Bank Funding Construction Loses Out Where It Failed to Let Liens Be Perfected

It happens from time to time that an act of keen business judgment in keeping a project running could come back to bite you.  The realities of deadlines, the need to supply funds to keep work progressing, and the differing contractual relationships that place payments into a river flowing downstream have certainly become heller-esque over the past year.  So it was only a matter of time before the legal morass wrought by an industry down on its luck managed to swim upstream as well.

To stay abreast in the stream, every lender with a mortgage on a partially completed job will want to be familiar with the Illinois Third District Appellate Court’s recent decision in LaSalle Bank N.A. v. Cypress Creek, et al. (Doc. No. 3-08-0114); preferably before they try to step in and complete a project that an owner has abandoned.

LaSalle Bank had a mortgage on 13.79 acres in Illinois securing an $8 Million loan for the development of apartments for seniors.  The mortgage was recorded in 2003.  The owner contracted with both Edon Construction and Eagle Concrete for work on the project.  Both the Edon and Eagle contracts were entered after the mortgage was recorded.  Eagle and Edon subsequently recorded mechanics liens for amounts they had not been paid. 

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