IL Underwriting References

Agency

Corporate Authority

Last effective date: November 17, 2019 All statutes checked through November 17, 2019

See generally the Business Corporation Act of 1983 (hereafter “the Act”), which is found in the Illinois statutes at 805 ILCS 5/1 et seq.

A domestic corporation is incorporated under the laws of Illinois. A foreign corporation is organized under laws other than the laws of Illinois. See 805 ILCS 5/1.80(b).

The Business Corporation Act of 1983 gives a corporation broad powers. For example, it can sell, convey, mortgage, or otherwise dispose of its assets. See 805 ILCS 5/3.10. A corporation, however, does not have unlimited authority to do this. Consequently, the Company has adopted various underwriting practices when insuring the mortgage or sale of corporate property.

Note that the use of a corporate seal is no longer mandatory. See 805 ILCS 5/3.10(c); see also 805 ILCS 105/103.10(c).

Fees and Charges

Both domestic and foreign corporations have to pay license fees and franchise taxes. See 805 ILLCS 5/15.05. A license fee covers regulations costs. A franchise tax is a tax on the privilege of carrying on business in the nature of a corporation. See 805 ILCS 5/15.20 and 805 ILCS 5/15.35. If these charges are not paid, the following can result:

• The Secretary of State can administratively dissolve any domestic corporation. See 805 ILCS 5/12.35.

• The Secretary of State can revoke the certificate of authority of a foreign corporation. See 805 ILCS 5/13.50(h).

• A domestic corporation cannot maintain a civil action in Illinois until the charges are paid. See 805 ILCS 5/15.85(c). The Secretary of State can refuse to file any articles, certificates, or other documents relating to a domestic or foreign corporation until all fees are paid. See 805 ILCS 5/15.85(a).

• The annual franchise tax of a corporation is a prior and first lien on the real property of the corporation. See 805 ILCS 5/15.80(d). It is enforceable for seven years after the date the annual report was filed for the period that gave rise to the franchise tax lien. See 805 ILCS 5/15.90(a).

When insuring the sale or mortgage of corporate real estate by a domestic corporation, the title examiner wants to be sure that all taxes, fees, and charges have been paid. This exception probably does not have to be raised when the examiner is dealing with an established corporate customer that management knows to be financially sound.

A certificate of authority must be obtained by a foreign for-profit corporation before it can transact business in Illinois. Once the certificate is revoked, the foreign corporation no longer has the authority to transact business in Illinois and is prohibited from doing so. Also, the foreign corporation cannot maintain a civil suit in any court in Illinois. However, it can defend an action in Illinois. See 805 ILCS 5/13.05, 805 ILCS 5/13.55(c), 805 ILCS 5/13.70, 805 ILCS 5/13.75.

Clearance for a Domestic Corporation

• A corporation has the power to sell and mortgage property. See 805 ILCS 5/3.10(e).

• The examiner should obtain and review a certificate of good standing. See 805 ILCS 5/15.95(e). The certificate is not necessary if dealing with an established corporation that is financially sound. (In lieu of obtaining a certificate of good standing, the examiner may confirm the good standing of a corporation by searching the Illinois Secretary of State’s website, which is: www.cyberdriveillinois.com.)

• How important is the certificate of good standing? The Illinois Secretary of State will administratively dissolve a corporation if, for example, it has not paid any fee or its franchise tax. See 805 ILCS 5/12.35(c). The dissolution of a corporation terminates its corporation existence. A dissolved corporation cannot carry on any business except what is necessary to wind up its affairs. See 805 ILCS 5/12.30.

• Each corporation shall have a board of directors, and the business and affairs of the corporation shall be managed by the board of directors. See 805 ILCS 5/8.05.

• A majority of the number of directors fixed by the by-laws, or in the absence of a by-law fixing the number of directors, the number stated in the articles of incorporation or named by the incorporators, shall constitute a quorum for the transaction of business unless a greater number is specified by the articles of incorporation or the by-laws. See 805 ILCS 5/8.15(a).

• The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by the articles of incorporation or the by-laws. See 805 ILCS 5/8.15(c).

• A corporate resolution, passed by the board of directors, authorizing the deed or mortgage, is evidence of board authorization of the proposed deed or mortgage. See 805 ILCS 5/8.50.

• When the title company is insuring the sale or mortgage of all or substantially all of the corporate assets of the corporation, and the transaction is made in the usual and regular course of business of the corporation, the examiner must obtain the authorization of the board of directors. Shareholder consent is not needed, however. See 805 ILCS 5/11.55.

• Even if the title company is insuring the sale or mortgage of less than all or substantially all of the corporate assets of the corporation, the examiner should still obtain a corporate resolution. As indicated above, this resolution is evidence of the board authorizing the proposed deed or mortgage. See 805 ILCS 5/8.50.

• The resolution should be executed by a quorum of the board of directors, thus evidencing the board’s approval of the proposed transaction. However, note that 805 ILCS 5/8.50 does state that “one officer, in this Act generally referred to as the secretary, shall have the authority to certify the by-laws, resolutions of the shareholders and board of directors and committees thereof, and other documents of the corporation as true and correct copies thereof.”

• If the proposed conveyance is of all or substantially all of the corporate assets of the corporation, and the transaction is not in the usual and regular course of business of the corporation, then the examiner must obtain approval from the holders of at least 2/3 of the outstanding voting shares of stock (as well as a corporate resolution). See 805 ILCS 5/11.60(c).

Execution of the Deed or Mortgage by a Domestic Corporation:

• The deed or mortgage should be executed by the president, a vice-president, the secretary, an assistant secretary, the treasurer, or other officer authorized by the board of directors, or if there are no such officers, then by a majority of the directors or by such directors as may be designated by the board, or if there are no such officers or directors, then by the holders of record of a majority of all outstanding shares, or by such holders as may be designated by the holders of record of a majority of all outstanding shares. See 805 ILCS 5/1.10(b)(2). (The wording of this statute indicates that a deed or mortgage need be executed by only one authorized party. Naturally, the specific requirements of the corporation, as detailed in, e.g., its resolution, may differ from those set forth in this statute.)

• If the corporate resolution does not indicate the names of the people who are to sign the documents, the examiner should ask for a copy of the by-laws; see 805 ILCS 5/8.50. As a last resort, the examiner should ask for a copy of the articles of incorporation; see 805 ILCS 5/2.10; see especially 805 ILCS 5/2.10(8)(b)(2)(ii).

• 805 ILCS 5/1.10(b)(2)(v) provides that if the corporate assets are in the possession of a receiver, trustee or other court appointed officer, then the documents should be signed by the fiduciary or the majority of them if there are more than one.

• Note that the use of a corporate seal is no longer mandatory. See 805 ILCS 5/3.10(c); see also 805 ILCS 105/103.10(c).

Clearance for a Foreign Corporation (805 ILCS 5/13.05 et seq.)

Clearance:

• The examiner should not ask for an Illinois certificate of good standing. Instead, the examiner should request evidence that the foreign corporation is in good standing in its home state.

• It is certainly true that a foreign corporation has to pay license fees and franchise taxes. However, these fees have to be paid by the foreign corporation as a condition to doing business in the State of Illinois. See 805 ILCS 5/13.50(h); 805 ILCS 5/15.50 and 805 ILCS 5/15.65.

• As set forth in the Act, merely owning real estate, in and of itself, does not constitute doing business in Illinois. See 805 ILCS 5/13.75(9). For a list of “activities that do not constitute transacting business,” see 805 ILCS 5/13.75.

• “Owning, without more, real or personal property” is not transacting business in Illinois. “Conducting an isolated transaction that is completed within 120 days and that is not one in the course of repeated transactions of a like nature” is not transacting business in Illinois. See 805 ILCS 5/13.75(9); 805 ILCS 5/13.75(10).

• Is the selling, buying, and mortgaging of several lots in a series of closings transacting business? Perhaps it is. If the examiner is concerned about a foreign corporation transacting business in Illinois, the examiner should check to see if the Illinois Secretary of State has filed the foreign corporation’s application for authority to transact business in Illinois as a foreign corporation. This filed application is evidence that the foreign corporation can transact business in Illinois. Alternatively, the examiner should consult an underwriter. See 805 ILCS 5/13.05; 805 ILCS 5/13.15; 805 ILCS 5/13.20.

• Article 13 of the Business Corporation Act (805 ILCS 5/13.05 through 805 ILCS 5/13.75) concerns foreign corporations. Unlike the statutes concerning domestic corporations, Article 13 contains no provisions for corporate resolutions or shareholder approval. The examiner will have to look to the laws of the state of the foreign corporation for guidance in this area. As a last resort, and with underwriter approval, the examiner can accept a corporate resolution that has been passed by the board of directors of the foreign corporation in order to insure a deed or mortgage executed by a foreign corporation.

Execution of a Deed or Mortgage by a Foreign Corporation

• Article 13 contains no provision for document execution. The examiner will have to look to the laws of the state of the foreign corporation for guidance in this area. As a last resort, and with underwriter approval, the examiner can rely on 805 ILCS 5/1.10(b)(2). That is, the deed or mortgage of a foreign corporation should be executed by the president, a vice-president, the secretary, an assistant secretary, the treasurer, or other officer authorized by the board of directors, or if there are no such officers, then by a majority of the directors or by such directors as may be designated by the board, or if there are no such officers or directors, then by the holders of record of a majority of all outstanding shares, or by such holders as may be designated by the holders of record of a majority of all outstanding shares.

Corporate Clearance for the All-Cash Transaction

Assume that a corporation is purchasing property in an all-cash transaction. One might think that in this situation, the examiner does not have to be concerned about obtaining the appropriate corporate clearance, that if a claim were to arise, the claim would be an “act of the insured,” which is excluded from policy coverage pursuant to Exclusion 3(a) of the 2006 ALTA owner’s title policy.

However, it is Company policy that the examiner obtain the evidence that the corporation exists as a valid corporation, even in an all-cash transaction. The reasoning is as follows:

If a corporation were not in good standing in Illinois, it would not be able to maintain a lawsuit in Illinois courts. See 805 ILCS 5/15.85(c). This would deprive the Company of its right to subrogation under the owner’s title policy.

That is, if the Company settled a claim on behalf of its insured corporation and then wished to sue in Illinois on behalf of the corporation for recoupment, it would not be able to do so. The Company had “stepped into the shoes of the corporation” and so would not be able to maintain the lawsuit.

Rule of Title Practice—A Summary

Generally speaking, an examiner should request a copy of a corporate resolution when insuring a conveyance or mortgage of a foreign or domestic corporation.

A resolution is not needed if the proposed transaction is within the ordinary scope of business of the corporation. Consider, for example, a relocation company selling a home.

The deed or mortgage should be executed by the president, a vice-president, the secretary, an assistant secretary, the treasurer, or other officer authorized by the board of directors of the corporation to execute the document. However, the resolution should offer guidance in the execution of the document(s).

In the event the contemplated conveyance or mortgage comprises a sale or mortgage of all or substantially all of the assets of the corporation, the examiner must obtain both a corporate resolution and also written evidence of the shareholders’ approval of the transaction.

Dissolution of Corporations (805 ILCS 5/12.05 et. seq.; 805 ILCS 105/112.05 et seq.)

If a domestic corporation does not pay its franchise tax or file its annual report, the Illinois Secretary of State can administratively dissolve the corporation. See 805 ILCS 5/12.35. Corporate dissolution is evidenced by the Secretary of State issuing a certificate of dissolution, which is filed with the Illinois Secretary of State and mailed to the registered office of the corporation. See 805 ILCS 5/12.40(b).

In the alternative, the shareholders can consent in writing to dissolving the corporation. See 805 ILCS 5/12.10; 805 ILCS 105/112.10. Furthermore, all members of a corporation, or a quorum of members of a not-for-profit corporation, can vote to dissolve the corporation. See 805 ILCS 5/7.10; 805 ILCS 105/107.10.

A circuit court can dissolve a corporation if the Attorney General shows that the corporation abused its authority or violated the law. See 805 ILCS 5/12.50; 805 ILCS 105/112.50. Furthermore, a circuit court can also dissolve a business corporation if a creditor proves that it has a judgment that cannot be satisfied by the corporation’s assets. See 805 ILCS 5/12.50.

If a court enters an order of dissolution, it will supervise the “winding up” of the corporation’s business. See 805 ILCS 5/12.65; 805 ILCS 105/112.65; 805 ILCS 5/12.40(c).

Years ago, when a corporation dissolved, a corporation’s assets vested in the shareholders of the corporation. This has not been the case since July 1, 1984. Now, the dissolution of a corporation does not transfer title. Instead, upon dissolution of the corporation, title to the land remains in the corporation. See 805 ILCS 5/12.30(c)(1).

