Illinois Adds Omitted Subordinate Interest Provisions to Mortgage Foreclosure Law

Foreclosure

On August 26, Illinois amended its Code of Civil Procedure by adding Section 15-1603.5 to address situations where a foreclosure sale occurred, but a junior lienholder was not named in the foreclosure complaint. Specifically, the law permits a holder of a certificate of sale who discovers an omitted subordinate interest to file a strict foreclosure complaint naming the person who has the omitted subordinate interest as the defendant. Unless the defendant objects, the court must enter a judgment extinguishing the omitted subordinate interest. If the defendant objects, the court must hold a hearing and order either (i) that the defendant has not agreed to pay the redemption amount, in which case the court must enter judgment; or (ii) that the defendant has agreed to pay the redemption amount. The law also sets forth the items that must and must not be included in the redemption amount, and provides that the defendant has 30 days after the entry of the order to pay the redemption amount. Although the person who has an omitted subordinate interest does not have a right to file a strict foreclosure action, the person does maintain the right to claim surplus proceeds from the foreclosure sale.