Illinois General Assembly - Full Text of SB3810
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Full Text of SB3810  97th General Assembly




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1    AN ACT concerning rent assignments.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 1. Short title. This Act may be cited as the
5Uniform Assignment of Rents Act.
6    Section 2. Definitions. In this Act:
7    (1) "Assignee" means a person entitled to enforce an
8assignment of rents.
9    (2) "Assignment of rents" means a transfer of an interest
10in rents in connection with an obligation secured by real
11property located in this State and from which the rents arise.
12    (3) "Assignor" means a person that makes an assignment of
13rents or the successor owner of the real property from which
14the rents arise.
15    (4) "Cash proceeds" means proceeds that are money, as
16defined in Article 1 of the Uniform Commercial Code, whether in
17the form of cash, checks, deposit accounts, or the like.
18    (5) "Day" means calendar day.
19    (6) "Deposit account" means a demand, time, savings,
20passbook, or similar account maintained with a bank, savings
21bank, savings and loan association, credit union, or trust
23    (7) "Document" means information that is inscribed on a



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1tangible medium or that is stored on an electronic or other
2medium and is retrievable in perceivable form.
3    (8) "Notification" means a document containing information
4that this Act requires a person to provide to another, signed
5by the person required to provide the information.
6    (9) "Person" means an individual, corporation, business
7trust, estate, trust, partnership, limited liability company,
8association, joint venture, public corporation, government or
9governmental subdivision, agency, or instrumentality, or any
10other legal or commercial entity.
11    (10) "Proceeds" means personal property that is received or
12collected on account of a tenant's obligation to pay rents.
13    (11) "Purchase" means to take by sale, lease, discount,
14negotiation, mortgage, pledge, lien, security interest, issue
15or reissue, gift, or any other voluntary transaction creating
16an interest in property.
17    (12) "Rents" means:
18        (A) sums payable for the right to possess or occupy, or
19    for the actual possession or occupation of, real property
20    of another person;
21        (B) sums payable to an assignor under a policy of
22    rental interruption insurance covering real property;
23        (C) claims arising out of a default in the payment of
24    sums payable for the right to possess or occupy real
25    property of another person;
26        (D) sums payable to terminate an agreement to possess



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1    or occupy real property of another person;
2        (E) sums payable to an assignor for payment or
3    reimbursement of expenses incurred in owning, operating
4    and maintaining, or constructing or installing
5    improvements on, real property; or
6        (F) any other sums payable under an agreement relating
7    to the real property of another person that constitute
8    rents under law of this State other than this Act.
9    (13) "Secured obligation" means an obligation the
10performance of which is secured by an assignment of rents.
11    (14) "Security instrument" means a document, however
12denominated, that creates or provides for a security interest
13in real property, whether or not it also creates or provides
14for a security interest in personal property.
15    (15) "Security interest" means an interest in property that
16arises by agreement and secures performance of an obligation.
17    (16) "Sign" means, with present intent to authenticate or
18adopt a document:
19        (A) to execute or adopt a tangible symbol; or
20        (B) to attach to or logically associate with the
21    document an electronic sound, symbol, or process.
22    (17) "State" means a state of the United States, the
23District of Columbia, Puerto Rico, the United States Virgin
24Islands, or any territory or insular possession subject to the
25jurisdiction of the United States.
26    (18) "Submit for recording" means to submit a document



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1complying with applicable legal standards, with required fees
2and taxes, to the appropriate county clerk or recorder's office
3under the Conveyances Act.
4    (19) "Tenant" means a person that has an obligation to pay
5sums for the right to possess or occupy, or for possessing or
6occupying, the real property of another person.
7    Section 3. Manner of giving notification.
8    (a) Except as otherwise provided in subsections (c) and
9(d), a person gives a notification or a copy of a notification
10under this Act:
11        (1) by depositing it with the United States Postal
12    Service or with a commercially reasonable delivery
13    service, properly addressed to the intended recipient's
14    address as specified in subsection (b), with first-class
15    postage or cost of delivery provided for; or
16        (2) if the recipient agreed to receive notification by
17    facsimile transmission, electronic mail, or other
18    electronic transmission, by sending it to the recipient in
19    the agreed manner at the address specified in the
20    agreement.
21    (b) The following rules determine the proper address for
22giving a notification under subsection (a):
23        (1) A person giving a notification to an assignee shall
24    use the address for notices to the assignee provided in the
25    document creating the assignment of rents, but, if the