“Winding Up” the Corporation’s Business

Upon dissolution, the corporation cannot carry on any business except that necessary to “wind up” its affairs. See 805 ILCS 5/12.30. 805 ILCS 5/12.30(b) states that “after dissolution, a corporation may transfer good and merchantable title to its assets as authorized by its board of directors or in accordance with its by-laws.” See also 805 ILCS 105/112.30, which concerns the dissolution of not-for-profit corporations.

Therefore, a corporation can be dissolved and still convey real estate to an Insured. Because the Act allows a dissolved corporation to “wind up” its affairs, the dissolved corporation does not have to pay any unpaid license fees and franchise taxes before it conveys real estate.

However: Any request to insure a conveyance by a dissolved corporation as part of the “winding up” process when the corporation has been dissolved for more than a year should be referred to an underwriter. The underwriter may decide that a long-dissolved corporation can no longer wind up its affairs. Instead, the corporation may have to be reinstated.

Rule of Title Practice for Dissolved Corporations

• Upon dissolution of a corporation, title to the land remains in the corporate name. Title does not vest in the names of the shareholders. See 805 ILCS 5/12.30(c)(1).

• Upon dissolution, a corporation cannot carry on any business except what is necessary to “wind up” its affairs. Thus, it does not appear that a dissolved corporation can mortgage its corporate property. See 805 ILCS 5/12.65.

• After dissolution, the corporation may transfer title to its assets “as authorized by its board of directors or in accordance with its bylaws.” See 805 ILCS 5/12.30(5)(b).

• The examiner will obviously be unable to obtain a certificate of good standing. However, the examiner should ask for a resolution that not only authorizes the proposed conveyance, but also indicates that the deed is part of the “winding up” process of the corporation. See 805 ILCS 5/8.05(a); 805 ILCS 5/8.50; 805 ILCS 5/11.55; 805 ILCS 5/12.40(c).

• When examining title to land that is held by a dissolved corporation, the examiner should show the certificate of dissolution as a Schedule B exception on the title commitment. Upon a sale of the land, the certificate can be waived for any policy issued.

Execution of deed:

• The deed should be executed by the president, a vice-president, the secretary, an assistant secretary, the treasurer, or other officer authorized by the board of directors, or if there are no such officers, then by a majority of the directors or by such directors as may be designated by the board, or if there are no such officers or directors, then by the holders of record of a majority of all outstanding shares, or by such holders as may be designated by the holders of record of a majority of all outstanding shares. See 805 ILCS 5/1.10(b)(2).

• If the corporate resolution does not indicate the names of the people who are to sign the deed, the examiner should ask for a copy of the by-laws; see 805 ILCS 5/8.50. As a last resort, the examiner should ask for a copy of the articles of incorporation; see 805 ILCS 5/2.10; see especially 805 ILCS 5/2.10(8)(b)(2)(ii).

Other Matters Concerning Dissolved Corporations

See the 2012 Illinois Supreme Court case Pielet v. Pielet, 2012 IL 112064; this case indicates that in order to sue a dissolved corporation, the cause of action must exist prior to the time of dissolution. This case concerns Section 12.80 of the Business Corporation Act, or 805 ILCS 5/12.80.

Because of this case, the examiner should not accept a personal undertaking when it is executed by a corporation. Instead, the undertaking should be executed by one or more shareholders. (See also A Plus Janitorial Corp. v. Group Fox, Inc., 2013 Ill. App. (1st) 120245.)

Example: Land is owned by ABC Corporation. The corporation is in financial difficulty. It wants to sell the building it is constructing. At the closing, the Company agrees to accept a personal undertaking from the corporation for possible mechanics lien claims. Three months later the corporation is dissolved. Four months later a mechanics lien is recorded, and the claimant immediately begins foreclosure proceedings. Five months later the Company is tendered the defense of the mechanics lien claim. The Company immediately tenders the defense of the claim to the corporation, but it is now dissolved. A court might conclude that the cause of action arose after the corporation was dissolved, and that therefore, the corporation has no legal obligation to honor the personal undertaking.

Once a corporation pays its delinquent fees and charges, the Secretary of State can reinstate the corporation. See 805 ILCS 5/12.45; see also 805 ILCS 105/112.45.

Once reinstated, the corporate existence shall be deemed to have continued without interruption from the date of the issuance of the certificate of dissolution. That is, the corporate existence “relates back” to the time the certificate of dissolution was issued. Once reinstated, it is as if the certificate was never issued. See 805 ILCS 5/12.45(d).

Not-for-Profit Corporations

See the General Not-for-Profit Corporation Act of 1986, which is codified as 805 ILCS 105/101.01 et seq.

In General

A not-for-profit corporation is a corporation whose income is not distributable to its members. See 805 ILCS 105/106.05. A not-for-profit corporation may be organized for charitable, religious, or educational purposes, or for any one or more of the other purposes outlined in 805 ILCS 105/103.05. A not-for-profit corporation has the power to sell or mortgage any or all of its property or assets. See 805 ILCS 105/103.10(e) and 805 ILCS 105/111.55.

Clearance for a Not-for-Profit Corporation

• A not-for-profit corporation has the power to sell and mortgage its property. See 805 ILCS 105/103.10(e).

• A not-for-profit corporation can be involuntarily dissolved for, among other things, failing to file its annual report or failing to pay any fees and charges. See 805 ILCS 105/112.35(a) and 805 ILCS 105/112.35(c). For this reason the examiner should either ask for a certificate of good standing or confirm the good standing of the corporation by searching the Illinois Secretary of State’s website, which is: www.cyberdriveillinois.com.

• The examiner should review the bylaws of the corporation to see if there are any limitations on the corporation’s power to sell and mortgage its property. The examiner may also want to look at the articles of incorporation. See 805 ILCS 105/101.80(c); 805 ILCS 105/101.80(e); 805 ILCS 105/102.10; 805 ILCS 105/102.25.

• When insuring the sale of mortgage of all or substantially all of the corporate assets of the corporation, when made in the usual and regular course of business of the corporation, the examiner will need the authorization of the board of directors. See 805 ILCS 105/111.55.

• A corporate resolution, passed by the board of directors, authorizing the deed or mortgage, is evidence of the consent of the board of directors. See 805 ILCS 105/108.50(b).

Even if the Company is insuring the sale or mortgage of less than all or substantially all of the corporate assets of the corporation, the examiner should still obtain a corporate resolution. As indicated above, this resolution is evidence of the board authorizing the proposed deed or mortgage. See 805 ILCS 105/108.50(b).

• If the proposed conveyance or mortgage is of all or substantially all of the corporate assets of the corporation, and the transaction is not in the usual and regular course of business of the corporation, then the transaction is authorized in the following manner: If the corporation has no members or no members entitled to vote on the proposed conveyance or mortgage, then the majority vote of the directors in office can authorize the conveyance or mortgage. See 805 ILCS 105/111.60.

But if the corporation has members entitled to vote on the proposed conveyance or mortgage, then the board of directors has to adopt a resolution recommending the sale or mortgage. The members then have to vote at either an annual meeting or a special meeting to authorize the deed or mortgage. A two-thirds affirmative vote of a quorum (a quorum being members holding one-tenth of the votes entitled to be cast) is needed. See 805 ILCS 105/107.60; 805 ILCS 105/111.60.

Execution of deed or mortgage:

• The deed or mortgage should be executed by the president, a vice-president, the secretary, an assistant secretary, the treasurer, or other authorized officer. If there are no such officers, then the document should be executed by a majority of the directors or by such directors as may be designated by the board of directors. If there are no such officers or directors, then the document should be executed by the members or such members as may be designated by the members at a lawful meeting. See 805 ILCS 105/101.10.

Corporate Merger (805 ILCS 5/11.05)

The statute provides as follows:

Any two or more corporations may merge into one of such corporations or consolidate into a new corporation in the following manner:

The board of directors of each corporation shall, by resolution adopted by a majority vote of the members of each such board, approve a plan of merger or consolidation setting forth various items. These are set forth in the statute. They include the following:

• The names of the corporations proposing to merge or consolidate, and the name of the corporation into which they propose to merge, which is hereinafter designated as the surviving corporation or to consolidate, which is hereinafter designated as the new corporation;

• The terms and conditions of the proposed merger or consolidation and the mode of carrying the same into effect;

• A statement of any changes in the articles of incorporation of the surviving corporation to be effected by such merger or a statement of the articles of incorporation of the new corporation;

• Such other provisions with respect to the proposed merger or consolidation as are deemed necessary or desirable.

The Illinois Entity Omnibus Act

See also the Illinois Entity Omnibus Act, codified as 805 ILCS 415/101 et seq. This Act provides for conversions and domestications.

Conversion involves Illinois and foreign entities of different types. Domestication concerns Illinois and foreign entities of the same type.

Examples of Conversion

An Illinois corporation can become an Illinois limited liability company. A Delaware corporation can become an Illinois limited liability company.

Examples of Domestication

An Illinois corporation can become a Delaware corporation. A Delaware corporation can become an Illinois corporation.

To create a conversion or domestication, a statement of conversion or a statement of domestication must be filed with the Illinois Secretary of State.

Corporations and Judgments

A corporation is a legal “person.” Thus, it can sue and be sued; it can incur liability in its own name. See 805 ILCS 5/3.10(b) and 805 ILCS 5/3.10(d).

Employees of the corporation manage the corporation, but under agency law, the employees are not personally liable for their actions. Instead, the corporation is liable for the employees’ actions. See 805 ILCS 5/3.10(p). Therefore, only judgments against the corporation (and not judgments against an employee or shareholder) have to be shown on the title commitment for property owned by a corporation. See 805 ILCS 5/3.10(b); 805 ILCS 5/3.10(p). See also 805 ILCS 105/103.10(b); 805 ILCS 105/108.70.

Municipal Corporations

See 65 ILCS 5/11-76-1 et seq. (Sale or Lease of Real or Personal Property)

Home Rule Municipalities

Until 1970 units of local government were deemed to be creatures of the state. It was thought that all of their powers must be specifically granted by the Constitution or by state statute, or must be necessarily implied from that grant of power.

But then the 1970 Illinois Constitution created home rule. Home rule municipalities are governed by Article 7, Section 6, of the Illinois Constitution, which provides that “a home rule unit may exercise any power and perform any function pertaining to its government and affairs including, but not limited to, the power to regulate for the protection of the public health, safety, morals, and welfare, to license, to tax, and to incur debt.”

Compare these broad powers to non-home rule units. Article VII, Section 7 of the Illinois Constitution states that “counties and municipalities that are not home rule units shall have only powers granted to them by law. . . .” These powers include the right to make local improvements by special assessment; to adopt, alter, or repeal their forms of government by referendum; to provide for the selection of their officers; to incur debt, and to levy taxes.

Home rule units are municipalities with over 25,000 people. Municipalities can opt in or out of home rule status by referendum. A county that has a chief executive officer elected by the electors of the county is also a home rule unit. Home rule units are not special districts, like a park district.

The website of the Illinois Municipal League contains a list of all of the home rule municipalities in Illinois. Go to www.iml.org and then search “home rule.” Then click on, “Home Rule Municipalities.”

The Sale of Municipal Property by a Home Rule Unit

Home rule units can adopt whatever rules they choose in selling their property. Thus, home rule units have two alternatives:

• They can adopt by ordinance whatever rules they choose, or,

• They can follow the statutes.

Rule of Title Practice for Home Rule Municipalities

The examiner should ask for a copy of the ordinance for the sale of property, and then follow the ordinance. See below for a sample title exception:

In order to insure the sale of municipal property pursuant to an ordinance drafted pursuant to the municipality’s home rule status, we should be furnished a copy of said ordinance. This commitment may be subject to additional exceptions after our review of said ordinance.

Non-Home Rule Municipalities

Non-Home Rule municipalities do not have the option of drafting their own ordinances to sell property. Instead, they must follow the Illinois statutes. These various statutes are outlined below. (Unless otherwise stated, the following underwriting rules apply to non-home rule municipalities.)

The Sale of Municipal Property by a Non-Home Rule Municipality

A city or village has the power to convey real estate when, in the opinion of the corporate authorities, the real estate is no longer needed by the city or village. This power shall be exercised by an ordinance passed by three-fourths of the corporate authorities of the city or village then holding office, at either a regular meeting or a special meeting. See 65 ILCS 5/11-76-1.

This ordinance shall specify the location of the real estate, the use thereof, and such conditions with respect to further use of the real estate that the corporate authorities deem necessary. See 65 ILCS 5/11-76-2.

