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Condominium Law FLASHPOINTS December 2018

December 14, 2018Print This Post Print This Post

Kenneth Michaels, Jr., Bauch & Michaels, LLC, Chicago
312-588-5000 | E-Mail Kenneth Michaels, Jr.

Department of Human Rights Not To Act in Smoke Infiltration Case

A recent Human Rights Commission order affirmed the dismissal of a charge by a condominium unit owner that the property manager, Cortland Properties, Inc., failed to provide an accommodation for the owner’s physical disability in violation of the Illinois Human Rights Act, 775 ILCS 5/1-101, et seq. In re Deyerler, Charge No. 2014CH2252, 2018 ILHUM Lexis 503 (Nov. 7, 2018). Without identifying her disability, the complaining unit owner charged that Cortland Properties violated §3-102.1(C)(2) of the Human Rights Act by failing to prohibit a tenant occupying Unit 1E, which was below the complainant’s unit, from smoking to the extent the smoke spread into and permeated the complainant’s unit.

Pursuant to §3-102.1(C)(2) of the Human Rights Act, it is a civil rights violation “to refuse to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” 775 ILCS 5/3-102.1(C)(2). Article 3 of the Human Rights Act proscribes civil rights violations in connection with real estate transactions. Pursuant to §3-101, real property includes any interests in land, cooperatives, or condominiums.

The Commission affirmed dismissal of the charge. The problem with the charge was that Cortland Properties, which once managed the condominium property, ceased managing the property more than a year before the complainant or her husband complained to Cortland’s president, William Samatas, about the smoking infiltrating their unit. Additionally, Cortland Properties did not own the unit with the smoking tenant. Public records showed that Unit 1E was owned by another entity, Bluffs Crossing, LLC, which was managed by Thomas Samatas.

The Commission’s published opinion cites a section of Article 7a of the Human Rights Act for the applicable procedure, but this is likely a typographical error. 2018 ILHUM Lexis 503 at *2. The proper procedures for considering charges under Article 3 of the Human Rights Act are contained in Article 7b. The Department of Human Rights is responsible for investigating charges and making recommendations to the Commission. Pursuant to §7b-102(D) of the Human Rights Act, if the Director of the Department of Human Rights determines that no substantial evidence exists to support the charge and to vote it to complaint status, then the Director may dismiss the charge, as also happened here. The complainant may then appeal the dismissal to the Commission, as happened here. The Commission affirmed the dismissal because “[t]he possible familial relationship between Thomas Samatas, and Cortland’s President William Samatas, is not clear from the Petitioner’s evidence or the Respondent’s investigation.” 2018 ILHUM Lexis 503 at *2. Furthermore, none of the evidence showed “any connection between Thomas Samatas and Cortland.” Id.

Takeaway

The Commission’s order is silent about the fact that under §7b-102(B)(2) of the Human Rights Act, the Department was empowered to substitute Bluffs Crossing, LLC, and Thomas Samatas as either additional or substitute respondents based on the Department’s investigation. Furthermore, the order does not mention that the Secretary of State’s records for the two entities involved show that the two entities apparently share the same office or are immediately next door to each other. It is foolish to extrapolate a broad conclusion from one opinion. Nevertheless, given the Department’s broad powers and what was not done in this case, a person cannot help but wonder whether the Department and Commission were exercising caution before injecting themselves into irreconcilable quality of life disputes among condominium unit owners.

Association Responsible for Mortgagee Attorney’s Defective Notice of Foreclosure Sale

Generally, a Rule 23 order is not worth the air it is written on. However, one recent Third District Rule 23 order may cause condominium association practitioners to rethink their positions on appearing — or more specifically not appearing — in foreclosure cases.