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1    assignee has provided the person giving the notification
2    with a more recent address for notices, the person giving
3    the notification shall use that address.
4        (2) A person giving a notification to an assignor shall
5    use the address for notices to the assignor provided in the
6    document creating the assignment of rents, but, if the
7    assignor has provided the person giving the notification
8    with a more recent address for notices, the person giving
9    the notification shall use that address.
10        (3) If a tenant's agreement with an assignor provides
11    an address for notices to the tenant and the person giving
12    notification has received a copy of the agreement or knows
13    the address for notices specified in the agreement, the
14    person giving the notification shall use that address in
15    giving a notification to the tenant. Otherwise, the person
16    shall use the address of the premises covered by the
17    agreement.
18    (c) If a person giving a notification pursuant to this Act
19and the recipient have agreed to the method for giving a
20notification, any notification must be given by that method.
21    (d) If a notification is received by the recipient, it is
22effective even if it was not given in accordance with
23subsection (a) or (c).
24    Section 4. Security instrument creates assignment of
25rents; assignment of rents creates security interest.



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1    (a) An enforceable security instrument creates an
2assignment of rents arising from the real property described in
3the security instrument, unless the security instrument
4provides otherwise.
5    (b) An assignment of rents creates a presently effective
6security interest in all accrued and unaccrued rents arising
7from the real property described in the document creating the
8assignment, regardless of whether the document is in the form
9of an absolute assignment, an absolute assignment conditioned
10upon default, an assignment as additional security, or any
11other form. The security interest in rents is separate and
12distinct from any security interest held by the assignee in the
13real property.
14    Section 5. Recordation; perfection of security interest in
15rents; priority of conflicting interests in rents.
16    (a) A document creating an assignment of rents may be
17submitted for recording in the county clerk or recorder's
18office in the same manner as any other document evidencing a
19conveyance of an interest in real property.
20    (b) Upon recording, the security interest in rents created
21by an assignment of rents is fully perfected, even if a
22provision of the document creating the assignment or law of
23this State other than this Act would preclude or defer
24enforcement of the security interest until the occurrence of a
25subsequent event, including a subsequent default of the



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1assignor, the assignee's obtaining possession of the real
2property, or the appointment of a receiver.
3    (c) Except as otherwise provided in subsection (d), a
4perfected security interest in rents takes priority over the
5rights of a person that, after the security interest is
7        (1) acquires a judicial lien against the rents or the
8    real property from which the rents arise; or
9        (2) purchases an interest in the rents or the real
10    property from which the rents arise.
11    (d) A perfected security interest in rents has priority
12over the rights of a person described in subsection (c) with
13respect to future advances to the same extent as the assignee's
14security interest in the real property has priority over the
15rights of that person with respect to future advances.
16    Section 6. Enforcement of security interest in rents.
17    (a) An assignee may enforce an assignment of rents using
18one or more of the methods specified in Sections 7, 8, and 9 or
19any other method sufficient to enforce the assignment under law
20of this State other than this Act.
21    (b) From the date of enforcement, the assignee or, in the
22case of enforcement by appointment of a receiver under Section
237, the receiver, is entitled to collect all rents that:
24        (1) have accrued but remain unpaid on that date; and
25        (2) accrue on or after that date, as those rents



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1    accrue.
2    Section 7. Enforcement by appointment of receiver.
3    (a) An assignee is entitled to the appointment of a
4receiver for the real property subject to the assignment of
5rents if:
6        (1) the assignor is in default and:
7            (A) the assignor has agreed in a signed document to
8        the appointment of a receiver in the event of the
9        assignor's default;
10            (B) it appears likely that the real property may
11        not be sufficient to satisfy the secured obligation;
12            (C) the assignor has failed to turn over to the
13        assignee proceeds that the assignee was entitled to
14        collect; or
15            (D) a subordinate assignee of rents obtains the
16        appointment of a receiver for the real property; or
17        (2) other circumstances exist that would justify the
18    appointment of a receiver under law of this State other
19    than this Act.
20    (b) An assignee may file a petition with the circuit court
21of a county in which any portion of the premises is located for
22the appointment of a receiver in connection with an action:
23        (1) to foreclose the security instrument;
24        (2) for specific performance of the assignment;
25        (3) seeking a remedy on account of waste or threatened