But before the corporate authorities sell the land by virtue of the ordinance, notice of the proposal to sell the land shall be published once each week for three consecutive weeks in a daily or weekly paper published in the city or village, and if there is no such paper, then in some paper published in the county in which the city or village is located. The first publication shall be not less than thirty days before the day provided in the notice for the opening of bids for the real estate. The notice shall contain an accurate description of the property, state the purpose for which the land is used, and state at what meeting the bids will be considered and opened. See 65 ILCS 5/11-76-2.

The corporate authorities may accept the high bid or any other bid determined to be in the best interest of the city or village by a vote of three-fourth of the corporate authorities then holding office. However, by a majority vote of those holding office, they may reject any and all bids. See 65 ILCS 5/11-76.2.

The deed conveying this property is signed by the mayor or president and also the municipal clerk. See 65 ILCS 5/11-76-3.

Sale of Land by the Resolution of a Non-Home Rule Municipality

The corporate authorities may also authorize the sale of surplus real estate by resolution. See 65 ILCS 5/11-76-4.1.

The value of the real estate is determined by an appraisal. The resolution is published “at the first opportunity following its passage” in a newspaper published in the municipality or, if none, then in a newspaper published in the county where the municipality is located. The corporate authorities may accept any contract proposal determined by them to be in the best interest of the municipality by a vote of two-thirds of the corporate authorities then holding office. In no event, however, shall the price by less than 80% of the appraised value. See 65 ILCS 5/11-76-4.1.

A Non-Home Rule Municipality’s Alternative Means of Selling Surplus Property

See 65 ILCS 5/11-76-4.2. This section of the Act applies if a municipality has a population of less than 20,000 and is in a county with an unemployment rate that is higher than the national average for at least one month during the six months preceding the adoption of the resolution to sell the real estate.

If the ordinance (65 ILCS 5/11-76-2) or resolution (65 ILCS 5/11-76-4.1) has failed to work, then the corporate authorities may by a different resolution (65 ILCS 5/11-76-4.2) authorize the sale of surplus land by either the staff of the municipality, by listing with a real estate agency, or by public auction.

The resolution must be published once each week for three successive weeks in a newspaper (in the same manner outlined earlier). No sale may be conducted until at least thirty days after the first publication. The corporate authorities may accept any offer or bid by a vote of 3/4 of the corporate authorities then holding office.

Rule of Title Practice

When insuring the sale of municipal property, consider a generic exception similar to the following:

In order to insure the sale of municipal property, we should be furnished the following, and our commitment and policy may be subject to additional exceptions after our review of these materials:

If the municipality is a home rule municipality, we should be furnished a copy of the appropriate ordinance. If the municipality is not a home rule municipality, (or if it is, but it follows the procedure outlined in the Illinois Compiled Statutes), then we should be furnished a copy of the appropriate ordinance (together with the number of “yes” and “no” votes as to its passage); a copy of the published notice, including evidence as to when the notice was published; and a statement as to the number of “yes” and “no” votes that approved the winning bid. If the sale was by resolution, we should be furnished a copy of the appraisal, a copy of the corporate resolution, evidence of publication, and a statement as to the number of “yes” and “no” votes that approved the contract to purchase the real estate pursuant to said resolution.

The Purchase of Municipal Property by a Non-Home Rule Unit

See 65 ILCS 5/11-76.1-1 et seq.

The corporate authorities of each municipality having a population of less than 500,000 people can purchase real estate for public purposes. To do so they must pass an ordinance; they need an affirmative vote of two-thirds of the corporate authorities. See 65 ILCS 5/11-76.1-1.

After the ordinance has been passed, it shall be published in a newspaper that is published (or if not published, then circulated) in the municipality at least twice within thirty days after its passage. In municipalities with less than five hundred people in which no newspaper is published, then publication can be had by posting a notice in three prominent places within the municipality. The ordinance shall not become effective until thirty days after its second publication. See 65 ILCS 5/11-76.1-3.

The Exchange of Real Estate

See 65 ILCS 5/11-76.2-1 et seq.

For an exchange of real estate, there first must be a public hearing pursuant to a three-fourths vote of the members of the corporate authorities. Notice of the public hearing must be published in a newspaper of general circulation. The notice must be published not less than fifteen days or more than thirty days prior to the date of the hearing. The notice shall include a legal description of all properties and the terms and conditions of the exchange.

After the public hearing, the corporate authorities may authorize the exchange. In order to do so they need a three-fourths vote. If the exchange is authorized, the authorization is by ordinance, and the ordinance should include the following:

• That the land to be exchanged in no longer needed by the municipality for the public interest;

• That the land to be received will prove useful to the municipality and will be for the public interest;

• And that the total value of the land to be received is approximately equal to or exceeds the value of the land being traded.

Note that the wording of the statute indicates that land can be exchanged between a municipality and an individual, legal entity, or other non-municipality. For the transfer of real estate between municipalities, see below.

The Transfer of Real Estate between Municipalities

See 50 ILCS 605/1 et seq.

This statute is called the Local Government Property Transfer Act. The “transferee municipality” has to declare by ordinance that it is necessary or convenient for it to use, occupy or improve any real estate held by the “transferor municipality.”

The transferor municipality can convey the land to the transferee municipality by a deed signed by the mayor, president, or other chief executive of the transferor municipality, attested by its clerk or secretary and sealed with its corporate seal, all authorized by a resolution passed by a two/thirds vote of the members of the legislative body of the transferor municipality.

A municipality has the power upon resolution passed by a two-thirds vote of the members of its legislative body then holding office to transfer property to the State of Illinois. The term “State of Illinois” includes the state or any department, commission, board or other agency of the state.

The Local Government Property Transfer Act includes provisions for the releasing of easements and restrictions.

Home Rule Issues

The title examiner should be cautious about relying on a municipality’s status as a home rule municipality.

Example: An attorney contacts the title examiner. The attorney represents a home rule municipality. He wants the city to vacate a road pursuant to 65 ILCS 5/11-91-1. This statute requires the approval of at least three/fourths of the alderman, trustees, or commissioners. The attorney argues that because the city is home rule, the city can enact an ordinance that allows for merely a simple majority to approve the vacation. Is the attorney correct?

Some underwriters feel that he is not correct. They claim that the law has made it clear that there are certain matters of law that cannot have local variations. The determination of the extent and ownership of fee title to real estate is one of them. Rather, this determination is more properly an affair of the state.

But on the other hand, Oak Park, Downers Grove, and Peoria all have ordinances that allow for this type of vacation.

For example, this is the current Oak Park ordinance:

22-11-1: Vacation of Streets and Alleys: Streets and alleys may be vacated by the Board of Trustees pursuant to the provisions and procedures set forth in division 91 of the Illinois Municipal Code (65 ILCS 5/11-91-1 and 5/11-91-2), provided, however, pursuant to the home rule powers of the Village as set forth in Article VII, Section 6 of the Illinois Constitution, an ordinance vacating a street or alley shall be effective upon being passed by the affirmative vote of a majority of the Board of Trustees (1981 Code).

Furthermore, consider this analysis: The Illinois Supreme Court in Schillerstrom Homes, Inc. v. The City of Naperville, 198 Ill.2d 281, 762 N.E.2d 494 (2001) said this:

This court has formulated a three-part inquiry for evaluating the constitutionality of exercise of home rule power. First, we must determine whether the disputed exercise of local government power falls within section 6(a) [of Article VII of the Illinois Constitution]—that is, whether the local government’s activity is a function pertaining to its government and affairs. If so, we must determine whether the General Assembly has preempted the use of home rule powers in this area. If not, then we must determine ‘the proper relationship’ between the local ordinance and the state statute.

That is, these three factors are as follows:

• Does the contemplated exercise of local government power pertain to the government and affairs of the local government?

• If so, has the General Assembly preempted the use of home rule powers in this area? That is, does the statute in question contain specific language that would preempt home rule under Article VII, Section 6(h), of the Illinois Constitution?

• If the statute does not contain such specific language, is the state statute an attempt to declare the subject an issue that requires exclusive state control?

The Illinois Supreme Court states the following as to the first factor:

An ordinance pertains to local government and affairs where it addresses local, rather than state or national, problems. . . . . Whether a particular problem is of statewide rather than local dimension must be decided not on the basis of a specific formula or listing set forth in the Constitution but with regard for the nature and extent of the problem, the units of government which have the most vital interest in its solution, and the role traditionally played by local and statewide authorities in dealing with it. [Citation omitted] Municipal development regulations . . . undoubtedly pertain to local affairs.

One might argue that the vacation of a right-of-way certainly pertains to local government and affairs.

Secondly, the vacation statute (65 ILCS 5/11-91-1) does not contain specific language that would preempt home rule under Article VII, Section 6(h), of the Illinois Constitution.

But as to the third factor: This seems rather nebulous. What is “the proper relationship” between the local ordinance and the state statute?” What does this statement mean?

The Schillerstrom court goes on to say:

This court has upheld the right of local governments to enact their own solutions to various local problems in the face of less stringent or conflicting State regulation, following a determination that the State’s expression of interest in the subject as evidenced by its statutory scheme did not amount to an express attempt to declare the subject one requiring exclusive State control.

In this regard, the case of The City of Wheaton v. Robert A. Sandberg, 215 Ill.App.3d 220, 574 N.E.2d 697, 158 Ill. Dec. 584 (1991) is illuminating. In this case the City of Wheaton wanted to condemn property. Wheaton is a home rule municipality. The defendant claimed that Wheaton’s enabling ordinance on which the condemnation action was based was invalid because it was preempted by the uniform state statutes created by the Commercial Renewal and Redevelopment Areas Act of the Illinois Municipal Code.

Specifically, the defendant claimed that the enabling ordinance was invalid because its definition of a “blighted area” differs from the definition of “blight” found in the state Act. That is, the state statute specifies that excessive vacancies may be one of the five elements necessary for a finding of blight, while the ordinance merely provides for vacancy alone in all or any part of the building as sufficient for a finding of blight.

The court concluded that there was no evidence indicating the necessity for uniform standards under the Commercial Renewal and Redevelopment Areas Act. Nor did the court perceive an overriding policy interest on the part of the state in keeping these standards uniform. Thus, the court maintained that the City of Wheaton could enact an enabling ordinance that did not conform to the state statute. (However, the court later said that although the ordinance was not preempted by the state statute, it was invalid on constitutional grounds.)

How does the holding of this case affect the issue relative to a right-of-way vacation? Again, the statement from the Schillerstrom case seems to be the key:

This court has upheld the right of local governments to enact their own solutions to various local problems in the face of less stringent or conflicting State regulation, following a determination that the State’s expression of interest in the subject as evidenced by its statutory scheme did not amount to an express attempt to declare the subject one requiring exclusive State control.

It does not appear that the State of Illinois’ requirement of a 3/4 vote as set forth in 65 ILCS 5/11-91-1 is an “express attempt” by the state to maintain exclusive control over the means of a right-of-way vacation.

However, this Schillerstrom statement does refer to a condition precedent of “a determination that the State’s expression of interest” does not amount to an attempt by the State of asserting exclusive state control of the matter. Who makes this so-called “determination?” If the court has not yet made a determination that the statutory requirement of a 3/4 vote is not an attempt to declare the subject of right-of-way vacations a matter that requires exclusive state control, could a disgruntled homeowner bring suit because of a home rule right-of-way vacation?

But is it up to the court to make this determination? In the alternative, can the municipality make this determination in its ordinance? That appears doubtful.

Rule of Title Practice

Any request to insure a municipal real estate transaction pursuant to a home rule ordinance when a corresponding state statute already exists that also governs this transaction should be referred to an underwriter. Is there a chance of an adjoining homeowner being upset by the proposed transaction? The underwriter may want to ask for a personal undertaking for defense costs in the event there is litigation.

Other Statutes

• For the transfer of real estate from a municipality to the State of Illinois, see 50 ILCS 605/4.

• For the sale of school district real property, see 105 ILCS 5/5-22 et seq.

• Note that there does not appear to be a statute that governs the purchase of school district property. In that regard, the title examiner should request a copy of the real estate contract and a copy of the minutes of the meeting of the board of education wherein that contract for the purchase of the real estate has been approved. For gifts or donations to school districts, see 105 ILCS 5/5-21.

• For the sale of land by a forest preserve district in a county of less than 550,000 people, see 70 ILCS 805/6e.

• For the sale or exchange of land owned by a fire protection district, see 70 ILCS 705/10a.

• For the conveyance of park district property, see 70 ILCS 1205/10-1 et seq.

