The Illinois Appellate Court, First District, recently held that a mortgagee was entitled to be placed in possession of the mortgaged property through a receiver and to collect rents, even though a condominium association had previously obtained an order of possession in a forcible detainer action for unpaid assessments.
A copy of the opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/1stDistrict/1133556.pdf.
A mortgagee filed a foreclosure action following a default, naming the borrowers and condominium association ("HOA") as defendants, among others. The HOA then filed a forcible detainer action against the borrowers, claiming unpaid assessments. The HOA obtained an order for possession, and began collecting rent from the borrowers' tenants.
Following the entry of the order for possession in the forcible detainer action, the mortgagee filed a motion for appointment of a receiver in the foreclosure action. The HOA appeared for the hearing on that motion, and argued that because it obtained an order for possession in the forcible detainer action, the mortgagor had no possessory right to the property, and therefore the mortgagee was precluded from exercising its right to possession of the property through the appointment of a receiver.
The lower court disagreed, and granted the mortgagee's motion for appointment of a receiver. The HOA was further directed to turn over the rents it received from the tenants. The HOA appealed.
The Appellate Court began its analysis by observing that the mortgage here was recorded several years prior to the date the assessments went unpaid. Accordingly, the Court determined that the mortgagee's lien was superior to the HOA's lien. In addition, the Court noted that the mortgagee recorded an assignment of rents in connection with the original loan, which was binding on the borrowers' successors and assigns.
Accordingly, the Court found that "because the rents collected from the tenants had already been assigned to the lender, an order entered more than eight years later allowing the association to collect rents could not possibly prevent the lender...from enforcing the prior assignment."
The Court further observed that because the lender was entitled to enforce the assignment "simply by giving notice to the tenant" - and therefore did not require the appointment of a receiver to enforce same - the HOA's arguments as to the impact of the forcible action are "beside the point."
Even if that were not so, the Court found in favor of the mortgagee for another reason: it determined that because the Illinois Mortgage Foreclosure Law supersedes any other inconsistent statutory provisions with respect to the right to possess mortgaged real estate during foreclosure, the HOA's effort to displace the IMFL through its forcible action "must fail." See 735 ILCS 5/15-1701(f).
Accordingly, the Court ruled in favor of the mortgagee, and affirmed the decision of the lower court.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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