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1    waste of the real property subject to the assignment; or
2        (4) otherwise to enforce the secured obligation or the
3    assignee's remedies arising from the assignment.
4    (c) An assignee that files a petition under subsection (b)
5shall also give a copy of the petition in the manner specified
6in Section 3 to any other person that, 10 days before the date
7the petition is filed, held a recorded assignment of rents
8arising from the real property.
9    (d) If an assignee enforces an assignment of rents under
10this Section, the date of enforcement is the date on which the
11court enters an order appointing a receiver for the real
12property subject to the assignment.
13    (e) From the date of its appointment, a receiver is
14entitled to collect rents as provided in Section 6(b). The
15receiver also has the authority provided in the order of
16appointment and law of this State other than this Act.
17    (f) The following rules govern priority among receivers:
18        (1) If more than one assignee qualifies under this
19    Section for the appointment of a receiver, a receivership
20    requested by an assignee entitled to priority in rents
21    under this Act has priority over a receivership requested
22    by a subordinate assignee, even if a court has previously
23    appointed a receiver for the subordinate assignee.
24        (2) If a subordinate assignee obtains the appointment
25    of a receiver, the receiver may collect the rents and apply
26    the proceeds in the manner specified in the order



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1    appointing the receiver until a receiver is appointed under
2    a senior assignment of rents.
3    Section 8. Enforcement by notification to assignor.
4    (a) Upon the assignor's default, or as otherwise agreed by
5the assignor, the assignee may give the assignor a notification
6demanding that the assignor pay over the proceeds of any rents
7that the assignee is entitled to collect under Section 6. The
8assignee shall also give a copy of the notification to any
9other person that, 10 days before the notification date, held a
10recorded assignment of rents arising from the real property.
11    (b) If an assignee enforces an assignment of rents under
12this Section, the date of enforcement is the date on which the
13assignor receives a notification under subsection (a).
14    (c) An assignee's failure to give a notification under
15subsection (a) to any person holding a recorded assignment of
16rents does not affect the effectiveness of the notification as
17to the assignor, but the other person is entitled to any relief
18permitted under law of this State other than this Act.
19    (d) An assignee that holds a security interest in rents
20solely by virtue of Section 4(a) may not enforce the security
21interest under this Section while the assignor occupies the
22real property as the assignor's primary residence.
23    Section 9. Enforcement by notification to tenant.
24    (a) Upon the assignor's default, or as otherwise agreed by



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1the assignor, the assignee may give to a tenant of the real
2property a notification demanding that the tenant pay to the
3assignee all unpaid accrued rents and all unaccrued rents as
4they accrue. The assignee shall give a copy of the notification
5to the assignor and to any other person that, 10 days before
6the notification date, held a recorded assignment of rents
7arising from the real property. The notification must be signed
8by assignee and:
9        (1) identify the tenant, assignor, assignee, premises
10    covered by the agreement between the tenant and the
11    assignor, and assignment of rents being enforced;
12        (2) provide the recording data for the document
13    creating the assignment or other reasonable proof that the
14    assignment was made;
15        (3) state that the assignee has the right to collect
16    rents in accordance with the assignment;
17        (4) direct the tenant to pay to the assignee all unpaid
18    accrued rents and all unaccrued rents as they accrue;
19        (5) describe the manner in which subsections (c) and
20    (d) affect the tenant's payment obligations;
21        (6) provide the name and telephone number of a contact
22    person and an address to which the tenant can direct
23    payment of rents and any inquiry for additional information
24    about the assignment or the assignee's right to enforce the
25    assignment; and
26        (7) contain a statement that the tenant may consult a