• For the acquisition of real estate by the Illinois State Toll Highway Authority, see 605 ILCS 10/9 et seq.

• For the acquisition of real estate by the Cook Country Forest Preserve District, see 70 ILCS 810/8; 70 ILCS 810/10; 70 ILCS 810/38.

• For the acquisition, finance, and sale of township property, see 60 ILCS 1/85-10(c); 60 ILCS 1/105-10.

• For the sale of public library property, see 75 ILCS 5/4-7(6) and 75 ILCS 5/4-16.

• For the mortgage of public library property, see 75 ILCS 5/5-6 and 75 ILCS 10/7(12).

• For the purchase of public library property, see 75 ILCS 5/4-7(4), 75 ILCS 5/5-6, 75 ILCS 10/7(4) and 75 ILCS 10/7(11).

Park Districts

See 70 ILCS 1205/1-1 et seq.

Can a Park District Mortgage Its Property?

It is not clear. Note that 70 ILCS 1205/6-2 states that the park district can “pledge its property,” but this is somewhat ambiguous.

70 ILCS 1205/9.3-5 indicates that a park district can mortgage an indoor or outdoor recreational facility under certain circumstances, but again, this is not a clear mandate.

The issue concerning a park district of other unit of government is: what happens when the loan is foreclosed? There is a basic underlying concept that a unit of government cannot lose its property.

Before insuring a mortgage of park district property, consider having the park district first obtain a declaratory judgment that it can mortgage the property in question.

Can a Municipality Mortgage Its Property?

• There are at least two statutes that refer to a municipality mortgaging its property. See 65 ILCS 5/11-74-4(5), which concerns an “industrial project.” 65 ILCS 5/11-74.4-4(c) indicates that a municipality can mortgage property within a “redevelopment project area.” However, what happens if the mortgage is foreclosed? There is a basic underlying doctrine or concept that a unit of government cannot lose its property.

But on the other hand, consider the broad wording of 65 ILCS 5/11-74.4-4(c), which provides as follows:

[Within a redevelopment project area, a municipality may] own, convey, lease, mortgage or dispose of land and other property, real or personal . . . . No conveyance, lease, mortgage, disposition of land or other property owned by a municipality, or agreement relating to the development of such municipal property shall be made except upon the adoption of an ordinance by the corporate authorities of the municipality. Furthermore, no conveyance, lease, mortgage, or other disposition of land owned by a municipality or agreement relating to the development of such municipal property shall be made without making public disclosure of the terms of the disposition and all bids and proposals made in response to the municipality's request.

• If asked to insure the mortgage of municipal property, the examiner should talk to an underwriter. The examiner may need to insist that the corporate municipality obtain a declaratory judgment that it can mortgage its property.

• 65 ILCS 5/8-1-3.1 provides that a municipality may borrow money from a bank or other financial institution, but the money must be repaid within ten years from the time the money is borrowed.

• 65 ILCS 5/8-1-6 and 65 ILCS 5/8-1-7 provide that a municipality cannot incur an expense unless an appropriation has been previously made pursuant to an appropriation ordinance. 65 ILCS 5/8-1-7(a) further states as follows: “Any contract made, or any expense otherwise incurred, in violation of the provisions of this section shall be null and void as to the municipality, and no money belonging thereto shall be paid on account thereof.” This statute illustrates a potential problem in insuring a mortgage of municipal property.

Can a Township Mortgage Its Property?

See 60 ILCS 1/85-10(c) and 60 ILCS 1/85-10(d). However, 60 ILCS 1/85-10(c) states that a township may finance the purchase of real estate by the use of “finance contracts.” This suggests that a township can mortgage property. However, see Attorney General Opinion Number 97-010, which states: “It has long been the rule in this State that a unit of local government may not legally execute a mortgage without express statutory authority to do so. (1933 Ill. Att’y Gen. Op. 758.)”

The Public Trust Doctrine

Customers will occasionally ask a title company to underwrite restrictions that benefit the public and not private parties. See, e.g., Morgan County v. Braner, 71 Ill. 546 (1874); Huntley Fire Protection District v. Huntley Development Limited Partnership, 338 Ill. App. 3d 609, 788 N.E.2d 355, 273 Ill. Dec. 46 (2003).

Example: In 1987 Landowner deeded Blackacre to Village. The deed includes a covenant that the property “is to be used for public park purposes.” For more than thirty years Blackacre has been used for a park. But in 2019 Village wants to enter into an inter-governmental agreement with School District, whereby Blackacre will be traded to School District in exchange for Whiteacre. School District indicates that after the two properties are exchanged, Blackacre will no longer be used as a public park. Can the 1987 covenant be endorsed over, providing coverage to School District over the violation?

It appears that in this instance the “public trust doctrine” is applicable. This tenet stands for the proposition that units of government own “trust resources,” like parks, as a trustee, and that these resources cannot be conveyed if the transfer would diminish or defeat traditional public access to and the use of those resources.

See Paepcke v. Public Housing Commission of Chicago, 46 Ill.2d 330, 263 N.E.2d 11 (1970); “Illinois Central and the Public Trust Doctrine in State Law,” 15 Va. Envtl. L.J. 713 (Summer 1996).

In order to endorse over this covenant, the Company will probably request that an appropriate government official contact the Attorney General’s office for an opinion, consenting to the violation of the covenant.

Factors to be considered by the Attorney General’s office would include: Is there another park near Blackacre? Will Whiteacre be used as a park?

Example:

In 2019 the Company was asked to insure the sale of the existing Geneva Public Library to a private party. The library was subject to a decades-old covenant that restricted the use of the land to a public library. The Company was asked to underwrite this covenant.

In this situation, the Company considered the Public Trust Doctrine. The Company agreed to endorse over the covenant upon the satisfaction of the following conditions:

• The new public library had to be relatively close to the old library. (The two buildings were six blocks apart.)

• The new library had to be at least as big as the old library. (The new library was substantially bigger.)

• The Company would not issue the endorsement until the old library was sold to a purchaser for value, a certificate of occupancy had been issued for the new library, and the new library was open for business.

Homestead

Last effective date: November 15, 2019

Homestead is a real estate concept that is misunderstood by many people in the title insurance industry. It is hoped that this article will serve as a practical guide for the understanding and comprehension of those issues relating to homestead that the title insurance examiner and closer encounters on a day-to-day basis.

Statutory law relative to homestead is set forth in 735 ILCS 5/12-901, hereafter termed "the Homestead Act."

Creation of Homestead

735 ILCS 5/12-901 provides as follows:

Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property that the individual uses as a residence. That homestead and all right in and title to that homestead is exempt from attachment, judgment, levy or judgment sale for the payment of his or her debts or other purposes and from the laws of conveyance, descent and legacy, except as provided in this Code . . . .

The individual must, one, own or "rightly possess by lease or otherwise" the land, and two, must occupy it as his residence in order to be entitled to a homestead estate. Consider the following examples and note how these two factors determine the existence and ownership of the homestead estate:

Examples of Homestead

• John and Jane both own and occupy a home. Because they both own the home and both live in it, both have a homestead estate.

• John is married to Jane. John alone owns the home in which they both live. Although both live there, only John owns it, and so, only John has the homestead estate.

• John is a bachelor who lives alone in the home he owns. John has a homestead estate.

• John and Jane are not married, but instead, they live together. John alone owns the home in which they live. Despite Justice Heiple’s concurring opinion in First National Bank v. Mohr, 162 Ill.App.3d 584 (1987), which is set forth in part in the footnote below, it is reasonable to state that only John has a homestead estate. Although both John and Jane live in the home, only John owns it.

• John and Jane are married. They both own a home in which they live. They also own a commercial building. John and Jane both have a homestead interest in their home; neither has a homestead interest in the commercial building, as they do not occupy the commercial building as their residence.

• John and Jane are married. John owns the building that they live in. John is an artist. His studio is on the first floor, and they both live upstairs on the second floor. Since in this case John and Jane do occupy this commercial building as their residence, John (because he owns the building) has a homestead interest in it.

• John rents a home from his landlord. John later gets married and Jane, now his spouse, moves in. John has a homestead interest in his rented home because he both occupies it as his residence and possesses it by lease. Jane has no homestead interest; although she lives there, she does not "rightly possess by lease or otherwise" the home.

This construction of the statute is consistent with Illinois case law. See, for example, In re Frank Carver, 2003 WL 23211627 (Bankr. S.D. Ill.), where the bankruptcy court found:

The estate in land to which the homestead right attaches must be supported by title or some ownership interest, and possession alone is insufficient to entitle an individual to claim a homestead.

See also Sterling Savings and Loan Ass’n v. Schultz, 71 Ill. App. 2d 94 (1st Dist. 1966), where the Illinois appellate court held that the non-title holding spouse was “not entitled to a homestead estate based upon naked possession, without any title or right in the real estate.”

Characteristics of Homestead

One does not need to have fee title in order to obtain homestead rights. One may have homestead in a life estate, an equitable estate created by an installment contract, or, as noted earlier, a leasehold estate.

So what exactly is homestead? How can it be defined? If one thinks of real estate as being a bundle of sticks, comprising many interests in land, such as covenants and easements, “homestead” is one of these sticks. Homestead in Illinois is both an estate and an exemption. That is, homestead is an estate (an interest in land) that is exempt from the lien of creditors. It is not just the right of occupancy.

Homestead as an Exemption

735 ILCS 5/12-901 provides that homestead is an exemption that creditors cannot seize in order to satisfy the debts of the party who possesses the homestead interest.

Example: John owns and lives in a home. He meets and eventually marries Jane. Jane moves into John's home. A year later John decides to refinance his current loan by taking out a new mortgage with the local bank. If the homestead rights of John are not properly waived by Jane in the mortgage, then, in the event the mortgage is later foreclosed, the lender might be unable to obtain the full amount of the unpaid debt. That is, $15,000, representing the homestead exemption of John, might have to be set aside.

Homestead as an Estate

735 ILCS 5/12-901 provides that homestead is an estate that is shielded “from the laws of conveyance, descent, and legacy.”

Example: John owns and lives in a home. He meets and eventually marries Jane. Jane moves into John's home. A year later John decides to sell his home. If the homestead rights of John are not properly waived by Jane in the deed or otherwise, the title to this homestead estate would not pass to the grantee of John's deed. Jane might later be able to assert her rights in this estate.

Release, Waiver, or Conveyance of a Homestead Interest

It is obvious from the above two examples that it is important for the title examiner or closer to know how the homestead exemption, or homestead estate, is properly waived. Note that this issue arises in invariably the same situation:

Example: Man and woman are married, but only one spouse owns the residence in which they live. At the closing, the "title holding spouse" wants to convey or mortgage the residence.

The issue is: Does the non-title holding spouse have to sign the deed or mortgage to waive an outstanding homestead estate or exemption? If the answer is yes, then how can this homestead estate or exemption be waived?

735 ILCS 5/12-904 provides three methods of releasing, waiving, or conveying a homestead interest:

No release, waiver or conveyance of the estate so exempted shall be valid, unless the same is in writing, signed by the individual and his or her spouse, if he or she have one, or possession is abandoned or given pursuant to the conveyance. . . .

Again, these three methods are as follows:

No release, waiver or conveyance of the estate so exempted shall be valid, unless

• One, the release, waiver, or conveyance of the estate is in writing and signed by both the individual and spouse, if applicable, or;

• Two, possession is abandoned, or;

• Three, possession is given pursuant to the conveyance. . . .

Release of Homestead: Method Number One

Except when the conveyance is from one spouse to another, any deed (or mortgage) executed by the owner spouse must also be signed by the non-owner spouse. See 765 ILCS 5/27.

Although it is not necessary, the instrument should contain a clause, releasing or waiving the right of homestead.

Note that the non-owner spouse does not have to execute this instrument. For example, if John owns the house in which both he and his wife (Mary) live, a deed or mortgage need not be executed by John and Mary, husband and wife. (Mary may not, for instance, want to warrant the condition of title to property that she does not own. Or, Mary may not want to be personally liable for any mortgage indebtedness). Rather, John alone can execute the deed or mortgage as "John, married to Mary." Then, Mary need only sign the instrument, which should contain a "release of homestead" clause in order to release the applicable homestead interest.

If for some reason the deed or mortgage does not contain such a clause, the title examiner or closer might want to consider adding such a clause, so that the instrument clearly evidences the intent to release or convey homestead and so that it conforms to statutory and case law. For example, a phrase similar to the following may be added above Mary's signature:

I, ____________________, sign this deed (or mortgage) for the sole purpose of waiving or releasing any applicable homestead interest.

