Page 19 - John Hundley 2018

Mortgage Law Roundup

Sharp Thinking

No. 155 Perspectives on Developments in the Law from Sharp-Hundley, P.C. June 2018

No Special Rep Required When Deceased

Mortgagor Has Transferred All Interest

It is not necessary for the court in a foreclosure action to appoint a special representative for a
deceased mortgagor when that mortgagor transferred all interest in the property to another before his
death, a panel in the Appellate Court in Chicago has concluded.

Ruling in Deutsche Bank Nat’l Trust Co. v. Estate of Schoenburg, 2018 IL App (1st) 160871, the court
dealt with the situation where the mortgagor had put the property into a land trust with a bank as trustee
after making the mortgage. Finding that beneficiaries of land trusts are permissible but not necessary
parties, the panel rejected jurisdictional challenges to the foreclosure action before addressing whether
the trial court erred in not appointing a special representative.

The panel ruled that Pub. Act 99-0024, which amended § 15-1501(h) of the Mortgage Foreclosure
Law while the case was in the trial court, applied retroactively to provide that the trial court did not have to
appoint a special representative for a deceased mortgagor if a trust was conveyed the property prior to his
death. However, it appears the panel would have reached the same result without the amendment.

It distinguished ABN Amro Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526 (2010), as “only
address[ing] the situation where the mortgagor is fully possessed of an interest in the property at the time
of her death.

Receiver May Increase Rent Rates To Lessees

A foreclosure court may permit a receiver to increase rental rates to lessees where necessary to
operate, manage and conserve the mortgaged real estate, but that does not imply that the receiver is
entitled to collect market rates in such cases.

So held a unanimous panel of the Appellate Court in Chicago recently in LOMTO Fed. Credit Union v.
6500 Western LLC, 2018 IL App (1st) 173106.

In LOMTO, defendant landlord’s manager was president of both of the lessees, and the leases at
issue were executed after plaintiff filed its foreclosure complaint and motion for appointment of a receiver.
They were sweetheart deals; no security deposit was required, and the rent was about 1/5 of the
receiver’s operating costs.

Receiver sought, and the trial court granted, permission to raise the lease rates to market rates. The
Appellate Court reversed on that point, construing 735 ILCS 5/15-1704(g) to permit rent increases for
lessees only to the extent “necessary to operate, manage, and conserve the mortgaged real estate.” It
remanded for calculation of what the rate should be.

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at 618-242-0200 or one of the addresses provided on page 2 of this newsletter.