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Can I get the deed to a property by foreclosing on an unpaid mechanic's lien in lieu of other payment?

IllinoisLien Foreclosure

If I hold a mechanic's lien in any amount against a single family owner occupied property, and the owner cannot/does not pay me... If I then file a foreclosure suit to satisfy my lien, does it force a public sale of the property, or am I in a position to take possession of the property in lieu of payment? Because a mechanic's lien is in first position and superior to the mortgage(s), does this mean that if I foreclose for nonpayment of my lien, I would then be able to take over the deed to the property and wipe out the mortgage? If the bank wants to pay the lien to keep their position, is it up to me whether to accept that payment or not? If I do acquire the deed through my foreclosure suit, does it wipe out any other encumbrances, as in back taxes owed (county property or IRS), or mechanics liens by other companies....or would I, as the new owner, be responsible to pay those obligations? If so, when would they be payable? Finally, would it make any difference if it were not owner occupied single family, Multifamily (owner occupied or not), or if it were a commercial property?

1 reply

Jan 21, 2020

Illinois has extremely unique priority rules. First, note that a mechanics lien claimant will have priority over any encumbrances or mortgages filed after the contract for the project was signed. So, if a mortgage was filed after the contract for work was signed, then the claimant would have full priority over the mortgage. This is pretty common as far as lien priority scenarios go. However, Illinois will also provide partial lien priority even if the mechanics lien is filed after another mortgage or encumbrance has been filed on the property. That is - if an Illinois mechanics lien claimant has performed work that's boosted the value of the property, then that claimant will have priority over a pre-existing mortgage to the extent that the property value was increased. Regarding property type - I'm not aware of any priority differences for commercial property or residential property.

What happens when an Illinois mechanics lien is enforced?

Importantly, note that when a mechanics lien claim is enforced, that doesn't automatically foreclose the property. Rather - a lien enforcement is a lawsuit, and the owner will generally be able to fight the lien claim, or even pay the claim to avoid the foreclosure of the property. What's more, even if an owner is unsuccessful in defending against the enforcement and foreclosure of their land, others with interest in the property might intervene or even pay the claim to avoid further issue with their investment. Further, in order for a lien claimant to take over the property, themselves, the claimant would ultimately have to file their claim, enforce the lien, send the property into foreclosure, then submit a winning bid in that foreclosure auction. So, it'd be extremely unlikely that the claimant would end up with actual control of the property - and ultimately, that's not the point of the mechanics lien remedy. Rather, mechanics liens provide an alternative method of securing payment and making sure that those who perform work get paid for that work.

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