(March 2001)


By Steven B. Bashaw

Steven B.  Bashaw, P.C.

Suite 1012

1301West 22nd Street

Oak Brook, Illinois  60523

Tel.: (630) 472-9990

Fax.: (630) 472-9993


(Copyright 2001 - All Rights Reserved)


(EDITOR’S NOTE: This month’s installment of the Real Estate Law Practice Key Points comes to you from a new address; physically and electronically. Please note the changes in your records and computer.

On February 28, 2001, I withdrew as a partner at McBride Baker & Coles, and opened my own office across the street in Oak Brook at Suite 1012, 1301 West 22nd Street. My departure from McBride was amicable and friendly, but related to the fact that continuing to provide these monthly updates, the work I enjoy doing with the ISBA and IRELA, and still meet the demands of a large firm seemed to be getting more and more difficult each month. I appreciate all of the good wishes from my partners and the cooperation I received from my firm over the last seven years.

More importantly, I appreciate the good wishes and expressions of support from all of you. I will continue to concentrate in the areas of real estate, real estate litigation, residential transactions, and mortgage foreclosure, and greatly appreciate having an opportunity to work with you and your clients in my new environment. You will find these "Keypoints", as well as earlier month’s, archived on my website, (, as my "thanks" for your support. Please logon to the website, feel free to browse, read, copy the materials and e-mail us there.

In addition to encouragement from the Illinois State Bar Association’s Real Estate Section Council, and the Illinois Institute of Continuing Legal Education, it should be noted that Chicago Title Insurance Company helps underwrite the monthly production of these real estate law Keypoints. Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area. Its staff attorneys are pleased to offer their view points on various developments in the law as set forth below.)



The Third District was confronted with an appeal from a condominium homeowner alleging that the late charges her association levied upon her for failure to pay her January assessment until October were unreasonably and constituted an unenforceable penalty. The Appellate Court agreed and reversed the trial court’s award of $1.696.12 to the association in Hidden Grove Condominium Association v. Crooks, (3rd Dist., January 26, 2001),

Noting that it is the duty of every unit owner in a condominium to pay a proportionate share of the common expenses by statute, (765 ILCS 605/9(a)), and the statute further provides that a late charge may be imposed by a board of managers, (765 ILCS 605/18.4), the Court noted that the charge must be reasonably related to "The necessary expenses and administrative costs of pursuing the late assessment fee as well as lost interest income…". Otherwise, "if the purpose [of the charge] is merely to secure performance of the agreement, it will not be upheld." Noting that the typical late charge is 5%-10%, and that "to demand an interest rate in gross excess of this amount is unnecessary and does not reasonably relate to any recoverable expense", the Court determined that a $25.00 late charge on a monthly assessment of $88.23 would be reasonable. Here, however, the association had engaged in "piling on of an additional $25 per month for each month the assessment fee goes unpaid". The resulting "255% return on an initial $88.23" as the association continued to tack on an additional $25 each month from the January due date until the payment in October. "An agreement setting damages in advance of a breach is an unenforceable penalty unless: (1) the amount so fixed is a reasonable forecast of just compensation of the harm that is caused by the breach; and (2) the harm caused is difficult of impossible to estimate." The case was remanded to the trial court to determine the amount of the late charges and with direction that the judgment entered should be reduced accordingly.



In the September, 2000, "Keypoints", the case of Aames Capital v. Interstate Bank of Oak Forest, (2nd Dist., July 31, 2000), was presented as determining the argument of "first in time, first in right" versus conventional subrogation in favor of the refinancing lender. The Court noted in Aames that an operative fact was that the prior mortgage was not released when Interstate Bank obtained its lien position, and therefore it was not "prejudiced" in its expectations. Then, in October, 2000, "Keypoints" we visited the case of LaSalle Bank v. First American Bank, (1st Dist. September 12, 2000),, in which the First District affirmed the position taken by the Second District in Aames relating to subrogation, and accorded protection via conventional subrogation to a refinancing lender. In the months that have followed, many have opined that the application of the doctrine by the Appellate Courts in Illinois ignores the fact that the entire theory of subrogation in the context of lien priority is a creature of title insurers seeking to avoid responsibility for a negligently conducted search of the land records. The law appears to be different in Indiana, however, where the Fifth District Court of Appeals quite bluntly rejected the application of subrogation in facts quite similar to the Illinois cases. Wilshire Servicing Corporation v. Timber Ridge Partnership, (5th Dist. Indiana Court of Appeals, 2/23/2001), 2001 Ind. App. LEXIS 300.

