A contractor and construction lender were recently pitted against each other in a priority contest, and the lender won. The contractor filed suit in Indiana to collect what it was owed on a construction project from the owner. The owner had borrowed money from a bank to fund the construction project, and the loan was secured by a mortgage on the real estate. The mortgage was recorded before the contractor began work. When the contractor was not paid for its work, the contractor recorded a mechanic’s lien against the property. (more…)
Posts Tagged ‘mortgage’
A Financial Face-Off: Bank Loans vs. Mechanic’s Liens
Thursday, August 11th, 2011Lender Wins in Lien Priority Dispute with IRS
Thursday, May 19th, 2011The Seventh Circuit Court of Appeals recently ruled in favor of a financial institution in a dispute between it and the IRS. The lender had filed a mortgage on its borrower’s real estate and an assignment of rents. Subsequent to the filing of the mortgage, the IRS filed a tax lien against the same real estate. A receiver was appointed and collected rents from the mortgaged real estate.
A lower court determined that the IRS had a right to the rent collected. Fortunately for the lender, the Seventh Circuit saw things differently and reversed the lower court, giving the lender priority over the IRS in the rents. The Appeals Court did not rely on the lender’s separate lien on the rents, but on characterizing the monthly rental as the value of the real property for that particular month, as a new asset that came into existence subsequent to the mortgage.
If you have questions about tax liens or real estate financing, please contact a Bamberger attorney.
Author: Lori Young (bio)
Phone: 812.452.3560
Email: lyoung@bamberger.com
Advice to Lenders: Mortgage Must Correctly Describe the Debt Secured
Tuesday, October 12th, 2010It is not unusual for a lender to obtain a mortgage on real estate owned by a party which is not liable on the underlying promissory note, as collateral for repayment of the note. In a case entered October 4, 2010 by the Indiana Court of Appeals, the Court was presented with a set of facts in which such a mortgage incorrectly described the identity of the makers of the underlying promissory note. The mortgage stated that the signators of the note secured included a corporation and three (3) individuals. In fact, one of said individuals named was not a maker of the note, but instead signed a guaranty. (more…)
Preparation Clauses in Kentucky Mortgages
Wednesday, March 10th, 2010Kentucky law indicates that a mortgage must contain a preparation clause signed by an attorney. The requirement for an attorney to sign the preparation clause cannot be satisfied by having a bank employee or other loan officer sign the preparation clause. (more…)