The Impact of Foreclosure on Chicago Area Renters

Thanks to an Illinois law passed last fall by Governor Quinn, tenants residing in an Illinois home that is undergoing foreclosure can have more time to make a move. If you are a renter in Rolling Meadows whose landlord is facing the loss of a home, it is important to know your rights under state law.

How Foreclosure Works

Illinois is one of 22 states that requires judicial foreclosures, which means a lender must go through the state court system and its judicial process in order to foreclose on a property and obtain relief on the debt owed. A lender initiates the proceeding by filing a complaint to foreclose on the property laying out the claims of the suit. The complaint will describe the promissory note, mortgage, default, amount due on the loan, property to be foreclosed, and the defendants, along with whatever interest they hold in the property. The complaint may also seek a deficiency judgment that allows the lender to file a separate suit against the borrower after the foreclosure if the proceeds at the sale do not fully cover the total debt owed. In addition to filing the complaint with the court, the lender will properly and effectively serve the complaint and a summons to appear in court on the defendants. The lender also files a lis pendens in the county records providing notice to the borrower - as well as the public - that a suit is underway relating to the property.

How Illinois Law Protects Renters

In August of 2013, Illinois Governor Pat Quinn signed a new state law protecting renters living in foreclosed properties, Senate Bill 56 (SB 56), requiring those who acquire real estate through the foreclosure process to honor existing leases through the end of their term or provide sufficient notice allowing the tenants to find new living accommodations. In particular, in a foreclosure a landlord may terminate a bona fide lease that was in effect prior to the sale only if: 1) in the case of a month-to-month or week-to-week lease, with no less than 90 days’ written notice; or 2) at the end of the term of the lease, with no less than 90 days’ written notice. If the buyer intends for the home to be the primary residence, then the lease can be terminated with 90 days’ written notice and the new owner is not required to honor the lease through the end of the term.

A bona fide lease is a residential lease that includes all of the following elements:

1.         The borrower is not the tenant under the lease, nor is the borrower’s child, spouse or parent the tenant. If the child, spouse or parent of the borrower is a tenant, it may be proven by a preponderance of the evidence that a bona fide lease exists;

2.         The rental amount stipulated in the lease is not substantially lower than the fair market value of comparable rentals or it is reduced because of local, state or federal subsidies;

3.         The lease was entered into before the date of the lis pendens, or after the date of lis pendens but before the date of the judicial sale of foreclosure and the lease term is for one year or less;

4.         The lease was the result of an arms-length transaction, which means there was no special relationship between the parties and the agreement was made freely and independently.

Law Offices of Gilbert C. Schumm

If you are considering purchasing a home that is in foreclosure or are renting a home facing foreclosure proceedings, contact an Illinois foreclosure attorney today to learn about your rights and obligations. Don’t navigate this complex process alone. With over 35 years of experience fighting for clients’ rights, the Law Offices of Gilbert C. Schumm can provide real estate advice, and serves the Chicago area including Rolling Meadows, Des Plaines, and Streamwood.