In this case, the Indiana Court was faced with the familiar scenario of a first mortgage followed by and intervening judgment creditor who prefects its lien in second position. This is then is followed by a refinancing lender, (who missed the intervening lien in its search of the title when it funded the new mortgage), and winds up in what appears to be "second place" when filed its foreclosure. Accordingly it, (or its title insurance company’s attorneys), proffered the theory of subrogation as a defense to the assertion of a priority by the intervening judgment creditor.

The Indiana Court notes in its decision that the first mortgage was paid in full from the funds generated at the time of the refinancing, and that Indiana statute provides that a mortgage is no longer in existence once released; i.e., and therefore can not be the foundation of subrogation. Turning then to the doctrine of subrogation, the Court notes that "it would be a gross misapplication of the doctrine of subrogation were we to hold that its cloak settles automatically upon one who has simply made a mistake, when it is a commercial transaction involving a consideration." In response to the particular circumstances and the argument advanced by the refinancing lender, the Court states:

"When distilled, Wilshire’s argument merely requests that we shift the burden to do that for which it and title insurers are compensated from them to third parties who were not negligent and were not associated with the transaction….Wilshire’s public policy argument [the doctrine of subrogation to avoid ‘unjust enrichment’] amounts to a request that we not view the circumstances but instead offer relief when a mistake is made. The doctrine of equitable subrogation will not, as a matter of right, relieve a sophisticated lender from the burden its mistake or negligence when intervening liens are not discovered before the release of a senior lien."

The Court rejected the same emphasis the Illinois Courts found persuasive; the argument that the "windfalls" to the intervening lienholders when senior liens are paid due to confusion or simple human error should not be allowed. Instead the Indiana Court notes that the lienholders were neither negligent nor associated with the transaction that elevated them, and certainly not unjustly enriched when they only received the payment to which they were entitled. The refinancing mortgagee had a duty and means to discover the intervening lien before releasing its funds and the original mortgage that held the senior lien position. It failed in that duty and should look to its title insurance rather the intervening lienholder to bear the burden of the error.

We will have to wait and see if the Illinois Courts continue on the path set by the decisions in Aames and LaSalle Bank cases. The Illinois Supreme Court did not grant the petition for certiorari in the Aames case. The reasoning of the Indiana Courts may play a part in the next case to be decided in this area.



In Onsite Engineering & Management, Inc. v. Illinois Tool Works, (February 8, 2001), the Court considered whether a temporary staffing agency is a subcontractor entitled to relief under the Mechanics Lien Act, and found that it is not. The Act provides that "every mechanic, worker or other person who shall…furnish or perform services or labor for the contractor…shall be known under this Act as sub-contractor, and shall have alien for the value thereof…" (770 ILCS 60/21), and "When the Contractor shall sub-let his contract or a specific portion thereof to a sub-contractor, the party furnishing the material to or performing labor for such subcontractor shall have a lien therefore…" (770 ILCS 60/22). Illinois Tool Works argued that Onsite was not a subcontractor because its work was performed under a "National Services Agreement" between Onsite and the general contractor, (Smith Technology Corporation), whereby Onsite was Smith’s sole provider of temporary contract employees in numerous states and projects to perform environmental remediation work. This made them a "temporary staffing agency", not a "subcontractor" specifically related to the Illinois project work, and therefore not entitled to a lien under the Act. The Illinois Court found the reasoning of the Colorado Court of Appeals in the case of Skillstaff of Colorado, Inc. v. Centex Real Estate Corp., (Col. App., 1998) 973 P.2d 674, persuasive and noted: "At the heart of this matter is the relationship between Onsite and Smith. A subcontractor, in general, is "one who has entered into a contract, express or implied, for the performance of an act with the person who has already contracted for its performance." In this case, Onsite was providing temporary employees who were under Smith’s management, supervision and direction, and absent in the agreement was nay reference to the Lincolnwood, Illinois project. "Thus, like the plaintiff is Skillstaff, Onsite had no contractual obligation to perform any work for this particular project.", and no standing as a subcontractor within the meaning of the Illinois Mechanic’s Lien Act.

