Public Act 98-1099, effective August 26, 2014, provides a new procedure for extinguishing a subordinate interest on a foreclosed property when that interest was not named in the original foreclosure action.

The new procedure applies only in limited circumstances where: (1) the property is the subject of a foreclosure action; (2) a motion to confirm the judicial sale is pending or has been granted; (3) the interest attached prior to filing or recording the notice of foreclosure; and (4) the person with the interest was not named in the foreclosure complaint.

If the above requirements are met, then the holder of the certificate of sale or purchaser of the foreclosed property may file a strict foreclosure complaint naming the omitted subordinate interest as defendant. The court will then enter a judgment to extinguish the omitted subordinate interest. The only option available to the person with the omitted subordinate interest is to redeem the property. He or she does not have a right to file a separate foreclosure action, though they may make a claim for the surplus in the proceeds from the sale of the property.

Generally, plaintiffs include subordinate lienholders as parties in a foreclosure action in order to extinguish the subordinate interest. Prior to the new procedure, an unnamed subordinate interest's claim would not be extinguished by the confirmation of the judicial sale. Therefore, this new procedure provides plaintiffs with an opportunity to extinguish the interest of a subordinate lienholder who was not named in the foreclosure complaint while at the same time giving the omitted lienholder an opportunity to redeem the property.

When reviewing a foreclosure case, if there is a subordinate interest who was not named in the initial complaint, ATG will require that interest to be extinguished under the new procedure outlined in Public Act 98-1099.