CONDOMINIUM ASSESSMENT LIENS


Condominium buildings and common areas do not maintain themselves. The upkeep of condominiums is the result of all individual unit owners chipping in together. When a unit owner does not chip in, however, an assessment lien may be placed on the unit owner's property. This article is an introduction to condominium associations and assessment liens.

Condominium Associations


A condominium is a form of cooperative ownership. A unit owner owns his or her own condominium unit individually and the unit owners own the common elements of the condominium (all other portions of the property) collectively as tenants in common. To manage the common elements as tenants in common, the unit owners form a condominium association. A new unit owner is automatically enrolled as a member of a condominium association when a unit is purchased, and membership is automatically terminated when a unit is sold. Condominium associations do not hold title to any property. Rather, as mentioned, legal title to the common elements is vested in the unit owners collectively.


Every condominium has a recorded declaration, plat of survey, and bylaws. The declaration and plat of survey are recorded and define the units and common elements. The declaration further serves as a constitution for the condominium complex, establishing the rights and obligations of the owners. These rights and obligations may include the right to levy assessments, to place liens on unpaid assessments, and to release assessment liens. The bylaws describe the management of the condominium, which is generally administered by a Board of Managers (Board). Association members elect this Board, which exercises the powers of administration.

Condominium Assessments


The association or the Board makes decisions regarding expenses incurred in administration, maintenance, and repair of the common elements. Each unit holder then pays a condominium assessment (assessment) to the association, in proportion to the percentage of his or her ownership in the common elements. The association relies exclusively on these assessments to satisfy the expenses and to fulfill obligations set by law. The assessment cannot be avoided by waiving the use or enjoyment of any common element. Lake Hinsdale Village Condominium Association v Department of Public Aid, 298 Ill App 3d 192, 197, 698 NE2d 214, 218, 232 Ill Dec 376, 380 (2nd D 1998).


Any assessment not paid by a unit owner constitutes a lien on the unit. 765 ILCS 605/9(g)(1); IC 32-25-6-3(a); Wis Stat § 703.16(4). In Wisconsin, a lien exists only if a statement of the lien is filed within two years after the date the assessment becomes due. Wis Stat § 703.16(4). It is important to note, however, that once a lien is filed, "[t]he lien is effective against the unit at the time the assessment became due regardless of when within the two-year period it [was] filed." Wis Stat § 703.16(4). Unlike Wisconsin, neither Indiana nor Illinois require that a lien be filed. Rather, an unpaid assessment simply constitutes a lien on the unit, effective at the time of assessment. 765 ILCS 605/9(g)(1); IC 32-25-6-3(a). However, to foreclose a lien in Indiana or Illinois, the Board must record notice of the lien. 765 ILCS 605/9(h); IC 32-25-6-3(b).

Condominium Assessment Liens


As mentioned earlier, condominium associations rely exclusively on assessments to satisfy expenses and fulfill obligations set by law. For this reason, an assessment lien takes priority over many other encumbrances, with just a few exceptions noted below. Lake Hinsdale Village Condominium Association v Department of Public Aid, 298 Ill App 3d 192, 197, 698 NE2d 214, 218, 232 Ill Dec 376, 380 (2nd D 1998).


Liens of general and special taxes always take priority over assessment liens. 765 ILCS 605/9(g)(1)(a); IC 32-25-6-3(a)(1); Wis Stat § 703.16(6)(a). In Wisconsin, a mechanics lien filed before the failure to pay an assessment takes priority over an assessment lien. Wis Stat § 703.16(6)(c). Furthermore, in Wisconsin and Indiana, all sums unpaid on a first mortgage prior to the failure to pay an assessment take priority over an assessment lien. IC 32-25-6-3(a)(2); Wis Stat § 703.16(6)(c). In Illinois, any encumbrance recorded prior to the failure to pay an assessment takes priority over an assessment lien. 765 ILCS 605/9(g)(1)(b).


It is important to note the priority different states give to assessment liens. It is also important to look at each condominium association's unique declaration. As mentioned above, a declaration may allow for the release of an assessment lien. In Board of Directors of Olde Salem Homeowners' Association v Secretary of Veterans Affairs, 226 Ill App 3d 281, 283, 589 NE2d 761, 763, 168 Ill Dec 361, 363 (1st D 1992), the declaration allowed a foreclosure purchaser to take title to a condominium unit free of assessment liens accrued before the time of foreclosure. Although in this case the foreclosure purchaser received title free of assessment liens, not all declarations allow for the release of assessment liens. Therefore it is important to examine an association's declaration to see if assessment liens may be released. In St. Paul Federal Bank for Savings v Wesby, 149 Ill App 3d 1059, 501 NE2d 707, 103 Ill Dec 390 (1st D 1986), the court held that two mortgages recorded prior to the recording of a condominium association's assessment lien had priority over the assessment lien. The court agreed that a condominium association's declaration is a covenant running with the land that binds mortgagees. 149 Ill App 3d at 1064, 501 NE2d at 710, 103 Ill Dec at 393. However, the court found that the declaration did not put mortgagees on notice of the possibility that the association's lien would relate back to the date the declaration was recorded. 149 Ill App 3d at 1073, 501 NE2d at 716, 103 Ill Dec at 399. Thus, priority was determined relative to the dates the liens were actually recorded. Since Wesby was decided, 765 ILCS 605/9 has been amended. The amendments changed the point in time at which an assessment lien is perfected. However, Wesby is still good law with regard to its discussion of the relationship between condominium declarations and liens in general.


In certain instances, a lien might be recorded against the association as a whole. An example might be a mechanic's lien for work done on common areas. In Illinois, individual unit owners are entitled to pay the encumbrancer directly for the unit's pro rata share and receive a partial release of the lien. 765 ILCS 605/9.1.

Conclusion


Condominium associations maintain and repair common elements to keep the condominiums attractive and maintain the property value. Associations rely exclusively on members' payments to do this. When assessments are unpaid, they constitute a lien on the property. These liens take priority over most other encumbrances, for "[t]o allow other parties potentially unlimited claims to take priority over the association's might well put the association in an impossible position." Lake Hinsdale Village Condominium Association v Department of Public Aid, 298 Ill App 3d 192, 197, 698 NE2d 214, 218, 232 Ill Dec 376, 380 (2nd D 1998). However, be sure to check the differences in priority that different states give to assessment liens.

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