(This case also discussed issues relating to standing to sue where a foreign corporation fails to file its annual report and pay franchise tax, and the two-year limitation period set forth in 770 ILCS 60/9.)



In 1995, the Illinois Supreme Court declared two state enabling statutes and the resulting DuPage county ordinances imposing transportation impact fees on builders of new home developments unconstitutional in Northern Illinois Home builders Ass’n v. County of DuPage, (1995) 165 Ill.2d 25. As a result, the Court stated "monies collected thereunder should be returned". The impact fees were paid between January, 1989 and July, 1990, under protest by Sundance Homes, and in July, 1996 filed this case as a class action suit to recover more than $6 million paid by the builders in the area to DuPage County. The county filed a motion to dismiss pursuant to section 2-619 of the Code of Civil Procedure, arguing that the case was time barred for failure to file within five years from the date its cause of action accrued and, alternatively, latches. Sundance argued that its cause of action did not accrue until the date of the Illinois Supreme Court decision in the NIHBA case in March, 1995, and that prior to the ruling it had not right to a refund of the impact fees.

Justice Harrison’s decision in Sundance Homes, Inc. v. County of DuPage, (Il. S.Ct., February 16, 2001),, serves as an "analysis with observations on the nature of time limitations applicable to legal and equitable actions by way of statutes of limitation and the equitable doctrine of laches, respectively, focusing specifically on refund litigation.

A statute of limitation begins to run on the date that the party has a right to seek a remedy from the court; "when facts exist which authorize one party to maintain an action against another…a limitation period will not await commencement until a plaintiff has assurance of the success of an action." Specifically, relating to tax refunds, the period begins to run when the taxpayer tenders payment, not when the taxpayer discovers that the payment or assessment was erroneous. Laches occurs when there is "a neglect or omission to assert a right, taken in conjunction with a lapse of time or more or less duration, and other circumstances causing prejudice to an adverse party, as will operate to bar relief in equity…a plaintiff must have knowledge of his right, yet fail to assert it in a timely manner." A relationship exists between the two because courts will generally look to the limitation period as a "convenient measure" for determining the laches period, so that "laches is the doctrine of limitation as applied to actions in equity."

The result of the majority decision is to hold that the general five year-statute of limitations of the Code of Civil Procedure applies to tax refund cases, and the period begins to run upon the tender of payment, regardless of intervening litigation relating to the constitutionality of the tax. Justice Freeman, with Justice McMorrow joining, specially "concur(s) in the judgment of the court, but not in its opinion", finding fault with the attack on the distinction/relationship between cases at law and equity, and giving an interesting insight into the differing philosophical positions of the Justices.



(Ed: When Dick Bales and I talked about surveys recently, and he told me things I didn’t want to know about…you know the old saying "You really don’t want to know what goes into the making of laws and sausages..", and, well, real estate closings as well…from a survey point of view…Here is what Dick has to say:)

"Last week Steve and I spoke at a real estate seminar sponsored by the Lake County Bar Association. I talked about residential surveys. During the question and answer session one of the attendees asked about recent regulations concerning plats of surveys and mortgage inspection plats, also sometimes called mortgage inspections or mortgagee inspections. This was not the first time I had heard of this, and so I decided to do some investigating.

Illinois DOES have new regulations. To access it, go to the website of the Department of Professional Regulation. The site is at Then click on "Proposed Rules," "Land Surveying" and "Proposed Changes to Acts and Rules." (The site has not been changed since these "proposed rules" became law in November). The regulations consist of new section number 1270.56. I visited this website in the morning. In the afternoon I happened to see a fax from a major Chicago area surveying company. The fax consisted of two pages--a letter and a mortgage inspection plat. The letter read as follows:

"This is to advise you that all practicing land surveyors in the state of Illinois are no longer able to title mortgage survey plats as "Mortgage Survey" or "Plat of Survey."

