While many lenders, especially SBA Lenders, shy away from Illinois Land Trusts, they actually have benefits for the secured and mortgage lender. Once the Lender takes an assignment of beneficial interest in a land trusts, the Lender has positioned itself to have more control over the collateral and ease of liquidation after default.
The collateral assignment of a beneficial interest in a land trust creates a security interest in personal property that is governed by the by Article 9 of the Illinois Uniform Commercial Code, Ill. Rev. Stat. ch. 26 para. 9-101 et seq. (1987). Upon assigning the beneficial interest, notice will be given to the lender of any subsequent attempts to grant security interests in the collateral and the lender can have veto power over such encumbrances.
One of the favorable remedies afforded to Lenders are non-judicial foreclosures. These foreclosure proceedings are often faster and more economical than traditional real estate foreclosures. The Lender must make sure that the Loan Documents grant this default remedy properly, but with careful drafting a Lender can have many alternatives in liquidation.