Because the non-owner spouse is, in fact, waiving or releasing an interest in land, any signature of the non-owner spouse should be acknowledged.

Note that the statute states that the waiver or release must be signed by both spouses. Therefore, it is possible that a “release of homestead” executed solely by the non-title holding spouse but not part of another document executed by the title holding spouse may be invalid.

Discussion of Method Number One

Example: Bob and Carol are married and live in a home that Bob alone owns. Bob and Carol want to sell the home to Ted and Alice. As Bob owns the home, he will hereafter be called "owner spouse." As Carol does not own the home, she will hereafter be called "non-owner spouse."

As it is Bob, and Bob alone, who both lives in and owns the home, Bob owns the homestead estate. However, for Bob to effectively convey this estate, Carol must execute or otherwise sign the deed. Or, to put it another way, Carol, the non-owner spouse, must sign the deed (or, e.g., a mortgage), but not to release her homestead interest, as she has no homestead interest to release. Rather, the non-owner spouse must sign the instrument in order to waive, release, or convey the homestead interest of the owner spouse. Thus, she must sign the document in order to waive, release, or convey his homestead interest!

Thus, a properly-drafted conveyance of the property will be signed by both Bob and Carol. Bob must execute the deed, as he is owner of the property. Carol must sign the deed in order to release the homestead of Bob.

See also 765 ILCS 5/27:

No deed or other instrument shall be construed as releasing or waiving the right of homestead, unless the same shall contain a clause expressly releasing or waiving such right. And no release or waiver of the right of homestead by the husband or wife shall bind the other spouse unless such other spouse joins in such release or waiver.

An Exception to Method Number One

See 735 ILCS 5/12-904:

If a conveyance is made by an individual as grantor to his or her spouse, such conveyance shall be effectual to pass the title expressed therein to be conveyed thereby, whether or not the grantor in such conveyance is joined therein by his or her spouse.

There is one exception to the necessity of the non-owner spouse's signature. When a conveyance is made by an individual as grantor to his or her spouse, the spouse need not join in the conveyance.

The Rationale of Homestead

To appreciate the reasoning as to the requirement of the non-owner spouse's signature, one must first understand the purpose of the homestead laws. Robert Kratovil and Raymond J. Werner, in their book, Real Estate Law (8th Edition, 1983) lists three principal reasons for these laws.

• The first is the protection of the family against being evicted from its home by the enforcement of creditors' claims. (Homestead is an exemption as well as an estate).

• The second is the traditional concept of providing some protection to the widow after the death of her husband. This concept is beyond the scope of this article.

• The third and final object of the homestead laws is the historical notion of protecting one spouse against the acts of the other spouse. In the past, lawmakers have provided that one spouse cannot convey good title to one’s own home unless the other spouse signs the deed. Thus, the one spouse cannot sell the home against the wishes of the other spouse. (Or in other words, the title holding spouse cannot sell the family home without the consent of the non-title holding spouse.) It is for these reasons that a husband and wife must join in any deed or mortgage of homestead property—with a few exceptions, to be discussed later.

Release of Homestead: Method Number Two:

Homestead can also be released or waived (but not conveyed) pursuant to an abandonment of the property. (That is, the spouse of the titleholder releases the homestead interest of the titleholding spouse by abandoning the property).

Example: Adam and Betty are married but separated. Adam owns the home that he lives in. He wishes to refinance his existing mortgage. Does Betty have to sign the mortgage? Adam assures the title company that there is no hope of reconciliation and that "they will be getting a divorce soon.” Adam may claim that Betty has never lived in the property, and that therefore there is no homestead problem.

Or, to set forth the facts even more simply:

Facts: A and B are married. A buys the home in which A and B live. B moves out. Later, A wants to execute a mortgage of the home.

Issue: Does B have to sign the mortgage in order to waive homestead?

Discussion: All the facts of the situation must be considered before waiving the requirement as to the spouse's signature on the mortgage. If the couple has been separated for ten years, there is probably little risk in not requiring the spouse to execute the mortgage. But what if the couple has been separated for only ten days? What factors should the examiner consider? These include:

• Has the non-title holding spouse ever lived on the property?

• How much time has elapsed since the non-title holding spouse moved out?

• When the non-title holding spouse moved out, what were the surrounding circumstances?

• If one spouse never lived in the property (for example, perhaps one spouse moved out of the family home and bought another house, which is now being mortgaged), how long has the other spouse lived in the home?

• Is the couple’s separation permanent or temporary? What possibility is there of a reconciliation?

• Has the non-title holding spouse established a new homestead? How permanent is the homestead? For example, has the spouse changed his or her driver’s license or voter registration?)

• Is the non-title holding spouse’s present whereabouts known?

• How accurate is the information furnished the examiner? How credible is the party furnishing this information to the examiner? Is the information being furnished by a spouse or by a third party who may not have a complete knowledge of all of the facts?

• Has one of the parties filed for divorce, or are the parties “going to get a divorce?” If the parties have formally filed for divorce, and one of the parties has moved out of the home, the examiner is probably in a good position to waive the requirement as to obtaining that spouse’s signature on the mortgage.

The Ambiguity of Abandonment

There is, unfortunately, an inherent ambiguity in the concept of abandonment of a homestead. There are many old cases that seem to indicate that the intent to abandon the home is the key, that a mere moving out of the home, without the intent to truly abandon it, does not constitute an abandonment of possession. See, e.g., McBride v. Hawthorne, 268 Ill. 456 (1915) and Ketcham v. Ketcham, 269 Ill. 584 (1915).

Illinois case law is replete with unusual decisions, holding that what seems to be abandonment is not necessarily so. For example, in McBride v. Hawthorne, 268 Ill. 456 (1915), the court stated that residing on the homestead premises is not essential in order to prevent abandonment if, when the homesteader leaves, he intends to return and occupy the property. In Brokaw v. Ogle, 170 Ill. 115 (1897) the court noted that a widow does not abandon her homestead because she goes to her daughter's house to be taken care of during an illness and rents the homestead during her absence in order to obtain money to pay the expenses of said illness. In Ketcham v. Ketcham, 269 Ill. 584 (1915) the court stated that the fact that a person leases the land of his homestead after his home thereon burns down, and no longer lives on the homestead, does not constitute an abandonment when there is no evidence of an intent to abandon.

Rule of Title Practice:

Seldom should abandonment be relied upon in order to waive a homestead exception from a title commitment or policy without careful consideration.  The reason for this is the great difficulty in determining abandonment, which is a question of intent.  How does one, e.g., determine if the "separated" wife has truly left her husband and abandoned the property or just temporarily left her spouse for a few days? Title company underwriters must thoughtfully weigh all factors before deciding not to require a spouse’s signature.

An Abandonment Variation

Example: But now change the facts slightly. Unfortunately, Adam and Betty both took title to their home. Adam now wants to refinance (or sell) the home. He tells the examiner that Betty has been gone for at least ten years, and he has no idea where she lives or even if she is still alive.

This is not a homestead issue; this is a title issue. Adam may have to file some kind of quiet title action. Although a title holder can abandon possession of land, one cannot abandon title. Although it is technically possible to adversely possess land as against a true owner, this can only be accomplished by a complete repudiation of the title of this owner. See Carpenter v. Fletcher, 239 Ill. 440 (1909). Furthermore, it is doubtful that a title company would insure title pursuant to such a repudiation.

Release of Homestead: Method Number Three

The homestead can be released if possession is of the land is delivered to a purchaser of the land "pursuant to the conveyance” by the non-title holding spouse.

Example: In 2012 John buys a home in Chicago. In 2014 he marries Jane, who moves into the home. In 2019 John and Jane decide to move to Denver, Colorado. Accordingly, John and Jane put "their" home up for sale. At closing, John, the title holding spouse, delivers a warranty deed signed by John alone. Jane, the non-title holding spouse, is unable to sign the deed, as she is already in route to Denver.

In the above example, it is clear that Jane has given up possession of the property in question. By doing so, she has released her spouse’s homestead interest. On a case-by-case basis, each situation judged on its own merits, one may choose to rely on this method as a means of waiving a homestead exception from a title policy. Although it is not necessary, the parties may want to consider adding a "release of homestead" statement to the deed. For example:

Possession by the non-title holding spouse is surrendered pursuant to and concurrently with this conveyance, sufficient to convey and release homestead, as provided in 735 ILCS 5/12-904.

Before waiving an exception relating to homestead, the title examiner or closer should verify that the non-title holding spouse is giving up possession of the land.

Rule of Title Practice

For the title examiner, the issue of homestead usually arises as follows: The application for a title commitment comes in, showing that John and Jane Doe, husband and wife, are the owners. However, the title search shows that only one spouse owns the property. When the title examiner is faced with these or similar facts, the examiner should show the following exception on the title commitment:

If applicable, the spouse of the party in title should join in the conveyance or mortgage for the purpose of releasing, waiving, or conveying the title holder's homestead interest.

Note the words, "if applicable,” in the title exception. Remember that the spouse needs to join in the conveyance or mortgage only if the property is the owner's homestead. If the title search reveals that John and Jane Doe are married, and John alone owns the property, but it is established that the property is not the residence of the owner, then the spouse of the title holder does not have to join in the conveyance or mortgage. To prevent future questions as to the transaction, however, it is acceptable (but not necessary) to write on the document, "this is not homestead property" or words to that effect. By doing this, future title examiners will realize that the property is not homestead property and, therefore, not question the absence of a spouse's signature.

Example: John owns his home. He wants to convey it to his wife. Does his wife have to sign the deed in order to release any homestead interest?

No, as noted above, John’s wife does not have to sign the deed to her husband in order to waive homestead. See 735 ILCS 5/12-904, which states: “But if a conveyance is made by an individual as grantor to his or her spouse, such conveyance shall be effectual to pass the title expressed therein to be conveyed thereby, whether or not the grantor in such conveyance is joined therein by his or her spouse.”

Homestead and a Spouse Not in Possession of the Home

Sometimes a potential homestead problem may not be easy to recognize. Consider the following example:

Example: Oscar and Della Renta are husband and wife. They are separated. Oscar, while he is separated from his wife, purchases a home, paying cash for it. Oscar lives there by himself for six months. He then finds out that his employer is transferring him across the country. He puts his home up for sale. It is obvious that at the time of closing, Oscar, and only Oscar, one, bought the house, and two, lived in the house.

Question: Does Della need to sign the deed?

Answer: At first one might think that Della has to sign the deed. After all, Oscar is still married, owns the home, and lives in it, thus meeting all the statutory requirements, previously discussed, of the Homestead Act.

However, Illinois case law indicates that the spouse of the title holder must reside with the titleholder in the titleholder's home in order for the Homestead Act to be operative. For example, in Dixon v. Moller, 42 Ill. App. 3d 688 (1976), the court noted that the chief object of the homestead laws is to shelter the family. In Rendleman v. Rendleman, 118 Ill. 257 at 264 (1886), the Supreme Court stated that “the holder of the title cannot wrongfully deprive the other of the enjoyment of the homestead premises." The Supreme Court in Brod v. Brod, 390 Ill. 312 at 323 (1945) noted the following:

The law and public policy of this state, as exemplified by [the Homestead Act] and the many decisions in this state thereunder, have been and are to insure to the family the possession and enjoyment of a home.

These and other similar cases indicate that Della would not have to sign the deed. Della had never lived in Oscar's home; consequently, Oscar, by selling the property, would not be depriving her of "the possession and enjoyment of a home." And of course, Oscar, the only occupant of the home, is delivering possession of the home pursuant to the conveyance.

But again, now change the facts slightly. What if Oscar, the title holder, had abandoned the property? This would obviously be a problem. The Company needs a deed from the title holder before it can insure a sale of the property. One cannot easily abandon title to the land.

And now change the facts again:

Adam and Betty are married. Adam owns a home in DuPage County, Illinois. Betty does not own the home. Because of her job, Betty lives out of state, and she has never lived in Adam’s home. Adam now wants to refinance his purchase money mortgage. Does Betty have to sign the mortgage in order to waive homestead?

Answer: What if Betty eventually moves to Illinois and into Adam’s house a year after he signs the mortgage? And what if, a year later, the mortgage goes into foreclosure? The better practice is that Betty sign the mortgage. In the event of a mortgage foreclosure, Adam’s attorney will probably argue that $15,000, representing Betty’s homestead, should be set aside from the mortgage foreclosure.

The Homestead Checklist

It might be helpful for the closer or examiner to adopt a "checklist" in deciding whether or not a homestead problem exists. Title personnel might want to consider the following "two pronged" test and ask themselves the following:

1. Who owns the property? (Remember, all owners of the property must execute any deed or mortgage. There are no exceptions to this rule).