Recently enacted Illinois Administrative Code additions passed by the Illinois General Assembly and enforced by the Illinois Department of Professional Regulation mandated changes in platting format and certifications. Therefore we are advising our clients to review their standard contract forms used in real estate transfers and replace the title of "Plat of Survey" and replace it with "Mortgage Inspection" where applicable. If a "Plat of Survey" is still required, the surveyor must perform additional work and consequently additional expense to the consumer will be incurred.

Attached is a copy of the new format we are required to use, along with a copy of the minimum standards for this type of professional service. If you would like to review the entire code addition, refer to 68 Ill. Adm. Code, Sec. 1270.56.

We, as one company, can do little to affect the revision of this Administrative Code section, which was pushed through by the Illinois Professional Land Surveyors Association. Our clients, however, can contact their state professional organizations and legislators, asking for the repeal of this onerous section."

I want to devote this months column to a thorough discussion of mortgage inspection plats and these regulations.

Rules governing the execution of mortgage inspection plats have been around since at least 1973. Therefore, even before these regulations there were two sets of standards for these plats, a national standard and an Illinois standard. They simply were not law until now.

In the December, 1973 issue of the magazine of the American Congress on Surveying and Mapping, the organization published an article entitled "Mortgage Loan Inspection Committee Final Report and Recommendations." (See Surveying and Mapping, Vol. XXXIII, No. 4, pp. 536-539 [December, 1973]; see also Basic Real Estate Practice, Vol. II, Chapter 3, "The Survey," by Dan G. Curtis and George M. Covington, published by the Illinois Institute for Continuing Legal Education [IICLE], 1988, Supplement 1990). In this report a mortgage loan inspection was defined as:

"An instrumentality (authors note: not a "survey"), common to the residential mortgage industry, whereby substantial proof is submitted to the mortgagee or title insuror [sic] that the building(s) and/or other improvements are actually located on the land covered by the legal description of the mortgage...[it] is only a professional opinion..."[emphasis in original].

In other words, a mortgage loan inspection merely provides "substantial proof" to the lender or title company that the buildings that are supposed to be on the property are on the property.

The second standard that governs mortgage loan inspection plats is that standard promulgated by the Illinois Professional Land Surveyors Association (IPLSA), as set forth in Section 4.02 of the "Standards of Practice" of their publication, The Illinois Survey Manual. The IPLSA describes a mortgage loan inspection as follows:

"Use of the word "survey" is prohibited. A Mortgage Loan Inspection does not approach the standards of other survey categories....[It is the] field investigation, measurements, and platting of improvements which clearly do or do not encroach onto deed lines. The Mortgage Loan Inspection does not constitute a survey....The Mortgage Loan Inspection is intended for use by mortgagee and/or title insurers and is only a professional opinion made with reasonable care short of conducting a Boundary Survey...whos [sic] intent is to assist in the determination of their suitability to serve as collateral for a mortgage....A complete Mortgage Inspection will produce...a plat (author's note: not a "survey") entitled ‘Mortgage Loan Inspection’. . . ."

Both sets of standards make it clear that a mortgage inspection plat is an instrumentality designed to allow a lender to determine prior to funding a mortgage whether or not the land in question is improved with one or more buildings. But it seems to me that this function, while admirable, falls short of the goal of the real estate lawyer and the title company--obtaining a survey of sufficient quality so that the title company can give extended coverage over matters of survey on its owners title policy. Indeed, note that the national standards do not even use the word "survey". Note that the Illinois standards state that the use of the word "survey" on a mortgage inspection plat is prohibited. (Thus, it would seem that a plat labeled "mortgage survey" would be violative of these Illinois standards.) Both standards painstakingly go out of their way to point out the limited application of the mortgage inspection plat.

And this is carried over to 68 Ill. Adm. Code 1270.56. The law provides that "the mortgage inspection [assists] in the determination of the propertys suitability to serve as collateral for a mortgage. It is not an opinion as to deed, title or platted lines."

The field procedures for mortgage inspections mandate only that the surveyor "eliminate the possibility of gross error in location of the premises." (Emphasis added).

