Illinois Decision On Lien Priorities

Previously published in Building & Bonding: The Construction Group Newsletter

The Illinois Supreme Court in La Salle Bank N.A. v. Cypress Creek 1, LP has issued an opinion clarifying the relative priorities of a lender and mechanic's lien claimants to the proceeds of a foreclosure sale where the lender's mortgage was recorded before the mechanic's liens attached. The only other pertinent fact is that the sale proceeds were insufficient to satisfy the mortgage and the mechanic's liens. The court held that a lender has priority to the value of the property at the time the construction contract was entered into, plus the value of the improvements that were paid for out of the construction loan secured by the mortgage. The state Supreme Court concluded a mechanic's lien holder has priority only to the value of the improvements for which it has not been paid. This case expressly overruled Mitchell v. Robinovitz, which allowed a lien claimant's priority claim to include