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Does a mechanic's lien ever wipe out the mortgage or allow me to take over the propery?

IllinoisLien Priority

I submitted a question yesterday about mechanics liens and priority. I should qualify what I meant. My question applies to remodeling of existing homes in Illinois, not new construction. If there is a mortgage on the home, and I do remodeling work that goes unpaid, and file a mechanic's lien, what happens? Can I force a sale of the property? If the property is worth less than the loan, will I get paid, or does the bank take all first proceeds to satisfy their loan? Is there any circumstance where I would take priority over the mortgage? Is there any circumstance where instead of forcing a sale of the property, I would be able to take the deed in lieu of payment and the bank would lose their interest? I know that is what happens with tax liens. Is there any situation that is comparable with a mechanic's lien? Thanks again.

1 reply

Jan 23, 2020

Most mechanics lien claims are resolved before enforcement of the lien becomes necessary. But, if a lien has been filed and remains unpaid, then a lien enforcement action could eventually become necessary. And, if the dispute is not settled or resolved at that point, eventually, foreclosure of the property may take place. If a foreclosure does become necessary, then those who have an interest in the property will be paid in order of their priority. Often, a bank will have first priority as a result of a mortgage on the property - so, that bank will generally be paid first, and other claimants will then receive payment from what's left over. However, as discussed in the answer to your question previously posted, Illinois has interesting and unique priority rules which could at least result in partial payment to a lien claimant ahead of the bank. Based on those unique priority rules - a lien claimant can obtain partial priority over a bank, even if the mortgage was filed long before the mechanics lien was. If the work which gave rise to the mechanics lien improved the property value, then a lien claim will take priority over a previously recorded mortgage to the extent the work raised the property value. Of course, that's a very technical calculation - so, if a lien enforcement action is on the horizon and if lien priority has become an important concern, then it's a good idea to consult a local construction or real estate attorney for additional clarity.

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