Wires and drywall were all that remained in a three-bedroom, two-and-a-half-bath Wrigleyville condominium unit that its owner abandoned in 2009. The owner wasn’t paying on his mortgage or his monthly condo association assessments, prompting his lender to foreclose and causing a budget shortfall that the other owners in the association had to absorb, reports Keith J. Hales, president of Hales Property Management, Inc. in Chicago, whose firm manages the 21-unit building.
This is just one example of the crisis impacting condo associations throughout the seven-county Chicagoland region as foreclosures continue to increase and condo and homeowners association boards must grapple with a variety of related problems.
According to the Illinois Foreclosure Listing Service, June 2012 foreclosure filings in the region totaled 6,645, up about three percent from 6,440 in May 2012 and about 10 percent from 6,032 in June 201l. Roughly twice as many other properties are in various stages of pre-foreclosure, and still others in distress could further inflate foreclosure statistics in the months ahead. “We do not see a slowdown in foreclosures,” declares Mark Pearlstein, a partner in the Chicago law firm of Levenfeld Pearlstein LLC.
Debtor in Possession
Faced with a backlog of unpaid assessments on a Chicagoland condo unit or home, a board has several alternatives. One is an Illinois law that allows the board to ask a judge for possession so it can rent out the unit for up to 13 months. After that, if the bank still holds title, the board could go back to court and ask to retain possession for another 13 months.
Marcia Caruso of Caruso Management Group in Naperville used this procedure for over 20 units in the first half of 2012. “If we get possession of a unit within six months and then rent it within one or two weeks, we can recoup the association’s loss in six to nine months,” she says. “If the homeowner walks back into the scene and says, ‘Give me my home back,’ you have to give him the excess cash. The homeowner resumes being in good standing. It’s a win-win situation. He gets it back in good condition with all new appliances.”