The mortgage inspection plat must contain this language:

"This mortgage inspection and drawing is not a boundary survey or plat of survey. This mortgage inspection was prepared to assist the mortgage company and title insurance company and is not to be used for any purposes of boundary disputes, location of actual deed, title or platted lines, or for construction of new improvements. Graphic representation shall be deemed approximate and no reliance should be placed on the scale of the drawing."

I see at least three problems here. What if I am asked to review a mortgage inspection that discloses fence lines close to the property line? If "graphic representation shall be deemed approximate", do I have any assurances that the fences don’t actually encroach over the lot line? Should I now raise an exception as to a possible fence encroachment? Granted, the regulations do provide that "if evidence exists of the possibility that the improvements on the subject property or adjoining property are on or very near the apparent deed lines, the surveyor is obligated to note his/her findings and recommend that a boundary survey or land title survey be performed." But the surveyor has already noted his findings on his mortgage inspection. Do I even have to take the second step of phoning the surveyor or getting possibly self-serving or insufficient affidavits from the seller and the owner of the land that the surveyor did not "recommend" that a real survey be performed?

Second, the law does not mandate that the surveyor show any platted building lines or easements on the mortgage inspection. Further, it states that "no dimensional ties from structures or other improvements to apparent deed lines are required." This statement, coupled with the fact that "no reliance should be placed on the scale of the drawing," elicits the question--how does the title company determine if there are any building line violations? And what are "apparent" deed lines? Furthermore, if easements are not shown on the plat, how does the title company determine if there are any encroachments onto any easements? In the past, the title examiner could use a triangular engineers scale to at least estimate and draw in the location of missing building lines and easements. With a questionable survey scale, the examiner will be unable to do this. In fact, taken to an illogical and absurd conclusion, when a title company accepts a mortgage inspection, and no building line is drawn in, yet one exists, it would theoretically be within its rights to raise a title exception relating to possible building line violations--which may not seem such a bad thing, until you read Nelson v. Anderson, 286 Ill.App.3d 706 (1997).

Three, the mortgage inspection plat states on its face that "is not to be used for [the] location of actual deed, title or platted lines." The law states that "boundary dimensions shown shall be based on the public record or description provided; field measurements do not need to be shown." The law states that the surveyor has to locate and dimension only relevant’ improvements. This being the case, then how can the title company ever realistically give extended coverage over the survey-related general exceptions, which are:

2. Encroachments, overlaps, boundary line disputes, or other matters which would be disclosed by an accurate survey and inspection of the premises.

3. Easements, or claims of easements, not shown by the public records.

What about that shed built on the utility easement? Is that a relevant improvement?

If a post-closing survey problem arises, would a title company have any redress against the surveyor for performing a defective mortgage inspection plat? Would the protections afforded parties who rely on a survey, as outlined in Rozny v. Marnul, 43 Il.2d 54 (1969), even be available when the ‘plat’ they relied on states on its face that it "is not to be used for [the] location of actual deed, title or platted lines", when the applicable law does not mandate that easements be shown on the plat or that field measurements be shown, and when even the plat’s scale cannot be relied on? Indeed, with the above exculpatory language on the plat, can a truly defective mortgage inspection even exist, short of the surveyor showing a building on the land when the land is actually vacant?

The mortgage inspection does not seem to be the ideal product to be used when requesting title company extended coverage. I would think that most real estate practitioners would think twice before agreeing to amend their real estate contracts, as suggested in this letter."

Dick Bales, Chicago Title, Wheaton



(Ed: As I was walking out the door with a few boxes in tow, a number of my friends and colleagues from McBride Baker & Coles wished me well and gave me little parting gifts which I thought I’d share. My favorite paralegal, Kathleen Siegel of the Bankruptcy Department is someone I will sorely miss. It was she I could turn to in order to check to see if someone had filed a bankruptcy and the status. She gave me a step-by-step instruction sheet on how to get the information myself on the Internet, so I have included it below. My favorite librarian, Elizabeth Robertson, has been working on a listing of real estate related Internet sites, and completed that work last month. I updated it and checked each of the sites and then, with Elizabeth’s permission, distributed it to the ISBA Real Estate Section Council Members. It is too long to include here, but you can view and download it from my new website, Finally, something that I really hadn’t considered was brought to my attention this month about garage door openers in residential real estate. Naomi R. Angel, an attorney with McBride, has this to say about garage door openers:)



