The Association as "Landlord"
If an owner is renting his/her unit at the time an eviction is filed, a court order of possession can provide the association with an immediate assignment of rents. Rather than wait weeks or even months for the sheriff to forcibly remove the occupants, the association can serve the tenant with a court order requiring it to immediately pay rent to the association. As the monthly rent typically far exceeds the amount of the monthly assessments, this rent assignment can provide an accelerated revenue stream for the association.
While a rent assignment is a favorable outcome for the association, it is not uncommon for the tenant to be uncooperative. For instance, the tenant may be a friend or relative of the owner who decides to simply stop paying rent after receiving the court order. Unless the association initially named the tenant as a defendant in the lawsuit, and served the tenant with the complaint, the association cannot evict that tenant without filing a new lawsuit. Another issue that often arises after the rent assignment is the issue of repairs to the unit. If repairs to the unit are necessary, the law permits the association to make the repairs and to add the repair costs to that unit owner’s ledger.
It is important to understand that when an association evicts an owner for non-payment of assessments, the association is acquiring a “possessory” interest in the condominium unit, not an “ownership” interest. As such, the association is not obligated to obtain property insurance coverage for the unit, or otherwise pay the mortgage, taxes or other ownership expenses on the unit. However, in the event the electricity is about to be shut off in the unit due to non-payment, the association may want to consider paying that utility bill in order to “keep the lights on”. In that scenario, once again the association can charge that expense to the delinquent owner’s ledger.
When the association is receiving rents pursuant to rent assignment, the association has not taken on the rights and duties of a landlord. However, the association becomes a landlord when it renews a lease with an existing tenant, or otherwise rents out a vacant unit. There are many pitfalls to be aware of when an association officially becomes a landlord. For instance the Chicago Landlord Tenant Ordinance contains strict guidelines for the handling of security deposits which can subject the landlord to significant monetary damages. As such, it is advisable for the association not to require a new tenant to pay a security deposit.
If the owner were to secure possession back from the association after paying all assessments and charges on the ledger, the association should prepare a written lease assignment back to the owner.