2. If the fact situation involves a title holding spouse and a non-title holding spouse, does the title holding spouse reside at the property?

a) If the answer to question "2" is "no," then a non-title holding spouse's signature on a deed or mortgage is not necessary.

(b) If the answer to question "2" is "yes," then, generally speaking, the non-title holding spouse should sign the deed or mortgage, conveying or releasing the homestead interest of his or her spouse.

(c) If the title holding spouse resides on the property, but the non-title holding spouse does not, then the individual facts of the situation should be considered before waiving the requirement as to the non-title holding spouse's signature on a deed or mortgage on the basis that the spouse would not be deprived of "the possession and enjoyment of a home." (Factors to consider include whether or not the non-title holding spouse had ever lived in the home, the length of time the couple had been separated, and the nature—permanent or temporary—of the separation.)

Note that part two of the above checklist refers to the requirement of the title holding spouse residing at the property. The question may arise, then: How can homestead be an issue at closing, when, invariably, the purchaser is not yet residing at the property, and hence, not satisfying this requirement of the above two-pronged test? The answer is found in Illinois case law; the purchaser of property, with the intention of occupying it as a homestead, followed within a reasonable time by the actual occupancy thereof as a residence, creates an estate of homestead, even before there is an actual occupancy of the home.

Homestead and the Illinois Land Trust

The Homestead Act is applicable to personal property. 735 ILCS 5/12-901 states:

Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property. . . .

The statute refers to personal property. The beneficial interest in a land trust is personal property. See Chicago Federal Savings and Loan Association v. Cacciatore, 25 Ill. 2d 535 (1962). Therefore, any assignment of said beneficial interest should contain, if applicable, a waiver of homestead rights.

But assume that title to the land is in an Illinois land trust:

Example: John buys a home. He takes title pursuant to an Illinois trust—the Chicago Title Land Trust Company, as trustee under trust number 12345. A year later John marries Jane. A year after they get married, John and Jane decided to have a mortgage executed of the family home. Does Jane have to sign the mortgage in order to waive homestead?

No, Jane does not have to sign the mortgage. There is, generally speaking, no homestead issue concerning land trust property. The title examiner need not worry about a mortgage or trustee's deed containing a waiver of homestead. The reasons for this are as follows:

• The beneficial interest in a land trust is personal property, and the trustee’s deed conveys real estate.

• Even assuming for the moment that the two-pronged test set forth in 735 ILCS 5/12-901 is applicable, the trustee, not the trust beneficiary, is the owner of the real estate, and he does not qualify for the homestead estate, as he does not occupy the property as his residence.

• The beneficiary, who does, most likely, occupy the property, does not own the property. The beneficiary owns only the beneficial interest in the land trust, which is a personal property interest, not a real property interest.

735 ILCS 5/12-901 sets forth the two requirements necessary in order to possess a homestead estate in real property:

• The individual must "own or rightly possess by lease or otherwise" the property;

• The individual must occupy it as his residence.

Because neither the trustee nor the beneficiary can satisfy both requirements, there is, generally speaking, no homestead issue relating to real estate conveyed via a trustee's deed out of a land trust.

Homestead and the Personal (Living) Trust

For the above reasons, it appears that this "no homestead with a trustee's deed" rule is equally applicable to both commercial land trusts and personal trusts, or living trusts.

Example: Samantha and Darrin own a home. For purposes of estate planning, Darrin owns the home as trustee of the Samantha and Darrin living trust. If Darrin, as trustee, were to convey or mortgage the property, does Samantha have to join in the deed or mortgage?

Because of 735 ILCS 5/12-901, homestead should not be an issue in this type of situation. This section deals with an individual owning land and occupying it as his or her residence. One might reasonably argue that a legal fiction is created here in that Darrin the individual is an entity separate and apart from Darrin the trustee. Darrin the individual occupies the land, while Darrin the trustee owns it. Therefore, both parts of the Section 901 two-pronged test are not met. That is, although Darrin the trustee owns the home, Darrin the individual occupies it. These are legally two separate people.

Remember that any conveyance into either an Illinois land trust or a personal trust must waive or convey any applicable homestead interest. If it does not, any subsequent trustee's deed does not "cure" the problem of the outstanding homestead interest.

Note, though, that many lenders will not allow their mortgages to be executed by land trustees. Their rationale, however, does not involve homestead. Rather, it appears to stem from the legal characteristics of the Illinois land trust. Many lenders are apparently concerned that property can be purchased and mortgaged through a land trust, and later, the beneficial interest can be assigned to a third party, with nothing ever subsequently placed of record in the property's chain of title that will alert the mortgagee that the original "owner/mortgagor" no longer has an interest in the property.

Homestead: Lender Considerations

The issue of homestead involves special considerations for the lender. This is because the problem of an outstanding homestead estate is usually not a major issue for the title insurer. Possession is virtually always surrendered concurrently with delivery of the deed; as stated earlier, this is an effective means of extinguishing any homestead interest.

The problem of an outstanding homestead exemption is, though, a different matter. Assume that John and Jane buy a home. At the closing the seller signs a deed whereby John and Jane take title to the home as tenants by the entirety. John executes the purchase money mortgage, but Jane signs the mortgage only to waive homestead. A few years later, the mortgage is foreclosed. Only then does their attorney realize that the mortgage was improperly executed. Their attorney immediately files a motion in the foreclosure proceeding, asking that the court declare the mortgage to be invalid. The title company that insured the mortgage is immediately tendered a claim.

The Common Homestead Situation Involving a Lender

Adam and Betty are husband and wife. Their friends are Charles and Dianne, who are also husband and wife. The two couples decide to get together and buy investment property. Even though it is not "homestead" property, the "spouses," since they own the property, have to execute any mortgage of the property. Otherwise, in the event of foreclosure, the lender would succeed to only a 50% interest in the property.

Clearly this is not a homestead issue. Since four people own the property, the same four people must mortgage the property. The examiner must remember the first portion of the two-pronged "homestead checklist" mentioned earlier. In any mortgage situation, all owners of the property must execute the mortgage.

The closer must be aware of this situation, as this issue often arises. Usually, the fact situation is something like this:

The Common Example: A Trap for the Unwary Closer

Example Number One:

John and Jane will take title to property as joint tenants. The property may or may not be homestead property. The title company will close the transaction. The lender’s closing instructions state that John is to execute the mortgage but that Jane may sign the mortgage, but just to waive homestead.

Example Number Two:

John and Jane will take title to property as tenants by the entirety. The property may or may not be homestead property. The title company will close the transaction. The lender’s closing instructions state that John is to execute the mortgage but that Jane may sign the mortgage, but just to waive homestead.

Example Number One: 

This is unacceptable because, under Harmes v. Sprague, 105 Ill.2d 215, 473 N.E.2d 930, 85 Ill. Dec. 331 (1984), a mortgage given by one joint tenant of his interest in the property does not sever a joint tenancy. As such, a surviving joint tenant's right of survivorship becomes operative upon the death of the joint tenant who executed the mortgage. Thus, upon the death of the joint tenant who executed the mortgage, the surviving joint tenant becomes the sole owner of the property, and the mortgage executed by the deceased joint tenant does not remain as a lien on the surviving joint tenant's property.

In other words: John and Jane buy a home, taking title in joint tenancy. John executes the purchase money mortgage, but Jane signs the mortgage only to waive homestead. A year later John dies. Jane owns the home as a surviving joint tenant, free and clear of the mortgage.

Insuring a mortgage that is executed in this manner could result in a claim for a title company.

Example Number Two:

This example is equally unacceptable. If John and Jane own their home as tenants by the entirety, then pursuant to 765 ILCS 1005/1c, the mortgage may be completely invalid! This Illinois statute states that “no deed, contract for deed, mortgage, or lease of homestead property held in tenancy by the entirety shall be effective unless signed by both tenants.”

Remember that all owners of the land must always execute the mortgage! This is the case, regardless of the tenancy by which people own property. Thus, if Adam and Betty own the land as tenants in common, joint tenancy, or tenancy by the entirety, both Adam and Betty must execute the mortgage. There are no exceptions to this rule.

Lender Issues: Exceptions to Homestead

There may be instances in which an apparent homestead problem is not really an issue at all. This stems from 735 ILCS 5/12-903:

No property shall [by virtue of the Homestead Act] be exempt. . . for a debt or liability incurred for the purchase or improvement thereof. . . .

In other words: When a transaction involves either a purchase money mortgage or the construction of improvements to vacant land, said transaction falls outside the provisions of the previously-discussed statutes relating to homestead. Consequently, the issue of homestead becomes irrelevant.

One: The Purchase Money Mortgage Exception

A purchase money mortgage is a mortgage executed for the purpose of purchasing property. 735 ILCS 5/12-903 indicates that the non-title holding spouse of a mortgagor who is executing a mortgage used to buy real estate does not have to sign the mortgage to waive homestead.

What is the Rationale for this Statute?

In a purchase money mortgage transaction, the mortgage is executed and disbursed at the same time title is transferred. The facts create a “but for” test. “But for” the mortgage, the buyer would be unable to purchase the property. Thus, the land, when conveyed to the buyer, is transferred, already burdened by the mortgage. Hence, the lien of any homestead interest that would have been created would be subordinate to the lien of the pre-existing mortgage. Because any homestead interest that would have been created would be subordinate to the mortgage, there is no reason for the mortgagor to waive this homestead exemption in said mortgage.

Note that Illinois case law indicates that if one assumes an existing mortgage to purchase property, and the assumption and the purchase are both part of the same transaction, this mortgage assumption is considered a purchase money mortgage.

Rule of Title Practice for the Purchase Money Mortgage Exception

The examiner may want to consider the following guidelines when asked to waive a possible homestead issue on the basis that the mortgage in question is a purchase money mortgage:

The purpose of the loan should be to purchase the residence. All of the mortgage proceeds must be used to buy the property and to pay for charges relative thereto, such as title fees, recording charges, and document transfer stamps. In other words, the buyer cannot directly receive any proceeds from the closing.

Why can’t the buyer receive any proceeds from the closing? The statute provides that the homestead issue is not applicable as to a mortgage for the purchase or improvement of a residence. If a mortgagor takes out a mortgage, one-half of which is used to buy a home and one-half of which is used to buy a car, the mortgage is no longer a "debt or liability incurred for the purchase or improvement [of property]."

Sometimes this doctrine is not easy to understand. Consider this following example:

Example: Adam and Betty are married. Betty is buying the family home, as Adam is out of the country. Betty takes title in her own name. She is getting a mortgage in order to buy the home. Betty made a large earnest money deposit, and as a result, she is getting cash back at closing. The cash she is getting back is less than the amount of the earnest money deposit. Is there a problem?

No, there is not a problem, as long as the amount of cash back is less than the amount of the earnest money deposit. As long as Betty is getting back less than the amount of her earnest money deposit, it is as if the mortgage is still a purchase money mortgage.

The Purchase Money Mortgage/Home Equity Mortgage Combination

Prior to 2008, lenders were funding the purchase of homes with 100% mortgage financing. Consider this example:

Adam and Betty are married. They decide to buy a home with 100% financing. Only Adam takes title to the land. At closing Adam signs two mortgages, a purchase money mortgage and a home equity mortgage. Betty does not attend the closing. Is there a problem?

Yes, there is a problem. Betty does not have to sign the purchase money mortgage because of the statutory exception. But a home equity loan has no such statutory protection. Disbursements from a home equity loan (also called a revolving line of credit) can be made months after closing. Thus, a home equity loan is not a purchase money mortgage. Betty must sign the home equity mortgage.

Two: The Construction of a Residence Exception

As there is no "residence" for the "owner" to "occupy," there is no homestead estate that arises with this type of loan. Thus, a non-title holding spouse does not have to join in the execution of this type of construction mortgage. Any final "end" loan, however, taken out to pay off the new construction mortgage, may require the signature of the non-title holding spouse.

An Issue: The Construction of Improvements to an Existing Residence Exception

Again, 735 ILCS 5/12-903 reads as follows:

No property shall [by virtue of the Homestead Act] be exempt. . . for a debt or liability incurred for the purchase or improvement thereof. . . .

The statute suggests that a mortgage funded for the construction of additional improvements to an existing residence is exempt from the statutes relating to homestead.

Such a conclusion may be erroneous. The purchase money mortgage exception and the construction of a residence exception “make sense.” It does not make sense, however, that a mortgage merely used to pay for additional improvements to an existing residence should be exempt from the homestead statutes. The statute refers to a mortgage for the improvement of property. It is very possible that this statutory language refers to the construction of improvements to vacant land and not to the construction of improvements to an existing home. Therefore, if the purpose of the loan is for the construction of improvements to an existing residence, the non-title holding spouse should join in the mortgage in order to waive a possible homestead interest.