The garage door is the largest and heaviest piece of moving equipment in most homes. In order to avoid injury, it should be designed, manufactured, equipped, installed and maintained with due care. There are millions upon millions of automatic garage door openers in use today. Although automatic garage door openers have a life expectancy of approximately eight years, it is possible for individual openers to last as long as 40 years! It is common for young families to move into homes without ever thinking about the potential danger that an older automatic garage door opener might present.

Federal law requires that new residential automatic garage door openers must possess an automatic reversing safety device in compliance with current voluntary standards set forth in UL-325. However, there were no applicable industry safety standards requiring automatic reverse safety devices prior to 1973. Consequently, many automatic garage door openers that are still working do not have automatic safety reverse devices. For many of the doors that do have these devices, the door and opener systems may no longer be properly adjusted. This situation is worsened by the fact that many persons are not aware of this condition. They may have a false sense of security about their system because their door has an operational automatic garage door opener, which supposedly has an automatic safety device. However, if the door and opener system have not been tested or properly maintained, the system may not be able to protect residents, especially children, from serious injury or death.

What are the real estate disclosure and the home building inspector practices in your area? Is the presence of a garage door opener disclosed to the prospective buyer upon the transfer of residential property? When a house built before 1993 is sold, is the owner required to disclose the presence of a garage door opener that might not meet today’s safety standards? Presently, most real estate disclosure forms merely require the seller to list the garage door opener as one of many appliances and service systems included in the sale of the house. The only thing usually disclosed about that garage door opener is whether it’s in working condition--not whether it’s in compliance with current UL-325 safety standards relating to automatic reverse devices.

When buying an older home, find out if the garage door has an automatic garage door opener. If it does, ask two more important questions:

Is the opener in working condition?

Does it have a built-in automatic reverse feature or an entrapment protection device, such as an electronic eye or a constant control button?

Then, contact a garage door service professional to inspect the door system.

Naomi R. Angel serves as legal counsel to trade and professional associations, including the Door and Access Systems Manufacturers Association. She practices with the Chicago law firm of McBride Baker & Coles and can be reached at 312/715-5788 or



Obtaining Bankruptcy Case information, copies of pleadings, judge’s calendar for cases in the Northern District of Illinois Eastern Division

Step One: Go to website

Step Two: Click on [Case Image Viewing]

icon, scroll down to the Eastern Division or Western Division icon, and

click there as well (depending on where the case was filed of course).

Step Three: Select your search type

Case Number

Adversary Number (you will probably use this one the most)


Party Name

Filing Date

Most often, we will do searches under the case number or the name of the party who filed the case.

Step Four: To search by case number, enter the case number as follows

99-39658 (Don't use the letter B for bankruptcy or A for adversary, it doesn't work) Then click on [Search]

*Note, when you are entering the case number, there must be five digits. For example 01-1 would not come up, you must enter the case as 01-00001.

Then you will get the cover page of the case to print this page, put your cursor on [File], then click on print to print this page. To print the docket for this case, click twice on [Docket].

When you get to the docket, click control end to get to the bottom of the docket, in some cases, there are many entries, so there could be one or possibly two continuation pages. To print the first set of docket entries, click on [File], then print. Then, click on [More] at the bottom of the docket, which will take you to the second set of docket entries, to print this, click [File], then print.

Step Five: To print a document imaged on the website

12/23/99 - Image: 7 pages, 323 KB, TIFF

Click twice on the blue image category, open the file and, once the site for the document has been found, a copy of the first page of the document will appear on the screen. Click the print icon, select your printer (it is best to use a high speed printer, the printer in the library is the fastest). Although you will only be able to see the first page of the document on your screen, the entire document will print.

WARNING: The more pages contained in the document, the longer it will take to download from the internet.

Step Six: If you want to get a calendar of a particular judge's activity for a day click twice on [court calendar]. Then click twice on the Judge whose calendar you want to see.