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1    lawyer if the tenant has questions about its rights and
2    obligations.
3    (b) If an assignee enforces an assignment of rents under
4this Section, the date of enforcement is the date on which the
5tenant receives a notification substantially complying with
6subsection (a).
7    (c) Subject to subsection (d) and any other claim or
8defense that a tenant has under law of this State other than
9this Act, following receipt of a notification substantially
10complying with subsection (a):
11        (1) a tenant is obligated to pay to the assignee all
12    unpaid accrued rents and all unaccrued rents as they
13    accrue, unless the tenant has previously received a
14    notification from another assignee of rents given by that
15    assignee in accordance with this Section and the other
16    assignee has not canceled that notification;
17        (2) unless the tenant occupies the premises as the
18    tenant's primary residence, a tenant that pays rents to the
19    assignor is not discharged from the obligation to pay rents
20    to the assignee;
21        (3) a tenant's payment to the assignee of rents then
22    due satisfies the tenant's obligation under the tenant's
23    agreement with the assignor to the extent of the payment
24    made; and
25        (4) a tenant's obligation to pay rents to the assignee
26    continues until the tenant receives a court order directing



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1    the tenant to pay the rent in a different manner or a
2    signed document from the assignee canceling its
3    notification, whichever occurs first.
4    (d) A tenant that has received a notification under
5subsection (a) is not in default for nonpayment of rents
6accruing within 30 days after the date the notification is
7received before the earlier of:
8        (1) 10 days after the date the next regularly scheduled
9    rental payment would be due; or
10        (2) 30 days after the date the tenant receives the
11    notification.
12    (e) Upon receiving a notification from another creditor
13that is entitled to priority under Section 5(c) that the other
14creditor has enforced and is continuing to enforce its interest
15in rents, an assignee that has given a notification to a tenant
16under subsection (a) shall immediately give another
17notification to the tenant canceling the earlier notification.
18    (f) An assignee's failure to give a notification under
19subsection (a) to any person holding a recorded assignment of
20rents does not affect the effectiveness of the notification as
21to the assignor and those tenants receiving the notification.
22However, the person entitled to the notification is entitled to
23any relief permitted by law of this State other than this Act.
24    (g) An assignee that holds a security interest in rents
25solely by virtue of Section 4(a) may not enforce the security
26interest under this Section while the assignor occupies the



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1real property as the assignor's primary residence.
2    Section 10. Notification to tenant; form. No particular
3phrasing is required for the notification specified in Section
49. However, the following form of notification, when properly
5completed, is sufficient to satisfy the requirements of Section

8    Tenant: .................................................
Name of Tenant
10    Property Occupied by Tenant (the
11    "Premises"): ......................
13    Landlord: .........................
Name of Landlord
15    Assignee: .........................
Name of Assignee
17    Address of Assignee and Telephone Number of Contact Person
18    Address of Assignee: ....................................



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1    Telephone number of person to contact: ..................
2         1. The Assignee named above has become the person
3    entitled to collect your rents on the Premises listed above
4    under ...................................................
Name of document
6    (the "Assignment of Rents") dated ......................,
8    and recorded at .....................................
Recording data
10    with the County Clerk or Recorder of .............County.
County of Recording
12    You may obtain additional information about the Assignment
13    of Rents and the Assignee's right to enforce it at the
14    address listed above.
15        2. The Landlord is in default under the Assignment of
16    Rents. Under the Assignment of Rents, the Assignee is
17    entitled to collect rents from the Premises.
18        3. This notification affects your rights and
19    obligations under the agreement under which you occupy the
20    Premises (your "Agreement"). In order to provide you with



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1    an opportunity to consult with a lawyer, if your next
2    scheduled rental payment is due within 30 days after you
3    receive this notification, neither the Assignee nor the
4    Landlord can hold you in default under your Agreement for
5    nonpayment of that rental payment until 10 days after the
6    due date of that payment or 30 days following the date you
7    receive this notification, whichever occurs first. You may
8    consult a lawyer at your expense concerning your rights and
9    obligations under your Agreement and the effect of this
10    notification.
11         4. You must pay to the Assignee at the address listed
12    above all rents under your Agreement which are due and
13    payable on the date you receive this notification and all
14    rents accruing under your Agreement after you receive this
15    notification. If you pay rents to the Assignee after
16    receiving this notification, the payment will satisfy your
17    rental obligation to the extent of that payment.
18         5. Unless you occupy the Premises as your primary
19    residence, if you pay any rents to the Landlord after
20    receiving this notification, your payment to the Landlord
21    will not discharge your rental obligation, and the Assignee
22    may hold you liable for that rental obligation,
23    notwithstanding your payment to the Landlord.
24         6. If you have previously received a notification from
25    another person that also holds an assignment of the rents
26    due under your Agreement, you should continue paying your



