HB5037eng 95TH GENERAL ASSEMBLY

HB5037 Engrossed LRB095 15175 AJO 41155 b

AN ACT concerning civil law.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Legislative findings. The General Assembly finds that it is imperative for municipalities to reclaim certain housing stock that has been used in various fraudulent schemes and that now creates a nuisance to the municipality. Distressed condominiums create a hazard and blight to the general public and community, diminish the local tax base, distort the true value of property in the community (thereby creating illusory market values that harm innocent developers and buyers), and remove housing from the rental market, especially for low and moderate income renters. While normal conservation and building code enforcement methods can adequately deal with housing code violations found in legitimately created condominium buildings which are managed by functioning condominium associations, this Act is necessary because those normal code enforcement procedures are not effective in dealing with distressed condominiums, because there often is no functioning condominium board which can take responsibility for the necessary code repairs. In that situation the repairs may take years to complete, and the delay can result in a property with such serious problems that the property cannot be restored and instead must be demolished.

Section 5. The Condominium Property Act is amended by adding Section 14.5 as follows:

(765 ILCS 605/14.5 new)

Sec. 14.5. Distressed condominium property.

(a) As used in this Section:

(1) "Distressed condominium property" means a parcel containing condominium units which are operated in a manner or have conditions which may constitute a danger, blight, or nuisance to the surrounding community or to the general public, including but not limited to 2 or more of the following conditions:

(A) 50% or more of the condominium units are not occupied by persons with a legal right to reside in the units;

(B) the building has serious violations of any applicable local building code or zoning ordinance;

(C) 60% or more of the condominium units are in foreclosure or are units against which a judgment of foreclosure was entered within the last 18 months;

(D) there has been a recording of more condominium units on the parcel than physically exist;

(E) any of the essential utilities to the parcel or to 40% or more of the condominium units is either terminated or threatened with termination; or

(F) there is a delinquency on the property taxes for at least 60% of the condominium units.

(2) "Owner" means any unit owner or owner of record of the condominium property.

(3) "Other party in interest" means any mortgagee of record, lien holder of record, judgment creditor, tax purchaser, or other party of record, other than the owner, having legal or equitable title or other interest in the distressed condominium property or in a unit of the property.

(4) "Municipality" means a city, village, or incorporated town in which the distressed condominium property is located.

(b) A proceeding under this Section shall be commenced by a municipality filing a verified petition or verified complaint in the circuit court in the county in which the property is located. The petition or complaint shall allege conditions specified in paragraph (1) of subsection (a) of this Section and shall request the relief available under this Section. All owners shall be named as defendants in the petition or complaint and summons shall be issued and service shall be had as in other civil cases. All known other parties in interest shall be provided written notice and a copy of the petition or complaint either by United States certified mail, return receipt requested, within 30 days of the issuance of the summons or by personal service of the complaint. The hearing upon the suit shall be expedited by the court and shall be given precedence over other actions.

(c) If a court finds that the property is a distressed condominium property:

(1) the court may order the appointment of a receiver for the property with the powers specified in this Section; or

(2) the court, after a hearing held upon giving notice to all interested parties as provided in subsection (b), may appoint a receiver for the property and if the court further finds that the property is not viable as a condominium, then the court may declare:

(A) that the property is no longer a condominium;

(B) that the property shall be deemed to be owned in common by the unit owners;

(C) that the undivided interest in the property which shall appertain to each unit owner shall be the percentage of undivided interest previously owned by the owner in the common elements; and

(D) that any liens affecting any unit shall be deemed to be attached to the undivided interest of the unit owner in the property as provided herein.

A copy of the court's declaration under paragraph (2) of this subsection (c) shall be recorded by the municipality in the office of the recorder of deeds in the county where the property is located against both the individual units and owners and the general property. The court's declaration shall be forwarded to the county assessor's office in the county where the property is located.

(d) If a court finds that property is subject to paragraph (2) of subsection (c) of this Section, the court may upon a motion filed, notice given to all owners and other parties in interest as provided in subsection (b) and those parties having an opportunity to be heard, authorize the receiver to enter into a sales contract and transfer the title of the property on behalf of the owners of the property. In the event of such a sale, the net proceeds of the sale, after payment of all the receiver's costs, time, expenses, and fees as approved by the court, shall be deposited into an escrow account. Proceeds in the escrow account shall be segregated into the respective shares of each unit owner as determined under subparagraph (C) of paragraph (2) of subsection (c) of this Section and shall be distributed from each respective share as follows: (1) to pay taxes attributable to the unit owner; then (2) to pay other liens attributable to the unit owner; and then (3) to pay each unit owner any remaining sums from his or her respective share.

(e) A receiver appointed under this Section shall have possession of the property and shall have full power and authority to operate, manage, and conserve the property. A receiver appointed pursuant to this Section must manage the property as would a prudent person. A receiver may, without an order of the court, delegate managerial functions to a person in the business of managing real estate of the kind involved who is financially responsible and prudently selected.

Without limiting the foregoing, a receiver during such time shall have the power and authority to:

(1) secure, clean, board and enclose, and keep secure, clean, boarded and enclosed, the property or any portion of the property;

(2) secure tenants and execute leases for the property, the duration and terms of which are reasonable and customary for the type of use involved, and the leases shall have the same priority as if made by the owner of the property;

(3) collect the rents, issues, and profits, including assessments which have been or may be levied;

(4) insure the property against loss by fire or other casualty;

(5) employ counsel, custodians, janitors, and other help;

(6) pay taxes which may have been or may be levied against the property;

(7) maintain or disconnect, as appropriate, any essential utility to the property;

(8) make repairs and improvements necessary to comply with building, housing, and other similar codes;

(9) hold receipts as reserves as reasonably required for the foregoing purposes; and

(10) exercise the other powers as are granted to the receiver by the appointing court.

(f) If the court orders the appointment of a receiver, the receiver may use the rents and issues of the property toward maintenance, repair, and rehabilitation of the property prior to and despite any assignment of rents; and the court may further authorize the receiver to recover the cost of any feasibility study, sale, management, maintenance, repair, and rehabilitation by the issuance and sale of notes or receiver's certificates bearing such interest as the court may fix, and the notes or certificates, after their initial issuance and transfer by the receiver, shall be freely transferable and when sold or transferred by the receiver in return for a valuable consideration in money, material, labor, or services shall be a first lien upon the real estate and the rents and issues thereof and shall be superior to all prior assignments of rents and all prior existing liens and encumbrances, except taxes; provided, that within 90 days of the sale or transfer for value by the receiver of a note or certificate, the holder thereof shall file notice of the lien in the office of the recorder in the county in which the real estate is located. The notice of the lien filed shall set forth (i) a description of the real estate affected sufficient for the identification thereof, (ii) the face amount of the receiver's note or certificate, together with the interest payable thereon, and (iii) the date when the receiver's note or certificate was sold or transferred for value by the receiver. Upon payment to the holder of the receiver's note or certificate of the face amount thereof together with any interest thereon to the date of payment, and upon the filing of record of a sworn statement of such payment, the lien of such certificate shall be released. The lien may be enforced by proceedings to foreclose as in the case of a mortgage or a mechanics lien, and the action to foreclose the lien may be commenced at any time after the date of default. For the purposes of this subsection, the date of default shall be deemed to occur 30 days from the date of issuance of the receiver's certificate if at that time the certificate remains unpaid in whole or in part. The receiver's lien shall be paid upon the sale of the property as set forth in subsection (d) of this Section.

(g) The court may remove a receiver upon a showing of good cause, in which case a new receiver may be appointed in accordance with this Section.