclude an association from collecting any portion of the pre-foreclosure balance.
  • It does not matter if an association has been included as a defendant in a foreclosure action. The obligation to promptly pay post-foreclosure assessments applies to all foreclosure actions, whether the association has been named as a defendant or not. Further, the Supreme Court also appeared to state that if an association is not named as a defendant in the foreclosure action, the association’s lien is not extinguished even if post-foreclosure assessments are paid.

Because Deutsche Bank did not pay any post-foreclosure assessments, the Supreme Court did not address the timing of when a foreclosure purchasers’ ability to extinguish the pre-foreclosure lien by paying the post-foreclosure assessments expires. The only statement the Supreme Court made on the issue is Section 9(g)(3) “provides an incentive for prompt payment,” but it did not include any definition of what “prompt” means. Therefore, the Court did not impose any set deadline for payment. Accepting a payment, regardless of when the payment is made, most likely eliminates an association’s ability to collect the pre-foreclosure balance. Without any additional guidance from the Court, the best recommendation we can make is to be aggressive in turning accounts over post-foreclosure if the accounts have a pre-foreclosure balance and once accounts are turned over for collection, do not accept any payments.

While the General Assembly has not been responsive to efforts made by those who advocate on behalf of condominium associations to afford some additional relief related to the loss of assessment revenue that usually accompanies a foreclosure, the Illinois Supreme Court has unanimously recognized the obligation of foreclosure purchasers to promptly make payments upon taking ownership of units. If a foreclosure purchaser fails to promptly make post-foreclosure assessment payments and if an association acts diligently, it will put itself in position to recover pre-foreclosure amounts it may have believed were lost once ownership of the unit transferred.


A recent federal court decision highlights the importance of an association’s manager or board contacting the association’s attorney whenever a homeowner files for bankruptcy protection. When an individual files for chapter 13 bankruptcy protection, she is allowed to repay her debts over a period of up to five years through a court-approved payment plan, and her creditors are barred from attempting to collect on those debts unless first granted permission by the bankruptcy court. The plan is administered by the bankruptcy trustee, an official who collects money from the individual in bankruptcy (known as the “debtor”) and pays the creditors. In order to be included in the chapter 13 payment plan, a creditor, such as an association, must file a legal document with the bankruptcy court known as a “proof of claim.” The proof of claim sets forth the amount the debtor owed to the creditor as of the date she filed for bankruptcy protection (the “pre-petition debt”). Unless the debtor successfully objects to the proof of claim (i.e., convinces the court of some legal reason why the money is not owed or should not be paid through the bankruptcy), the creditor should be included in the plan and receive payments toward the pre-petition debt.

Because unpaid assessments are a lien on a homeowner’s unit in favor of the association, an assessment obligation is a “secured” debt (The lien on the unit “secures” the obligation.). The Federal Rules of Bankruptcy Procedure provide a deadline for when a proof of claim must be filed if a creditor wishes to be included in a chapter 13 plan. However, while it is well accepted that “unsecured” debts such as credit card debt will not be paid through the plan unless the creditor files a proof of claim by the deadline, there has been some confusion over whether this deadline applies to creditors, such as associations, holding secured claims.

The federal Seventh Circuit Court of Appeals, whose jurisdiction includes Illinois, settled this confusion in May 2015 with its decision in In re Pajian. For the first time, the Seventh Circuit clarified the proof of claim deadline established by the Rules of Bankruptcy Procedure applies to both unsecured and secured creditors. If a secured creditor does not file its proof of claim by the deadline, it may not be included in the chapter 13 plan and will not receive payments from the bankruptcy trustee.