Three: The Vacant Land Exception

There is no statutory exception for the mortgage of vacant land. Clearly, though, homestead is not an issue with vacant land. Therefore, the non-title holding spouse does not have to join in the mortgage of vacant land to waive a possible homestead interest.

The Homestead Trap: When the Non-Title Holding Spouse Must Sign the Mortgage: Example: A Refinance of an Existing Mortgage of a Residence

Assuming that the circumstances give rise to a homestead issue, the non-title holding spouse must join in the signing of the refinancing mortgage of a residence in order to waive the homestead interest. Although purchase money mortgages are exempted from the application of the Homestead Act, the Act makes no such provisions for refinancing mortgages.

Example:

John and Jane are married. In 2015 John and Jane decide to buy a home. Because Jane has credit problems, only John takes title to the home. John buys the home with a purchase money mortgage. At closing, only John executes the mortgage. Jane does not sign the mortgage. This is acceptable, because the mortgage is a purchase money mortgage. In 2019 John and Jane decide to refinance this mortgage. Because there are no homestead exceptions to a refinance mortgage, John must execute the mortgage and Jane must waive homestead.

The Homestead Trap: When the Non-Title Holding Spouse Must Sign the Mortgage: Example: A Second, Third, Etc., Mortgage of a Residence

Assuming that the circumstances give rise to a homestead issue, the non-title holding spouse must join in the signing of a second, third, etc., mortgage of a residence in order to waive the homestead interest. Although purchase money mortgages are exempted from the application of the Homestead Act, the Act makes no such provisions for a second, third, etc. mortgage.

Loan Policy Homestead Endorsements

There are two endorsements available to lenders that relate to homestead. This first endorsement insures the lender against loss in the event that its mortgage is not prior to any outstanding homestead rights of the spouse of the mortgagor. It is sometimes used in a non-purchase money mortgage situation when, for whatever reason, the title company is not requiring the spouse to sign the mortgage:

The Company hereby insures the insured against loss or damage that the insured shall sustain by reason of the entry of a final order of a court of competent jurisdiction, denying the priority of the lien of the mortgage described in Schedule A over any homestead rights of the mortgagor or the spouse of the mortgagor.

This second endorsement is often used when the title company relies on the “purchase money mortgage exception” and does not require the spouse of the mortgagor to sign the mortgage:

The Company hereby insures the insured against loss or damage that the insured shall sustain by reason of the possible outstanding homestead estate in the mortgagor or the spouse of the mortgagor by reason of the failure of the spouse of the mortgagor to sign the mortgage described in Schedule A.

Other Issues

Conveyance to Self and Third Party

Question: Husband owns the home. Husband wants to convey the home to himself and his son. Should Wife join in the conveyance?

Answer: The statute (735 ILCS 5/12-904) states that “if a conveyance is made by an individual as grantor to his or her spouse, such conveyance shall be effectual to pass the title expressed therein to be conveyed thereby, whether or not the grantor in such conveyance is joined therein by his or her spouse.”

But here the conveyance is not being made to the spouse; rather, the proposed conveyance is to the husband and the couple’s son. It would appear, then, that Wife should join in the conveyance.

Dissolution of Marriage

See 735 ILCS 5/12-905: In case of a dissolution of marriage, the court granting the dissolution of marriage may dispose of the homestead estate according to the equities of the case.”

The Homestead Checklist (set forth again for future reference)

1. Who owns the property? (Remember, all owners of the property must execute any deed or mortgage. There are no exceptions to this rule).

2. If the fact situation involves a title holding spouse and a non-title holding spouse, does the title holding spouse reside at the property?

a) If the answer to question "2" is "no," then a non-title holding spouse's signature on a deed or mortgage is not necessary.

(b) If the answer to question "2" is "yes," then, generally speaking, the non-title holding spouse should sign the deed or mortgage, conveying or releasing the homestead interest of his or her spouse.

(c) If the title holding spouse resides on the property, but the non-title holding spouse does not, then the individual facts of the situation should be considered before waiving the requirement as to the non-title holding spouse's signature on a deed or mortgage on the basis that the spouse would not be deprived of "the possession and enjoyment of a home." (Factors to consider include whether or not the non-title holding spouse had ever lived in the home, the length of time the couple had been separated, and the nature—permanent or temporary—of the separation.

Mortgage Execution and Homestead Issues

Part I: The Rule

The number one rule is: If you own it, you have to mortgage it. That is, all owners of the land must execute any mortgage of the land. An owner of the land cannot just sign the mortgage in order to waive homestead.

Example: John and Jane are married. They are buying their first home. The seller is Fred Jones. The closer looks at the deed. The deed indicates that Fred Jones, a bachelor, is conveying the land to John and Jane, husband and wife.

The closer now looks at the mortgage. The first page of the mortgage indicates that the mortgagor is John, a married person. The closer looks at the signature page of the mortgage. The closer sees that Jane is signing the mortgage, but Jane is signing only to waive homestead. Is there a problem?

Yes, there is a problem. This is not a homestead issue; this is a title issue. John and Jane are taking title to their home. All owners of the land must execute the mortgage as borrowers and mortgagors.

Why? The 2006 ALTA loan policy insures the validity of the mortgage. If John and Jane own the land, but if only John executes the mortgage, the lender has a lien on only a 50% interest in the land. If this mortgage were foreclosed, and if a sheriff’s deed were eventually issued, the deed would convey only John’s 50% interest in the land. The lender and Jane would own the home as tenants in common. This is obviously not what the lender intended when it prepared the loan documents for closing.

Court Cases

Phillips v. Phillips, 74 Ill. 2d 27, 383 N.E. 2d 973 (1978); the homestead exemption is not available as between co-tenants, even if one of the owners is otherwise entitled to the homestead exemption.

Miscellaneous

See 735 ILCS 5/12-1003; it appears that a spouse of a deceased homeowner has homestead rights:

When the head of a family dies, deserts or does not reside with the same, the family shall be entitled to and receive all the benefit and privileges which are by Part 10 of Article XII of this Act conferred upon the head of a family residing with the same.

Part II: Homestead: The Short Course

What is homestead? And when is homestead an issue?

Most people think homestead is an inchoate “right of possession” that a non-title holding spouse has in land that is owned by the title holding spouse. That is, they believe that the following example is a valid example of homestead in Illinois:

Example: John and Jane are married. Both of them live in the home that only John owns. In order for John to effectively convey or mortgage his home, Jane must sign the deed or mortgage in order to waive Jane’s homestead rights.

But this is not really the case. 735 ILCS 5/12-901 provides as follows:

Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence. . . . That homestead and all right in and title to that homestead is exempt from attachment, judgment, levy, or judgment sale for the payment of his or her debts. . . .

In other words (and broadly speaking), in order to have a homestead interest, one must both own the home and live in the home. A non-title holding spouse who only lives in the home but who has no ownership interest in the home does not have a homestead interest in the home.

The following, then, is an example of homestead:

Example: John and Jane are married. Both of them live in the home that only John owns. In order for John to effectively convey or mortgage his home, Jane must sign the deed or mortgage in order to waive John’s homestead rights.

Note, though, that the net effect is the same in both examples.

Homestead will be an issue when two people are married (or have entered into a civil union), but only one spouse or partner owns the family home in which the two people live. The following question will always be the issue:

Question: In a residential real estate transaction involving a married couple (or two people who have entered into a civil union), and only one spouse or partner owns the family home in which the two people live, does the non-title holding spouse have to sign the deed or mortgage in order to waive any applicable outstanding homestead interest?

Answer: It Depends.

Ideally, and in a perfect world, it is appropriate for the non-title holding spouse to always sign the deed or mortgage.

But we don’t live in a perfect world. And so if that spouse is not at the closing table, here are the general rules:

General Rule for the Sale of Property:

The Rule

Generally speaking, homestead should not be an issue for the sale of a home. The reason for this is not invariably both spouses are giving up possession of the home, and giving up possession is a valid way of releasing one’s homestead interest.

Facts: John and Jane are married. Only John owns the family home. The couple is selling the family home and buying a new home. Only John is at the closing; Jane is at the new home, directing the movers. John and Jane have already moved out of their old home. The old home is completely vacant.

Question: Does Jane have to sign the deed that is conveying the old home to the new purchaser?

Answer: Jane (the non-title holding spouse) does not have to sign the deed. Why? Because she has clearly given up possession of the home. The non-title holding spouse can waive homestead in a deed situation by either signing the deed or by giving up possession of the property when the title holding spouse executes the deed. The Illinois statutes provide for this. See 735 ILCS 5/12-904.

(But if the non-title holding spouse is at the closing, then there is nothing wrong in the closer asking that the non-title holding spouse sign the deed.)

And of course, all owners of property must execute the deed (or a mortgage) of the property. This is a title issue; it is not a homestead issue.

General Rule for the Execution of a Purchase Money Mortgage

The Rule

Homestead should not be an issue when the married title holding spouse is executing a purchase money mortgage and all the mortgage proceeds are being used to purchase the home and pay closing costs, attorney’s fees, etc.

Facts: John and Jane are married. They want to buy their first home. Jane has a $50,000 judgment against her, and so she does not want to take title to the home. Only John will take title to the home. The couple needs to get a “purchase money mortgage” in order to buy the property. (A purchase money mortgage is a mortgage wherein all of the mortgage proceeds are used to purchase property.) Because John will be the owner, John must execute the mortgage.

Question: But does Jane have to sign the mortgage in order to waive homestead?

Answer: Jane does not have to sign the mortgage as long as all the mortgage proceeds are being used to pay for the purchase of the home and to pay for costs relative to the home purchase, such as attorney’s fees and closing costs.

But note: If the mortgage proceeds are being used for other purposes, such as the paying off of a judgment against John, then the mortgage is not a true purchase money mortgage

Under the latter set of facts, why isn’t this mortgage a purchase money mortgage? The mortgage is not a purchase money mortgage because the mortgage money is not being used to purchase property; the money is being used to purchase property and to pay off a judgment. Therefore, Jane (the non-title holding spouse) has to sign the mortgage to waive homestead. (But again, even if the mortgage is a true purchase money mortgage, if the non-title holding spouse is at the closing, it is perfect acceptable to have that spouse sign the mortgage.)

General Rules for a Refinance Mortgage or Second, Third, etc. Mortgage:

The Rule

Homestead will always be an issue when the married title holding spouse is executing a refinance mortgage or a second or subsequent mortgage of the family home.

Facts: John and Jane are married. Their home was purchased in 2014. They have both been living in the home since 2014. At the time the home was purchased, Jane had a $50,000 judgment against her. For that reason, only John took title to their home. Because they bought their home with a purchase money mortgage, only John had to execute the mortgage. Jane did not have to sign the mortgage to waive homestead.

It is now 2019. John and Jane want to take advantage of low interest rates and refinance their existing mortgage.

Question: Does Jane (the non-title holding spouse) have to sign the new mortgage in order to waive homestead?

Answer: Yes. There are no exceptions to this rule, assuming that both John and Jane are living in the home.

Why Must the Non-Title Holding Spouse Sign a Refinance or Second Mortgage?

Review the homestead statute, which is at 735 ILCS 5/12-901:

Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence. . . . That homestead and all right in and title to that homestead is exempt from attachment, judgment, levy, or judgment sale for the payment of his or her debts. . . .

Assume that John and Jane and married, but only John owns the family home. John and Jane refinance their existing home. Assume that only John executes the mortgage, and Jane does not sign the mortgage to waive homestead. If that mortgage is later foreclosed, the lender would not obtain all of the foreclosure sale proceeds. $15,000 (representing John’s homestead interest) would have to be set aside from the proceeds of the foreclosure sale.

Furthermore, there is no exception in the statutes for a refinance or second mortgage of homestead property.

General Rule When Both the Husband and Wife Own the Home

When both the husband and wife own the home, both the husband and wife must execute any mortgage of the property and any deed of the property. Homestead is not an issue when both the husband and wife own the home—or any other property. That is, this is a title issue; this is not a homestead issue.

PART III: Mortgage Execution Problems

Part I set forth the basic problem that arises when an owner of the property does not execute a mortgage. But there are other issues, too.

Facts:

John and Jane are married. Both John and Jane own the home in which they live. The closing package is delivered to the title company office, and the lender has prepared the mortgage so that only John will execute the mortgage but Jane will waive homestead.

Question:

What are the problems?