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1    rents to the person that sent that notification until that
2    person cancels that notification. Once that notification
3    is canceled, you must begin paying rents to the Assignee in
4    accordance with this notification.
5         7. Your obligation to pay rents to the Assignee will
6    continue until you receive either:
7            (a) a written order from a court directing you to
8        pay the rent in a manner specified in that order; or
9            (b) written instructions from the Assignee
10        canceling this notification.
11    Assignee: .........................
Name of Assignee
13    By: ................
Officer/authorized agent of Assignee
15    Section 11. Effect of enforcement. The enforcement of an
16assignment of rents by one or more of the methods identified in
17Sections 7, 8, and 9, the application of proceeds by the
18assignee under Section 12 after enforcement, the payment of
19expenses under Section 13, or an action under Section 14(d)
20does not:
21        (1) make the assignee a mortgagee in possession of the
22    real property;
23        (2) make the assignee an agent of the assignor;



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1        (3) constitute an election of remedies that precludes a
2    later action to enforce the secured obligation;
3        (4) make the secured obligation unenforceable; or
4        (5) limit any right available to the assignee with
5    respect to the secured obligation.
6    Section 12. Application of proceeds. Unless otherwise
7agreed, an assignee that collects rents under this Act or
8collects upon a judgment in an action under Section 14(d) shall
9apply the sums collected in the following order to:
10        (1) the assignee's reasonable expenses of enforcing
11    its assignment of rents, including, to the extent provided
12    for by agreement and not prohibited by law of this State
13    other than this Act, reasonable attorney's fees and costs
14    incurred by the assignee;
15        (2) reimbursement of any expenses incurred by the
16    assignee to protect or maintain the real property subject
17    to the assignment;
18        (3) payment of the secured obligation;
19        (4) payment of any obligation secured by a subordinate
20    security interest or other lien on the rents if, before
21    distribution of the proceeds, the assignor and assignee
22    receive a notification from the holder of the interest or
23    lien demanding payment of the proceeds; and
24        (5) the assignor.



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1    Section 13. Application of proceeds to expenses of
2protecting real property; claims and defenses of tenant.
3    (a) Unless otherwise agreed by the assignee, and subject to
4subsection (c), an assignee that collects rents following
5enforcement under Section 8 or 9 need not apply them to the
6payment of expenses of protecting or maintaining the real
7property subject to the assignment.
8    (b) Unless a tenant has made an enforceable agreement not
9to assert claims or defenses, the right of the assignee to
10collect rents from the tenant is subject to the terms of the
11agreement between the assignor and tenant and any claim or
12defense arising from the assignor's nonperformance of that
14    (c) This Act does not limit the standing or right of a
15tenant to request a court to appoint a receiver for the real
16property subject to the assignment or to seek other relief on
17the ground that the assignee's nonpayment of expenses of
18protecting or maintaining the real property has caused or
19threatened harm to the tenant's interest in the property.
20Whether the tenant is entitled to the appointment of a receiver
21or other relief is governed by law of this State other than
22this Act.
23    Section 14. Turnover of rents; commingling and
24identifiability of rents; liability of assignor.
25    (a) In this Section, "good faith" means honesty in fact and



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1the observance of reasonable commercial standards of fair
3    (b) If an assignor collects rents that the assignee is
4entitled to collect under this Act:
5        (1) the assignor shall turn over the proceeds to the
6    assignee, less any amount representing payment of expenses
7    authorized by the assignee; and
8        (2) the assignee continues to have a security interest
9    in the proceeds so long as they are identifiable.
10    (c) For purposes of this Act, cash proceeds are
11identifiable if they are maintained in a segregated account or,
12if commingled with other funds, to the extent the assignee can
13identify them by a method of tracing, including application of
14equitable principles, that is permitted under law of this State
15other than this Act with respect to commingled funds.
16    (d) In addition to any other remedy available to the
17assignee under law of this State other than this Act, if an
18assignor fails to turn over proceeds to the assignee as
19required by subsection (b), the assignee may recover from the
20assignor in a civil action:
21        (1) the proceeds, or an amount equal to the proceeds,
22    that the assignor was obligated to turn over under
23    subsection (b); and
24        (2) reasonable attorney's fees and costs incurred by
25    the assignee to the extent provided for by agreement and
26    not prohibited by law of this State other than this Act.



