Public Act 98-0514 (IL)

Public Act 98-0514 (SB 56); Effective Date: 11/19/2013

 

Statutes Amended: 735 ILCS 5/9-121, 9-205, 9-207, 9-207.5 (new), 15-1202.5, 15-1224 (new), 15-1225 (new), 15-1501, 15-1506, 15-1508, 15-1508.5, 15-1701, 15-1703, and 15-1704

 

Protecting Tenants in Foreclosed Homes

 

The federal Protection Tenants at Foreclosure Act of 2009 (the Act), Pub. L. No. 111-22, §§ 701–704 (2009), which was enacted in response to the increasing number of tenants being evicted with little or no notice after foreclosure of their landlords’ properties, has required foreclosing lenders to notify tenants of eviction at least 90 days in advance. The Act, however, is set to expire on December 31, 2014. The new Illinois law, effective as of November 19, 2013, is closely drafted after the federal Act.

 

At the outset, the law imposes a mandatory 90-day written notice requirement for termination of every bona fide lease. 735 ILCS 5/9–207.5. The written notice needs to include instructions on the method of payment of future rent. 735 ILCS 5/15–1508.5; 15–1703; and 15–1704. In addition, the foreclosing lender may terminate a bona fide lease only at the end of the term of the lease. 735 ILCS 5/9–207.5. The 90-day written notice requirement also applies to a bona fide lease for a month-to-month or week-to-week term. Id. If the purchaser is an individual who will occupy the foreclosed property as his or her primary residence, however, the new owner does not have to honor the bona fide lease, but is still subject to the 90-day notice requirement. Id.

 

The entry of a judgment of foreclosure does not terminate or otherwise affect a bona fide lease, whether or not the tenant has been made a party in the foreclosure. 735 ILCS 5/15–1506(i)(3). Similarly, no order of possession can be entered against a bona fide tenant, whether or not the tenant has been made a party in the foreclosure. 735 ILCS 5/15–1508. The court file relating to a forcible entry and detainer action brought against a bona fide tenant must be placed under seal. 735 ILCS 5/9–121(c).

 

A lease needs to be a “bona fide lease” for the new protection to apply. “Bona fide lease,” as defined in Section 15–1224, is confined to “a lease of a dwelling unit in residential real estate in foreclosure.” “Dwelling unit” is defined in Section 15–1202.5. “Residential real estate in foreclosure” is defined in Section 15–1225.

 

To qualify for a “bona fide lease,” the tenant cannot be the mortgagor, or the child, spouse, or parent of the mortgagor. This requirement, however, can be waived if the tenant proves by a preponderance of evidence that the other requirements are met. So, the lease still needs to have been the result of an arms-length transaction to qualify for a “bona fide lease.” Also, the rent of a “bona fide lease” cannot be substantially less than fair market rent for the property, unless the rent has been reduced or subsidized by a federal, State, or local subsidy. Finally, the lease has to be either one of the following: (i) the lease entered into before the filing of the lis pendens, or (ii) the lease entered into after the filing of the lis pendens, but before the judicial sale, and the term of the lease is for one year or less. 735 ILCS 5/15–1224(a).

 

The following categories of leases are deemed to be a bona fide lease for a limited term. A written lease for a term exceeding one year entered into after the filing of lis pendens but before the judicial sale is deemed to be a bona fide lease for a term of one year. An oral lease entered into before the judicial sale is deemed to be a bona fide lease for a month-to-month term, but the tenant can prove by a preponderance of evidence that the lease is for a longer term, but only up to one year. A written or oral lease entered into after the judicial sale but before the court order confirming the judicial sale is deemed to be a bona fide lease for a month-to-month term. 735 ILCS 5/15–1224(b)–(e).

 

Special Representative for Deceased Mortgagor

 

In 2010, the Supreme Court of Illinois held in ABM AMRO Mortg. Group., Inc. v. McGahan, 931 N.E.2d 1190 (Ill. 2010), that mortgage foreclosure proceedings are quasi in rem actions. Thereafter, the Supreme Court Rule 113(i) has required the court to appoint a special representative for a deceased mortgagor in all mortgage foreclosure cases. Under the new statute that takes effect as of November 19, 2013, “The court is not required to appoint a special representative for a deceased mortgagor for the purpose of defending the action, if there is a living person that holds a 100% interest in the property that is the subject of the action, by virtue of being the deceased mortgagor’s surviving joint tenant or surviving tenant by the entirety.” 735 ILCS 5/15–1501(h).

Bill Number: 
SB 56
Public Act or Public Law Number: 
PA 98-514
By: ATG Underwriting Department | Posted on: Mon, 11/04/2013 - 4:27pm