Ask a Lawyer - Archive

I own a six unit apartment building. It was purchased through a land contract. The seller holds the mortgage. I missed August 08 payment. I was never late for over 4 years to this point. The seller threatened to have the tenants cars towed etc. if they don't pay rents to him, which they did. I have since paid all except $1500 to seller and have agreed to turn the building back to him in exchange for a release. He refuses and says he wants to sell the building and then settle. What if the sale price does not cover the note?

Is the $1,500 all that is owed to pay off the mortgage or is it instead only the remaining delinquent-payment amount (the arrearage on the current obligation)? If it's all that is still owed, then why sell the building for only a release?

In any case, if you own the building and wish to continue to own the building, you can. You are under no obligation to sell the building. In Illinois, mortgagors of real estate have a right to reinstate any mortgage which has become due prior to the maturity date stated in the mortgage because of an acceleration by default. To reinstate the mortgage, the mortgagor must pay all default payments then existing, other than the amount of principal which would not have been due had no acceleration occurred. In addition, the mortgagor must pay all costs and expenses due under the mortgage as a result of the default.

However, if the Seller forecloses on the mortgage, he or she could subsequently sell the building if you do not reinstate the mortgage as stated above (or redeem the mortgage). In that case, if the sales price does not cover the note, you could potentially be liable for a deficiency judgment.

If you decide to turn the building back over to the Seller in exchange for a release, you should negotiate the release terms to ensure you have no further liability for a deficiency.