Page 17 - John Hundley 2009

Sharp Thinking

No. 24 Perspectives on Developments in the Law from The Sharp Law Firm, P.C. September 2009
Host of Judicial Developments

Confronts Real Estate Industry

Legal developments continue apace for attorneys, realtors, lenders and others involved in real estate
transactions and ownership. A host of recent developments is the focus of this month’s Sharp Thinking.

Buyer’s Intent to Raze Structure Does Not Moot Seller’s Disclosure Duty

A seller’s duty to make accurate disclosures under the Residential Real Property Disclosure Act (765
ILCS 77) cannot be avoided even if the buyer intends to raze the structure at issue, the Second District
has held. In Skarin Custom Homes v. Ross, 388 Ill.App.3d 739 (2009), the seller misstated the severity of
basement leakage in the disclosure statement required by that act. However, when the purchaser sued,
the trial court dismissed because when the buyer purchased the property he
intended to raze the home and build a new one. Seizing on that fact, the court
thought the existing structure was not really residential property.

The Appellate Court disagreed. Noting the property met the definition of residen-
tial real property at the time of sale and that the act contained certain exceptions to
that definition – not including an intent to tear down the structure in the future – the
court said the disclosure duty applied. It distinguished cases where former homes
had been stripped of habitability elements before the sale.
Subcontractor Can Sue on Mechanic’s Lien Even If Owner Has Paid in Full

Few statutes are more textually complex and confusing than the Mechanics Lien Act (770 ILCS 60),
and few have more draconian ramifications for misunderstanding, as the
property owner in Weather-Tite, Inc. v. Univ. of St. Francis, 233 Ill.2d 385
(2009), learned recently. There a college entered into a construction contract
with a general contractor, who subcontracted out the electrical work. In each of
five installment payments, the contractor delivered its sworn statement as to
subcontractors as required by the act, and truthfully disclosed that the electrical
sub was unpaid. In each of those cases, the college paid the total amount to
the contractor, understanding the contractor would then pay the sub. In the
first four cases, it did so. But in the fifth case, the general’s bank seized the funds to setoff against the
general’s debt to it, before the sub could be paid. Thus unpaid, the sub sued.

The college objected that the sub had not served a subcontractor’s notice upon it, but the court said
that was not required when the general’s sworn statement disclosed the subcontractor’s claim. The
purpose of the sworn statement, it said, was “to put the owner on notice of subcontractor claims and to
create a duty upon the owner to protect the claims of the subcontractors named in the contractor’s sworn
statement” (emphasis added). That duty is exercised either by requiring a waiver of the lien or by making
payment to the sub directly. Because the owner did neither, it had to pay twice.

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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.