[Judge Barliant]

then click twice on the date

[July 25, 2000]

To print the calendar, click [File], print and select all frames individually.

The reason we do this is because the attorneys like to know where their case is on the call. It is especially helpful when there are several cases up in a given day.

Kathleen N. Siegel serves as the bankruptcy paralegal in the Chicago office of the law firm of McBride Baker & Coles.



And, while we are mentioning websites and the Internet, how could we not mention that on March 2, 2001, (the 50th birthday of its "second-cutest member of the board of directors), the Illinois Real Estate Lawyer’s Association (IRELA) announced that its new and improved website had been launched. The old site contained a good deal of useful information to local transactional lawyers and served as a focal point for "The only bar association representing the interests solely of real estate attorneys in Illinois. The new site promises to have updated and renewing content, and certainly bears inspection at



Last month, Dick Bales and I continued our discussion about Tenancy by the Entirety with his observations of the impact of a dissolution of marriage on this form of co-ownership of real estate. In the midst of any mention of Tenancy by the Entirety there must be reference to the cumbersome requirements of creating that estate; i.e., using "the magic words". Now, however, House Bill 1060, introduced by Representative Mathias, R-Buffalo Grove, seeks to amend the tenancy by the entirety statute by deleting the requirement that the deed conveying title expressly state the grantee’s marital status in order to be valid. The ISBA Real Estate Section Council and IRELA BOTH support this bill because their members believe that the current statute requirements (specifically identifying the grantees as husband and wife and negating joint tenancy and tenancy in common) are unduly burdensome, inappropriately cumbersome and present a malpractice pitfall that is contrary to the consumer protection goal of this legislation. Please support this legislation by contacting your state representative. (Remember, in the words of the ISBA’s "grassroots initiative of contacting legislators" ["Capitol Counsel"], that "all politics is local" and in addition to being a lawyer, you are a knowledgeable constituent to whom legislators turn for advice. Click here for the text of the bill and here for its status.

An equally important piece of legislation, although this one is opposed by the ISBA Real Estate Section Council) is House Bill 255, (Curry, D-Decatur), which would require that certain instruments affecting title to real estate be recorded to be effective. Under this Bill, if enacted, deeds, mortgages, contracts for deeds, articles of agreement for deed, and what appears to be most other "instruments that affect interests in real estate" would be of no impact until recorded. Currently, of course, Illinois is a "race/notice" state in its title theory, which allows actual notice of an interest in real estate to impact that interest regardless of recording in some in some instance, and provides that these interests are effective against creditors and subsequent purchasers as constructive notice after recording unless one has actual knowledge of the interest. This legislation would fundamentally change the status of established statutory and case law in Illinois and convert us to a "pure race" state.  This is another good example of legislation in which attorneys have a greater interest and understanding of the impact of a law, and your involvement in the legislative process may be worthwhile.



I hope we are not to be too focused on tenancy by the entirety this month. Nonetheless, noteworthy that the 6th Circuit has recently held that federal tax liens do not attach to property held in tenancy by the entirety under Michigan state law in Craft v. United States, (6th Cir.) ____F.3d ____, 2000 WL 1726906, because each tenant does not hold a separate interest in real estate to which the federal tax lien against only one tenant can attach.

In this case the Crafts owned their home in Michigan as tenants by the entirety, which is based on the premise that a husband and wife are a unified entity. Mr. Craft did not pay his income taxes for a number of years, and the IRS filed a $500,000 tax lien against him. Thereafter, the Crafts deeded their home to Mrs. Craft alone, and when she sold it several years later, she was required to escrow half of the proceeds, which the IRS claimed to be attributable to Mr. Craft’s liened proportionate share of the property. The Sixth Circuit initially decided that the tax lien did not attach to the home in its decision at 140 F.3d 638 in 1998, rejecting the argument that the deed was a fraudulent conveyance. The IRS appealed, requesting a rehearing based on the United States Supreme Court’s 1999 decision in Drye v. United States, 528 U.S. 49. In that case the Court held that the issue of whether or not a federal tax lien attaches is a matter governed by state law, (an important distinction in Illinois where our Supreme Court has now held that conveyance into tenancy by entirety is fraudulent only if the "sole intent" is to delay or hinder creditors…which is why I think this case is important regardless of the state law and federal circuit). The Sixth Circuit felt the IRS incorrectly interpreted the Drye case, and, in opposition to the IRS reading stated, "If the Supreme Court intended to hold that every conceivable interest in property, no matter how remote, is subject to a federal tax lien, we have little doubt that it would have said so outright…(and) Thus we reject the government’s argument that Drye stands for the proposition that a federal tax lien attaches to any right to inherit property, no matter how remote." This would also seem to support, in theory, at least a fairly good argument against a federal tax lien attaching to tenancy by the entirety property in Illinois, and thwart any effort to have a conveyance into that form of ownership undone under the "sole intent" guide as well.



