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Liability of Mortgagee or Mortgagor

A mortgagor or mortgagee exercising authority and control over a mortgaged premise will be liable for damages caused to third parties by unsafe conditions on such property[i].  Likewise, a mortgagee in possession who fails to employ the same care and supervision over a mortgaged premise that a reasonably prudent owner would exercise will be liable for damages[ii].

However, a mortgagee who is out of possession of a mortgaged premise without any management and control cannot be held liable for the defects on the mortgaged premises.  While determining the liability of a mortgagee, it must be established that the mortgagee had control over the land.  The establishment of a constructive possession however will not impose any liability upon the mortgagee[iii].

A mortgagee of a building with a defective condition cannot be held liable for damages:

  • if such mortgagee was appointed as a receiver for the premises only after the injury occurred; and
  • if there was no indication that the mortgagee had any control over the building before the accident.


A mortgagee, who leases a mortgaged property which is in a dangerous or unsafe condition at the time of lease, will be made liable, as a continuer of a nuisance on the premises that was created by the mortgagor.  This is provided the mortgagee has knowledge about the dangerous condition[iv].

Regarding the liability of a mortgagee for damages to third parties caused by unsafe conditions on the property, the determinative issue is not whether a defendant is properly a ‘mortgagee in possession’, but whether the defendant actually possesses the premises.  Therefore, whether someone is a mortgagee is not the critical point.  Instead the possession is the critical point[v].

[i] Cantrell v. DuQuoin State Bank, 271 Ill. App. 3d 291 (Ill. App. Ct. 5th Dist. 1995).

[ii] Roy v. Goings, 96 Ill. 361 (Ill. 1880).

[iii] Marcon v. First Federal Sav. & Loan Ass’n, 58 Ill. App. 3d 811 (Ill. App. Ct. 1st Dist. 1978).

[iv] Prudential Ins. Co. v. Zeidler, 233 Ala. 328 (Ala. 1936).

[v] Coleman v. Hoffman, 115 Wn. App. 853 (Wash. Ct. App. 2003).

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