Page 17 - John Hundley 2010

Sharp Thinking

No. 36 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. August 2010
Simplified Rules Apply To Obtaining Possession

Or Receivership With Non-Residential Mortgages

1
By John Hundley, 618-242-0246, Jhundley@lotsharp.com
Illinois trial courts have little discretion and generally must grant prayers for receivership or
mortgagee-in-possession when a two-prong test set forth for non-residential property is met, the
Illinois Appellate Court reiterated recently.

The decision in Bank of America v. 108 N. State Retail LLC, 401
Ill.App.3d 158, 928 N.E.2d 42 (1st Dist. 2010), arose in the context
of attempts to redevelop a long-vacant block in downtown Chicago.
After an initial developer developed financial problems, it sold out to
the defendants in the foreclosure action. After taking over, they
found additional improvements were required, lost tenant commit-
ments and developed financial shortcomings in the middle of the
redevelopment construction. The bank agreed to continue disburs-
ing funds under a series of “side letter” agreements which, among
other things, stipulated that the developer was in default. The
project continued to be financially troubled, however, and eventually
the lender sought to foreclose. In connection with the foreclosure,
the plaintiff successfully moved to have a receiver appointed, and the defendants appealed.

Affirming the appointment of the receiver, the First District
panel noted how substantially the Illinois Mortgage Foreclosure
Law (735 ILCS 5/15-1101 et seq.) (“IMFL”) had changed prior law
in cases where non-residential property was involved. Prior to
enactment of IMFL, the court noted, “Illinois statutory provisions
relating to mortgage foreclosures granted a court discretion to award
a mortgagee possession during the pendency of the foreclosure
proceedings” (the standards for mortgagee-in-possession and
receivership being the same). However, the court said, IMFL,
enacted in 1987, “employs mandatory language and drastically curtails a trial court’s discretion in
deciding motions to appoint a receiver” or to put the mortgagee in possession.

Specifically, in contrast to several protections which exist when a mortgagee seeks possession or
receivership for a person’s home, under IMFL the plaintiff’s burden for non-residential realty is two-
pronged: “(i) the mortgagee is so authorized by the terms of the mortgage or other written instrument

1
The Sharp Law Firm, P.C. and Mr. Hundley frequently represent lenders in mortgage foreclosure matters, including
foreclosures where possession or receivership of non-residential property is sought.

●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●●
Sharp Thinking is an occasional newsletter of The Sharp Law Firm, 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 lawyer at the phone number or one of the addresses provided on page 2 of this newsletter.