The United States Supreme Court reversed the Court of Appeals of the Seventh Circuit in Solid Waste Agency of Northern Cook County v. United States Army Corp of Engineers, (January 2, 2001), resulting in a limitation of the definition of "navigable waters", and the ability of the Army Corps of Engineers to use the "Migratory Bird Rule" to limit development of real estate by local governmental bodies (and perhaps private parties) where habitat for migratory birds have evolved into permanent and seasonal ponds.

The dispute arose when a consortium of 23 suburban Chicago cities and villages sought to determine if a federal landfill permit was required if it were to purchase and develop a site for the dispose of nonhazardous solid waste on a 533 acre parcel between Cook and Kane counties. The site was a sand and gravel pit until 1960, when mining was abandoned. Over the years, the site became a collection of ponds which attracted seasonal and migratory birds "in interstate commerce"; (i.e., the birds weren’t "in interstate commerce", as much as they had an "aggregate effect…on interstate commerce…because each year millions of Americans cross state lines and spend over a billion dollars to hunt and observe migratory birds.") The Clean Water Act, Section 404(a), grants the Army Corps of Engineers authority to issue permits "for the discharge of dredged or fill material into the navigable waters at specified disposal sites. Under that Section of the CWA, the Corps developed the "Migratory Bird Rule" stating that its jurisdiction encompasses not just the "navigable waters" of the United States but also includes intrastate lakes, rivers, streams, "prairie potholes", or wet meadows, which are or would be used as habitat for migratory birds crossing state lines or constituting endangered species.

The United States Supreme Court had previously agreed with the Corps’ broad interpretation of its jurisdiction relating to wetlands adjacent to the waters of the United States in United States v. Riverside Bayview Homes, Inc., (1985) 474 U.S. 121, but refused to extend that jurisdiction in this case. "It was the significant nexus between the wetlands and ‘navigable waters’ that informed our reading of the CWA in Riverside Bayview Homes. Indeed, we did not ‘express any opinion’ on the ‘question of the authority of the Corps to regulate discharges of fill material into wetlands that are not adjacent to bodies of open water…[and] In order to rule for respondents [the Army Corps] here, we would have to hold that the jurisdiction of the Corps extends to ponds that are not adjacent to open water. But we conclude that the text of the statute will not allow this." The term "navigable waters" refers to those bodies which ebb and flow with the tide or are used in interstate or foreign commerce. Isolated potholes, ponds and water-filled mining trenches simply do not meet the criteria for "navigable waters". Water areas used as habitat by migratory birds which cross state lines do not qualify as "waters of the United States" subject to the control of the Army Corps of Engineers through the "Migratory Bird Rule" under the Clean Water Act, unless the body of water is "inseparably bound up with the ‘waters’ of the United States" by being either adjacent to or part of the navigable waters. Isolated ponds, wholly located within a single state do not fall under the definition of "navigable waters" simply because they are the habitat for migratory birds, and there is no clear statement from Congress that it intended to affect "an abandoned sand and gravel pit such as we have here." Rather, the States have traditional and primary authority over the development and use of land and water within their boundaries, and the Army Corps’ use of the "Migratory Bird Rule" exceeded the authority granted to it by Congress under the Clean Water Act.

(Ed.: Does this mean I can build a tree house over that recurring puddle in my back yard where the birds stop in the spring now?)