In Countrylane Condominium Ass’n v. Barghouthi, 2018 IL App (3d) 170630-U, the appellate court affirmed a trial court’s decision to grant judgment for only post-sale assessments, expenses, and attorneys’ fees in a forcible action against a unit owner who purchased his unit at a sheriff’s sale. Recovery was denied to the condominium association for pre-foreclosure sale amounts due, including the amount that would have been due pursuant to the association’s superpriority six-month lien under §9(g)(4) of the Illinois Condominium Property Act, 765 ILCS 605/1, et seq. 765 ILCS 605/9(g)(4). (For discussions regarding §9(g)(4), see §15.40 of CONDOMINIUM LAW (IICLE®, 2016). See also Condominium Law FLASHPOINTS June 2018 (available in the IICLE® Online Library to subscribers).)

Section 9(g)(5) of the Condominium Property Act requires that the notice of sale in the foreclosure proceeding must state that a purchaser other than the original mortgagee must pay prior unpaid assessments due under the superpriority lien under §9(g)(4):

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. 765 ILCS 605/9(g)(5).

Section 15-1507 of the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1101, et seq., provides in relevant part:

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:

* * *

(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;

(H-2) in the case of a unit of a common interest community to which subsection (g-1) of Section 18.5 of the Condominium Property Act applies, the statement required by subdivision (g-1) of Section 18.5 of the Condominium Property Act. 735 ILCS 5/15-1507(c)(1).

In this particular case, the notice of sale did not contain this lien information. The trial court held that the lien was, therefore, unenforceable. The condominium association’s argument that the mortgagee’s attorney prepared the deficient notice of sale was rejected by the appellate court. The Third District found that these legislative enactments are policy decisions that “a foreclosure buyer, who may be getting a bargain, rather than the condominium association, should bear the burden of paying unpaid assessments.” 2018 IL App (3d) 170630-U at ¶14. Foreclosure buyers are put on notice of their duty to pay the assessments by the notice of sale. “In this case, the Association was served with summons in the prior foreclosure action.” Id. Implicitly, the association was responsible for not curing the defective notice of sale because it knew of the foreclosure.

Takeaway

Because of the cost of filing an appearance, answer, and counterclaim, most associations do not want their attorneys to defend a foreclosure action unless there are special circumstances or a likelihood of a surplus from a foreclosure sale. However, this Rule 23 order may cause some association attorneys to reexamine their advice in these circumstances because at least participation in the defense will get the association’s attorney an opportunity to review the notice of sale before the foreclosure sale and a chance to correct a mortgagee attorney’s errors or deficiencies in the sale notice.

Additional Takeaway

The trial court held that the condominium association had a duty to mitigate damages on the pre-foreclosure assessments. It appears that the association had obtained a possession order but never leased the unit or did not collect rent if it did so. The trial court, situated in Will County, disagreed with the First District’s holding in 100 Roberts Road Business Condominium Ass’n v. Khalaf, 2013 IL App (1st) 120461, ¶46, 996 N.E.2d 263, 374 Ill.Dec. 816, that §9-111.1 of the eviction (formerly “forcible eviction and detainer”) statute precluded a condominium association from having a duty to mitigate damages once it obtained a possession order. Section 9-111.1 states in relevant part: “[T]he board of managers shall have the right and authority, incidental to the right of possession of a unit under the judgment, but not the obligation, to lease the unit to a bona fide tenant.” 735 ILCS 5/9-111.1. The appellate court, here in the Third District, noted that in V & T Investment Corp. v. West Columbia Pace Condominium Ass’n, 2018 IL App (1st) 170436, ¶ 36, 105 N.E.3d 889, 423 Ill.Dec. 481, the First District held that when an association rents a unit to a third party pursuant to §9-111.1, the association must apply rents to delinquent assessments. This analysis implicitly suggests that a conflict may exist in the First District with regard to the condominium association’s duty to mitigate. However, the appellate court found that it did not need to reach the issue (whether §9-111.1 precludes a mitigation defense) because the defective notice of sale was dispositive. Countrylane, supra, 2018 IL App (3d) 170630-U at ¶11.

For more information on Condominium Law, see CONDOMINIUM LAW (ILLINOIS) — 2016 EDITION. Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.

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