The upshot of Pajian for associations is managers and board members, in order to ensure the association receives payments to which it is entitled, must notify the association’s attorney immediately upon receiving notice that a homeowner has filed for bankruptcy protection. The notice typically mailed to creditors by the bankruptcy court includes the proof of claim filing deadline. Given the ruling in Pajian, the proof of claim must be filed by this deadline in order for the association to receive payments through the plan. While a secured debt, even if not included in the plan, survives a discharge in a chapter 13 bankruptcy, collecting that debt five years down the road can be a much more cumbersome process when all that could have been required was filing a form with the bankruptcy court. Therefore, when the association’s manager or board becomes aware of a bankruptcy, notify the association’s attorney so she may, if necessary, file a proof of claim.

An Association must be aware that once it receives notice that one of its owners has filed for bankruptcy protection, and as long as the bankruptcy case is pending, no further attempts to collect any unpaid assessments may be commenced without first obtaining the approval of the bankruptcy court. This preclusion from collection during a bankruptcy case is commonly known as the automatic stay.

There are two types of bankruptcy cases that individuals may file. The first is a Chapter 7 bankruptcy. In a Chapter 7 bankruptcy, an individual is asking the court to “liquidate” all of his or her assets and discharge any remaining financial obligations as of the date the bankruptcy case is filed. An individual who is only seeking to “reorganize” his or her debts files a Chapter 13 bankruptcy. In a Chapter 7 bankruptcy, there is not much for an association to do to protect its interests. If the court determines that an individual in Chapter 7 bankruptcy is entitled to protection from his or her creditors, a discharge order will be entered. What is the effect of the discharge order on an individual owner’s assessment account with the association? All assessments that were due and owing as of the date the owner filed for bankruptcy protection may not be personally collected from the owner. However, the owner is obligated to make all payments for assessments that become due and owing after the bankruptcy filing date. For example, if an owner files for Chapter 7 bankruptcy protection on June 10th, all amounts owed through June 10th may not be personally collected from the owner if a discharge order is ultimately entered. However, all amounts that are levied on the account commencing on June 11th and forward may be collected from the owner, even if the owner obtains a bankruptcy discharge. BUT, these amounts may only be collected from the owner after the bankruptcy case is closed, unless the association has filed a motion for relief from the automatic stay with the bankruptcy court. If a relief stay motion is filed and granted, it allows the association to continue with collection of the post-petition assessments while the bankruptcy case remains pending.

Chapter 13 bankruptcies differ in that the individual filing bankruptcy is looking to reorganize his or her debts, not be completely absolved of them. In a Chapter 13 bankruptcy, an individual will set forth a proposed plan for repayment of his or her debts. Since an association’s right to receive assessment payments are secured by a lien against each individual owner’s home/property/unit, associations can receive 100% of the amounts owed to it at the time an individual owner files for Chapter 13 bankruptcy protection. There are, however, certain steps that an association must take in order to ensure that it is paid all of these amounts. Before these steps are described, associations must understand that regardless of whether an owner files for Chapter 7 or Chapter 13 bankruptcy protection, and if the owner obtains a discharge of his or her obligations, the discharge only eliminates the owner’s personal obligation to pay the delinquent assessments. Since the obligation to pay assessments is both the personal obligation of the owner and an obligation that runs with the underlying real estate, the association still has a valid lien for the unpaid assessments that were discharged in bankruptcy. The association may still collect the assessments discharged in bankruptcy, but it will need to be careful in doing so. Any association seeking to recover pre-petition assessments should consult with its attorneys to determine the appropriate method of collection.

As for the actions to be taken by associations in an owner’s bankruptcy case, the most common first step is the filing of a proof of claim. The proof of claim sets forth the amount owed to the association as of the bankruptcy filing date in addition to establishing that the association maintains a secured interest in the owner’s real estate. After filing the proof of claim, the association must make sure that the owner’s plan for repayment of his or her debts includes the association’s claim, in the full amount, and as a secured claim. If the association’s claim is not properly accounted for in the plan, the association may not receive all payments to which it is entitled and it should therefore consider filing an objection to the plan. Once the bankruptcy court confirms the owner’s plan, the association can expect to begin receiving monthly or periodic payments from the bankruptcy trustee toward the arrearage. The payments are typically spread out over a period of three to five years.