High court: Condo policy violates foreclosure law

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The state’s highest court on Friday found that a Lake Geneva condominium association’s policy involving certain assessments violated established foreclosure laws.

The court’s ruling stems from a dispute between Walworth State Bank and Abbey Springs Condominium Association Inc. Abbey Springs is an association for the owners of 15 condominiums at the Abbey Springs development in the village of Fontana, on the western shore of Geneva Lake. Members pay fees to operate the association and common areas in each building. They also pay a separate fee to access amenities such as a golf course, restaurants and a yacht club on property the association owned.

A judge in 2013 granted Walworth State Bank foreclosures on two Abbey Springs condo units. The bank bought the units through a sheriff’s sale and later sold them to a couple. However, before the sale, Abbey Springs had sent a letter to the bank indicating that it had a policy that forbids current or subsequent owners from using those amenities if their unit has any outstanding assessments.

Later, the condo association sent a letter to the bank indicating that the units had more than $13,000 in past due assessments.

When the couple learned of the assessments, they refused to close on the units as planned. Walworth State Bank responded by paying the fees. It later sued Abbey Springs in Walworth County Circuit Court for the amount, demanding that the money be returned because all debts on the units should have been extinguished by the foreclosure and the condo association’s policy was contrary to the state’s Condominium Ownership Act.

Walworth County Circuit Court Judge Phillip Koss found for the bank in 2014, ruling that the policy violates the condo act and that Abbey Springs had been unjustly enriched by the bank’s payment.

A three-judge panel for the District 2 Court of appeals in 2015 reversed Koss’ decision, finding that the condo act does not deal with past-due fees.

Although the 5-2 majority of high court justices in Friday’s decision agreed with the appeals court that the act did not apply, they reversed. Justices Shirley Abrahamson and Ann Walsh Bradley dissented.

The majority decision held that under well-settled foreclosure law and other provisions of the state’s condo-ownership act, all interests Abbey Springs had in the condos, including the past-due assessments, were terminated by the 2013 foreclosure judgment on the two condos.

Abbey Spring’s policy, the court found, is unlawful because it ties a debt owed by former owners to the units. It thus asserted a right to the property that foreclosure had eliminated. Follow @erikastrebel