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1    (e) The assignee may maintain an action under subsection
2(d) without bringing an action to foreclose any security
3interest that it may have in the real property. Any sums
4recovered in the action must be applied in the manner specified
5in Section 12.
6    (f) Unless otherwise agreed, if an assignee entitled to
7priority under Section 5(c) enforces its interest in rents
8after another creditor holding a subordinate security interest
9in rents has enforced its interest under Section 8 or 9, the
10creditor holding the subordinate security interest in rents is
11not obligated to turn over any proceeds that it collects in
12good faith before the creditor receives notification that the
13senior assignee has enforced its interest in rents. The
14creditor shall turn over to the senior assignee any proceeds
15that it collects after it receives the notification.
16    Section 15. Perfection and priority of assignee's security
17interest in proceeds.
18    (a) In this Section:
19        (1) "Article 9" means Article 9 of the Uniform
20    Commercial Code or, to the extent applicable to any
21    particular issue, Article 9 of the Uniform Commercial Code
22    as adopted by the state whose laws govern that issue under
23    the choice-of-laws rules contained in Article 9 as adopted
24    by this State.
25        (2) "Conflicting interest" means an interest in



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1    proceeds, held by a person other than an assignee, that is:
2            (A) a security interest arising under Article 9; or
3            (B) any other interest if Article 9 resolves the
4        priority conflict between that person and a secured
5        party with a conflicting security interest in the
6        proceeds.
7    (b) An assignee's security interest in identifiable cash
8proceeds is perfected if its security interest in rents is
9perfected. An assignee's security interest in identifiable
10noncash proceeds is perfected only if the assignee perfects
11that interest in accordance with Article 9.
12    (c) Except as otherwise provided in subsection (d),
13priority between an assignee's security interest in
14identifiable proceeds and a conflicting interest is governed by
15the priority rules in Article 9.
16    (d) An assignee's perfected security interest in
17identifiable cash proceeds is subordinate to a conflicting
18interest that is perfected by control under Article 9 but has
19priority over a conflicting interest that is perfected other
20than by control.
21    Section 16. Priority subject to subordination. This Act
22does not preclude subordination by agreement as to rents or
24    Section 17. Uniformity of application and construction. In



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1applying and construing this Uniform Act, consideration must be
2given to the need to promote uniformity of the law with respect
3to its subject matter among states that enact it.
4    Section 18. Relation to Electronic Signatures in Global and
5National Commerce Act. This Act modifies, limits, and
6supersedes the federal Electronic Signatures in Global and
7National Commerce Act (15 U.S.C. Section 7001, et seq.) but
8does not modify, limit, or supersede Section 101(c) of that Act
9(15 U.S.C. Section 7001(c)) or authorize electronic delivery of
10any of the notices described in Section 103(b) of that Act (15
11U.S.C. Section 7003(b)).
12    Section 19. Application to existing relationships.
13    (a) Except as otherwise provided in this Section, this Act
14governs the enforcement of an assignment of rents and the
15perfection and priority of a security interest in rents, even
16if the document creating the assignment was signed and
17delivered before the effective date of this Act.
18    (b) This Act does not affect an action or proceeding
19commenced before the effective date of this Act.
20    (c) Section 4(a) of this Act does not apply to any security
21instrument signed and delivered before the effective date of
22this Act.
23    (d) This Act does not affect:
24        (1) the enforceability of an assignee's security



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1    interest in rents or proceeds if, immediately before the
2    effective date of this Act, that security interest was
3    enforceable;
4        (2) the perfection of an assignee's security interest
5    in rents or proceeds if, immediately before the effective
6    date of this Act, that security interest was perfected; or
7        (3) the priority of an assignee's security interest in
8    rents or proceeds with respect to the interest of another
9    person if, immediately before the effective date of this
10    Act, the interest of the other person was enforceable and
11    perfected, and that priority was established.
12    Section 20. (Blank).
13    (765 ILCS 5/31.5 rep.)
14    Section 21. Repeal. The Conveyances Act is amended by
15repealing Section 31.5.