Answer:

The one basic problem is this: Under this set of facts, both spouses own the home. Remember the one important rule, as set forth above: All owners of real estate (not just the family home, but any real estate) must execute the mortgage! It is not enough that one spouse executes the mortgage and the other spouse just signs the mortgage to waive homestead.

The other issues depend in part on how John and Jane own their home:

• If John and Jane own their home as tenants in common, then the mortgage is a lien on only 50% of the land.

• If John and Jane own their home as joint tenants, then the mortgage would also be a lien on only a 50% interest in the land. But if John (the only person who executed the mortgage) dies before Jane, then pursuant to the Illinois Supreme Court decision, Harmes v. Sprague, 105 Ill.2d 215, 473 N.E.2d 930, 85 Ill. Dec. 331 (1984), Jane would not only own the home as a surviving joint tenant, she would own the home free and clear of the mortgage.

• If John and Jane own their home as tenants by the entirety, then pursuant to 765 ILCS 1005/1c, the mortgage may be completely invalid! This Illinois statute states that “no deed, contract for deed, mortgage, or lease of homestead property held in tenancy by the entirety shall be effective unless signed by both tenants.”

Note that the problem of improper mortgage execution is not just a national title claims issue. Consider this court case; this is a DuPage County appellate court case; see Deutsche Bank National Trust Company v. Dolci, 2012 IL App (2d) 111275-U. See also GMAC Mortgage v. Arrigo, 8 N.E.3d 621 (2014).

PART IV: Some Sample Homestead Fact Patterns

Homestead issues can arise in so many different ways. Consider the following examples:

Facts: John and Jane are married. Only John owns the home in which they live. John bought the home before the couple got married, and so the one existing mortgage on the property is a purchase money mortgage that John took out as an unmarried person when he bought the property. What if . . . .

• John and Jane decide to refinance “their” mortgage. Even though only John owns the home, Jane must also sign the new mortgage to waive any outstanding homestead interest. She does not have to execute the mortgage as mortgagor; she only has to sign the new refinance mortgage.

• John and Jane decide to take out a second mortgage. Even though only John owns the home, Jane again must also sign this new second mortgage to waive any outstanding homestead interest.

• John and Jane decide to sell the home. Only John attends the closing. Jane has not pre-signed the deed. In this case, the closer should verify that Jane is delivering possession of the land pursuant to the conveyance— the closer should make sure that Jane (the non-title holding spouse) has willingly moving out of the home. (The closer should always ask to make sure that the non-title holding spouse is giving up possession of the property.) If this is the case, the closer can accept the deed, even though only John has signed it. Jane does not have to execute the deed, and Jane does not have to sign the deed to waive any outstanding homestead interest. However, if Jane, the non-title holding spouse, is at the closing, there is nothing wrong with asking Jane to sign the deed to waive homestead. (But if both John and Jane had owned the home, then both John and Jane would have to execute the deed.)

• John and Jane then decide to buy a new home. Again, only John takes title to the property. At the closing, only John is shown as the mortgagor on the mortgage. In this case, the closer should verify that all loan proceeds are being used to purchase the home and to pay for ancillary closing costs. If this mortgage is a true purchase money mortgage, it is all right if only John executes it. Jane does not have to execute the mortgage and Jane does not have to sign the mortgage to waive any outstanding homestead interest. (But the closer must remember that if John and Jane later decide to refinance or obtain a second mortgage, Jane will have to sign the mortgage in order to waive any outstanding homestead interest. Also, the closer should make sure that the new lender does not have any special requirements concerning Jane signing this purchase money mortgage.)

• Same facts as immediately above. That is, John and Jane decide to buy a new home. Only John takes title to the property. John needs to take out a mortgage in order to buy the property. During the closing, the closer realizes that the mortgage is a revolving credit mortgage. A revolving credit mortgage is not a true purchase money mortgage. Months after the closing, John could draw on this mortgage and obtain additional mortgage funds. Because it is possible that the mortgage money may not be used solely to buy the home, Jane must sign the mortgage in order to waive homestead.

• Same facts as immediately above. That is, John and Jane decide to buy a new home. Only John takes title to the property. John needs to take out a mortgage in order to buy the property. During the closing the closer realizes that there is a first mortgage and a second mortgage in the closing package. Both mortgages are being used to purchase the property. However, the second mortgage is a revolving credit mortgage. The second mortgage may not be a true purchase money mortgage. Even if the second mortgage is totally disbursed at closing, John and Jane could later repay back some of the money that was disbursed at closing. Then, months after the closing, John could draw on this second mortgage and withdraw additional mortgage funds. Because this second mortgage may not be used solely to buy the home, it may not be a purchase money mortgage. Thus, in this situation Jane does not have to sign the first mortgage. However, Jane does have to sign the second mortgage in order to waive any outstanding homestead interest. Why is this the case? The second mortgage is not a true purchase money mortgage.

• Again, same facts as above. That is, John and Jane decide to buy a new home. Only John takes title to the property. John needs to take out a mortgage in order to buy the property. As the closer examines the closing statement, the closer realizes that the closer is being asked to pay off John’s $10,000 IRS lien. As mortgage money will be used in part to pay off the IRS lien (and not just purchase the home), the mortgage is not a purchase money mortgage. Jane must sign the mortgage in order to waive homestead.

• Again, same facts as above. That is, John and Jane decide to buy a new home. Only John takes title to the property. John needs to take out a mortgage in order to buy the property. At the closing the closer realizes that John is getting cash back from the mortgage. Thus, all the mortgage money is not being used to buy the home; some of the money is being given back to John. This is not a purchase money mortgage. Jane must sign the mortgage in order to waive homestead. John’s attorney argues with the closer; the attorney offers to have John pay the excess money back to the lender as a mortgage payment. This won’t solve the problem. A purchase money mortgage is a mortgage used to purchase property; a purchase money mortgage is not a mortgage where part of the mortgage money is used to purchase the property and part of the money is used to make a mortgage payment.

• In the above situation, assume that John was getting back $1,000. Some title people feel that John’s mortgage would still be a purchase money mortgage, except for that $1,000. Thus, they argue, the title risk is a risk of no more than $1,000. Other title people are of the opinion that a mortgage either is or is not a purchase money mortgage; there is no middle ground. To them, the risk is much greater—in this example, the risk would be $15,000, or the amount of the homestead exemption.

• Now change the facts completely. John and Jane were buying a new home, but that transaction fell apart, and they are moving forward, buying a new and different home. John and Jane are taking title in joint tenancy. The lender tells the closer that only John needs to execute the mortgage as a mortgagor, but that Jane simply needs to sign the mortgage “to waive homestead.” This is incorrect. Because both John and Jane are taking title, both John and Jane must execute the mortgage as well. That is, Jane must execute the mortgage and not just sign the mortgage to waive homestead.

Rule of Title Practice: All people who own the property (any property, not just the family home) have to mortgage the property. This really isn’t a homestead issue; it is a title issue. Otherwise, in the example immediately above, the lender has a mortgage on only a 50% interest in the land.

• But again, at the last minute, this transaction also falls through, and now John and Jane decide to buy a new and different home. John and Jane decide to take title to this new home as trustees of a living trust. The mortgage presented at closing shows John and Jane, individually, as mortgagors. This is not correct. The owners’ names must be the same as the mortgagors’ names. Since John and Jane, as trustees, own the home, John and Jane, as trustees, must execute the mortgage.

Rule of Title Practice: When the closer gets the deed and mortgage, the closer must compare the grantee(s) on the deed to the mortgagor(s) on the mortgage. The names must be identical! (But see also the paragraph immediately below.)

• John and Jane’s lender will not allow John and Jane to take title as trustees of a living trust. Therefore, John and Jane decide to take title as John and Jane, individually. The lender is asking that John’s parents, Fred and Ethel, also execute the mortgage. This is acceptable. One can have more borrowers execute the mortgage than there are people who own the land, as long as all the people who own the land mortgage the land. Here, John and Jane own the land, but John, Jane, Fred, and Ethel, are the mortgagors. (But always remember: all the owners of the land must execute the mortgage!)

• But for some reason this entire transaction falls apart, and so a month later John and Jane again decide to buy a new home. But now John and Jane will be the only people who will take title to this home, and only John and Jane will mortgage the home. (In other words: John and Jane take title to the home, and John and Jane execute the purchase money mortgage.) The lender tells the closer that because John makes so much money, he is the only one who has to sign the mortgage note. That is, Jane does not have to sign the note. This is acceptable; you can have fewer people signing the note than own and mortgage the property, as long as you have the approval of the lender. And of course the lender approved this arrangement; the lender is the one who drafted the note. (But it seems that it is possible that the lender is giving up its right to seek a deficiency judgment against the person who did not sign the note in the event of a mortgage foreclosure. But that is not the Company’s concern.) So in this example, because John and Jane will take title, John and Jane must both execute the mortgage. But only John will sign the note. And that is acceptable.

• A few years later, John and Jane move into still another home. John alone takes title to this home. John executes a purchase money mortgage at the closing. Jane gets angry at her in-laws, Fred and Ethel, and Jane moves out of the home. John never hears from her again. Five years later John decides to refinance his mortgage. On a case-by-case basis, with underwriter approval, the examiner may insure this new mortgage without Jane signing the mortgage to waive any outstanding homestead interest. Why is this the case? It appears that Jane has abandoned her home, and thus she has abandoned any outstanding homestead interest in the home. (But remember that if Jane had taken title to the home, then Jane must execute the mortgage. And if John decides to sell the home, and if Jane had taken title to it, then Jane must execute the deed. If both John and Jane take title to their home, and Jane moves out of the home and disappears, a quiet title suit may be John’s only recourse if Jane is nowhere to be found and he wants to sell the home. And even then the court may require that half the sale proceeds be held in an escrow until Jane is declared legally dead.)

This “abandonment of homestead” issue arises many times in many different contexts. And sometimes the issue isn’t one of abandonment. The title person may be told that, “My spouse lives permanently in a different town; she has never lived in this house.” Or, the examiner may be told that, “John and Jane are getting divorced; Jane has moved out of the home.” These and similar fact patterns have to be treated with much deliberation. The examiner has to ask many questions, such as, “How long has Jane been gone? When was the last time you saw Jane? You said that you and Jane are getting divorced; have you filed for divorce yet? Where is Jane living now? If you and Jane have not yet filed for divorce, do you anticipate doing so, and if so, when?”

• John owns the home that he and his wife, Jane, live in. John wants to deed the land to Jane and himself. Jane does not have to sign the deed to waive homestead; see 735 ILCS 5/12-904:

If a conveyance is made by an individual as grantor to his or her spouse, such conveyance shall be effectual to pass the title expressed therein to be conveyed thereby, whether or not the grantor in such conveyance is joined therein by his or her spouse.

This statute suggests that if John wants to deed the home to his wife, or if John wants to deed the home to both himself and his wife, his spouse need not join in the deed to waive homestead. Why? Probably because it is presumed that both John and his wife are already occupying the home as their homestead.

But if John wants to convey the land into the “John and Jane Living Trust,” then Jane would have to sign the deed in order to convey any homestead interest.

• John is married to Jane. John decides to buy the family home with a home equity/revolving line of credit mortgage. (See 205 ILCS 5/5d; see also 815 ILCS 205/4.1 et seq.) Even though the mortgage is being used to buy the home, the revolving line of credit envisions possible post-closing disbursements made months after the closing. Therefore, Jane must sign the mortgage to waive homestead.

Part V: A Final Reminder

Homestead is an issue in both a conveyance situation and also a mortgage situation.

However, because of the “possession given pursuant to the conveyance” provision of 735 ILCS 5/2-904, insuring the sale of land pursuant to a deed executed solely by the title holding spouse should not normally give rise to a title claim.

A misconception as to homestead concerning proper mortgage execution, may, though, result in a title claim.

And so in this regard, the examiner and closer should remember:

• All parties who own the property have to execute any mortgage of the property. The waiving of homestead is not sufficient. Indeed, homestead is not even an issue. The fact that all owners of the land have to execute a mortgage of the land is a title issue; it is not a homestead issue.

• In a situation involving the family home and a title holding spouse and a non-title holding spouse, and the Company is closing a refinance, a second mortgage, or a home equity mortgage, the title holding spouse will have to execute the mortgage. (See the rule immediately above.) The non-title holding spouse will probably have to sign the mortgage to waive homestead.

Judgments and Liens

A judgment is a lien on the debtor's property for seven years from the date the judgment is rendered (not from the date the judgment or memorandum of judgment is recorded). See Schindler v. Watson, 2017 IL App (2d) 160126.