Wednesday, September 17, 2014

Illinois Supreme Court: Contract? What contract?

Spanish Court Two Condominium Association v. Carlson:  Spanish Two sued a unit owner for failure to pay assessments. In Illinois, condo associations can do that in landlord-tenant court, and evict the owner without needing to foreclose. The owner alleged an affirmative defense of failure to maintain and repair the common elements and asked for a set-off, something that tenants do in landlord-tenant disputes over rent. The trial court struck the defense, but the Appellate Court reversed, saying unit owners could avail themselves of the same failure to maintain defense against condo associations, just as tenants do against landlords.  The Illinois Supreme Court reversed the Appellate Court, saying the trial court was right--

"Where a condominium association brought a forcible entry and detainer action against a unit owner for failure to pay assessments, the affirmative defense of alleged failure to repair and maintain common areas was properly stricken as not germane to that summary statutory proceeding."

It is interesting to read the language where the Supreme Court dances around the claim that the association-unit owner relationship is based on contract, something we hear all the time from advocates of strictly enforcing the DD&RS:  It's a contract, they say, and if you didn't like it you shouldn't have entered into it.  But now the shoe is on the other foot--an owner wants the rights that go with a contract:  the party claiming back assessments hasn't lived up to its part of the bargain, so the owner, like a tenant, should have the benefit of that breach.  But no, the court says, now that contract language isn't to be taken so literally.  You see, it's more accurate to say that it is largely based on statute.  From the IL SC opinion:
Spanish Court maintains that the appellate court’s recognition of a nullification defense rests on an ill-fitting analogy, namely, that the association-unit owner relationship is, for purposes of the forcible statute, analogous to the landlord-tenant relationship. See 2012 IL App (2d) 110473, ¶¶ 16, 26, 46. We agree with Spanish Court. 
¶ 20 The relationship between a landlord and tenant is contractual. See generally 24 Ill. L. and Prac. Landlord and Tenant § 1, at 157 (2009). Although aspects of that relationship may be governed by state and local landlord-tenant laws, the relationship is created through the agreement of the parties. When a landlord breaches the terms of the agreement (the lease) by failing, for example, to comply with the implied warranty of habitability, cases have traditionally applied contract remedies, including damages, rescission, reformation, or abatement of rent. Glasoe v. Trinkle, 107 Ill. 2d 1, 15-17 (1985). Cf. Mohanty v. St. John Heart Clinic, S.C., 225 Ill. 2d 52, 70 (2006) (“Under general contract principles, a material breach of a contract provision by one party may be grounds for releasing the other party from his contractual obligations.”). 

¶ 21 Although contract principles have sometimes been applied to the relationship between a condominium association and its unit owners based on the condominium’s declaration, bylaws, and rules and regulations (1 Gary A. Poliakoff, The Law of Condominium Operations § 1:23 (1988 and Supp. 2012-13)), the relationship is largely a creature of statute, defined by the provisions of the Condominium Act (765 ILCS 605/1 et seq. (West 2008)). Under that Act, the board of managers, through whom the association of unit owners acts (765 ILCS 605/2(o) (West 2008)), has the duty “[t]o provide for the operation, care, upkeep, maintenance, replacement and improvement of the common elements.” 765 ILCS 605/18.4(a) (West 2008). The Condominium Act also addresses the “[s]haring of expenses” among unit owners, and establishes that: “It shall be the duty of each unit owner *** to pay his proportionate share of the common expenses.” 765 ILCS 605/9(a) (West 2008).2 Although these duties may also be reflected in the condominium declaration and bylaws, as they are in this case, they are imposed by statute and exist independent of the association’s governing documents. Accordingly, a unit owner’s obligation to pay assessments is not akin to a tenant’s purely contractual obligation to pay rent, which may be excused or nullified because the other party failed to perform

1 comment:

IC_deLight said...

Wonder what trade group was responsible for the language of the statute.

Not aware of any other area of law (maybe probate) where a trade group has been able to get such self-serving legislation so extensive as the HOA vendor trade group. It's contract when it's a homeowner obligation but a statutory avoidance of the same "contract" when it comes to the obligations of the HOA. Lets vendors rip off HOA and homeowners with impunity - have to keep putting the money in (by contract) so it can be taken by the vendors without providing the services that the "contract" obligated the HOA to perform (by statute)