Yes, we believe that the county’s lien would have to be paid off before a previously recorded mortgage in the event of a judicial sale of the property at the completion of a foreclosure action.

The Senior Citizen Real Estate Tax Deferral Act permits a qualifying senior citizen to defer property tax payments, with interest, until the property is sold or the senior citizen dies. The Act creates a lien for the deferred taxes, interest and fees, and the county must record a copy of the tax deferral agreement. While the Act does not expressly address the priority of the county’s lien, it does state that the property cannot be sold or transferred “until the taxes which would have otherwise have been due on the property, plus accrued interest, have been paid unless the [county] collector certifies in writing that an arrangement for prompt payment of the amount due has been made with his office.”

We are aware of only one court decision interpreting this language as it relates to a mortgage lien in a foreclosure action. In that case, the U.S. District Court for the Southern District of Illinois held that county liens for deferred property taxes “are superior and have first priority over any other claims . . . .” As a result, funds from the foreclosure sale were first paid to the county and then to the mortgagee and other lienholders. The Illinois Mortgage Foreclosure Law appears to confirm this result, as it requires that foreclosure sale proceeds are applied first to “the reasonable expenses of securing possession before sale, holding, maintaining, and preparing the real estate for sale, including payment of taxes and other governmental charges” before satisfying mortgages and other claims.

For resources related to our guidance, please see:

• Senior Citizen Real Estate Tax Deferral Act, 320 ILCS 30/4 (“In the case of each tax deferral and recovery agreement entered into between the collector and the owner or owners of qualifying property, the collector shall forthwith cause to be recorded with the recorder of the county in which the qualifying property is located a statement of their action which shall constitute a lien upon the real estate and improvements thereon covered by such agreement for such taxes as have been deferred under the provisions of this Act, plus accrued interest as provided for by Section 3.”)

• Senior Citizen Real Estate Tax Deferral Act, 320 ILCS 30/3(2) (“No sale or transfer of such real property may be legally closed and recorded until the taxes which would otherwise have been due on the property, plus accrued interest, have been paid unless the collector certifies in writing that an arrangement for prompt payment of the amount due has been made with his office.”)

• U.S. v. Swann, Civil No. 11-118-GPM (Dist. Ct. S.D. Ill. October 13, 2011) (“Defendant Illinois Department of Revenue, by virtue of its valid real estate tax liens on the above described property pursuant to the Senior Citizens Real Estate Tax Deferral Program, 320 ILCS 30/3, is owed $20,130.33 as of August 23, 2011, plus all penalties, interests, and costs that have accrued thereafter. Illinois law governs the priority of the competing liens of Defendant Illinois Department of Revenue and the lien of Plaintiff on the above described property. Defendant Illinois Department of Revenue's property tax liens are superior and have first priority over any other claims, including that of Plaintiff, to the above described property. Funds from any foreclosure sale must be disbursed to Defendant Illinois Department of Revenue prior to any other lien holder or claimant.”)

• Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1512 (“The proceeds resulting from a sale of real estate under this Article shall be applied in the following order: . . . . (b) the reasonable expenses of securing possession before sale, holding, maintaining, and preparing the real estate for sale, including payment of taxes and other governmental charges . . . . (c) if the sale was pursuant to judicial foreclosure, satisfaction of claims in the order of priority adjudicated in the judgment of foreclosure or order confirming the sale . . . .”)