Illinois enacts new tenant protections related to forclosure

Illinois tenant protections in foreclosure

On August 21, 2013, Governor Quinn signed into law a bill passed by the Illinois Legislature this past June providing additional protections to tenants affected by foreclosures.  The law amends the Illinois Mortgage Foreclosure Act and goes into effect in 90 days.  Should people care?  Probably not right now.

The main provision of the law is that any party taking title to residential real estate via a foreclosure may only terminate a “bona fide” lease at the end of the lease term upon no less than 90 days notice or if the lease is month-to-month or week-to-week, then upon 90 days notice.  However, any party that takes title to such real estate who will occupy the unit as a primary residence may terminate the lease upon 90 days notice. (See section 9-207.5)

So, why is it that landlords should not care about this law?  Well, they certainly cannot ignore it, however, the law is nearly a copycat of another law that already exists and is already in force.  The new Illinois law mimics the Federal Protecting Tenants at Foreclosure law.  Broken down, it requires that when an Illinois tenant has a “bona fide” lease (I’ll have more on bona fide at a later time), the lease survives the foreclosure.  In all cases, a tenant must receive a minimum of 90 days notice.  Excepted from these requirements are any real estate buyers (think people who buy a post-foreclosure property from a bank) who intend to use the real estate as a primary residence.  For those buyers, they may cut a lease short and must merely provide a minimum 90 day notice (ie. they don’t have to wait to the end of the lease).

Here are a few examples.  If a tenant has a bona fide one year lease beginning on January 1, 2013 and the foreclosure is completed with an investor bank taking over on June 1, 2013, the tenant will get to remain in the property until December 31, 2013 and the tenant shall still be entitled to 90 days notice in advance of the end of the lease term.  If a tenant has a bona fide one year lease beginning on July 1, 2012 and ending on June 30, 2013 and the foreclosure is completed with an investor bank taking over on June 1, 2013, the tenant will get to remain in the property until the tenant is served a proper 90 day notice and the notice period expires (even though the lease expires before the end of the notice period).  If a tenant has a bona fide month to month lease and the foreclosure is completed with an investor bank taking over on June 1, 2013, the tenant will get to remain in the property until the tenant is served a proper 90 day notice and the notice period expires.

Inasmuch as the Protecting Tenants at Foreclosure Act is set to expire on December 31, 2014, the law will ensure tenant protections into the future beyond the expiration of the federal law (if the law is not extended).  For now, it is yet another layer of legislation.  Tenants already have just about all of the protection provided by this new law.  It seems to me that this is an example of legislators making a law so that they can campaign about a law that they made.  Yawn.  Until then, this is a good example of government bloat and really much ado about nothing.

 

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