from Local Attorney, Michael H. Wasserman

Monday, March 9, 2009

still more changes in store for Condos in Foreclosure

The speculative opportunities for condo investors abound. Many come in the guise of REO purchases; buying properties that have already been foreclosed upon. I have written of several over the last weeks. Such opportunities are not without their risks. Now more than ever, anyone even remotely considering buying a condominium ought to speak to a lawyer well before the ink dries on the offer sheet.

One such problem relates the the treatment of those monthly association assessments. Who pays the bill when a unit goes delinquent, then is lost to foreclosure? Conventional wisdom might have it that the seller / bank must pay off the balance before closing. At least that is what you might think
if your expectations are based on what happens in "conventional" condo sales.

NOT SO, for foreclosures. The bank only has to pay for the association bills for the time that they actually own the unit.

Current Illinois Law allows, in some but not all cases, for an association to demand payment of up to six months of assessments and costs from the buyer of a foreclosed property. That can come as quite a shock to unsuspecting Buyers. Inquiry must be made at the outset, to avoid surprises and assess the true transaction costs before it is too late.

NEWLY PROPOSED Illinois law makes this even more important. Sen. Ira I. Silverstein recently introduced SB2102, for consideration. If enacted, this bill proposes to eliminate the six month limitation. In other words, Buyers of REO condominiums would face the prospect of having to pay ALL delinquent condo assessments up to the date of foreclosure.

Alert Buyers and their attorneys might be able to use these situations to either negotiate a concession from their sellers or to renegotiate a transaction price to offset this "added" cost. Dillatory or unprepared buyers will simply have to be prepared to pay more to complete their deals.