Chicago’s new “Protecting Tenants in Foreclosed Rental Property Ordinance” consists of a number of parts. The law applies to certain foreclosed properties within the City of Chicago. Sections 5-14-020 and 5-14-030 help owners figure out if the law applies to them. Today, in part one of my short-series on the law, I will focus on the notice requirements. Section 5-14-040 sets forth the requirement that an owner, as defined by the ordinance, provide a certain notice to tenants within 21 days after becoming the owner of a foreclosed rental property.
Duty to Investigate. The law requires that owners make a “good faith-effort to ascertain the identities and addresses of all tenants of the rental units in the foreclosed rental property” and provide them with the required notice. What does this mean? It seems to say that an owner must do some due diligence. It is simply not good enough to say “I don’t know who lives there”. The owner should take active steps to ascertain the identity of the tenants. How far does that go? Does an owner have to hire a detective? Knock on every door? Stake out the place? Who knows. Surely tenant’s advocates will argue for these things and many others. This is a gray area of the law that will likely be fought over in court. Property owners – beware of what you are getting into when you purchase a foreclosure in Chicago governed by this ordinance!
Notice. The law sets forth the notice which must be in writing and given to the tenants. In general, the notice advises tenants that, under certain circumstances, the tenant may be eligible for relocation assistance. In addition to the required notice language, the notice must also include the name, address, and telephone number of the owner, property manager, or owner’s agent who is responsible for the foreclosed rental property.
The City of Chicago has a sample of the notice on its website. The trouble with the City’s website is that the law (at 5-14-040(a)(1)) requires that the notice “shall be given in English, Spanish, Polish and Chinese”. Yep, you read that right – four languages. What’s wrong with that, you may ask? Isn’t it good that as many people know and understand the notice as possible? Absolutely! The trouble is that the City of Chicago website only has the English language version posted. I’ve contacted the City and hope to get those notices, but so far, no luck. Hopefully, they will put up a Spanish, Polish, and Chinese translation, because my translation skills are lacking.
Notice to Tenants discovered after 21 days. So far, so good. Owners need to figure out the identity of the tenants in their new building and then give them notice within 21 days of becoming the owner. What about the tenants who were hiding, gone, lying, or discovered after 21 days? They get a notice too! The law requires that for any tenant whose identity is ascertained after the first 21 days of ownership, the owner shall then provide the same notice required by the law within 7 days after the owner finally ascertains their identity. What can we imply from this? Well, it sure sounds to me like there is an ongoing duty on the new owner to continue making a good faith effort to ascertain the identity of each and every tenant in the building, even after the first 21 days.
How to give the Notice. Section 5-14-040(a)(3) provides that there are three ways to provide the notice to tenants.
1. The notice can be delivered to the known tenant (ie. personal service on the actual tenant);
2. The notice can be left with some person age 13 or older who resides in the tenant’s rental unit; 3. The notice can be sent by “first class or certified mail, return receipt requested, to each known tenant, addressed to the tenant”.
That’s it. Three choices for effecting service. The options are actually quite similar to the methods prescribed by the Illinois Forcible Entry and Detainer Act for serving a tenant an eviction notice. Item 2 is tricky because an owner might not be able to know or prove that the person they leave the notice with actually resides in the rental unit (as opposed to being a guest). Item 3 is tricky because, first, the sentence is a grammatical nightmare and because it is hard to prove what was in a certified mail envelope or that the mail was actually received by the tenant. Prudent owners will make personal service and will probably have a witness nearby for good measure.
Also, Don’t Forget to Post a Notice. So, the “good” property owner finds out who lives in the building and gives the notice. In addition, to actual notice to tenants, the owner is also required, within 21 days of becoming the owner of the foreclosed property, to post a copy of the required written notice on the “primary entrance” of each foreclosed rental property.
What Happens if the Owner does not Comply? The City of Chicago is not joking around with this ordinance. One simple sentence for owners who don’t provide the required notices:
Any owner who fails to comply with this section shall not collect rent due and owing from any known tenant, until the owner has served the notices required by this section.
Read that again. Seriously. Read it again, I’ll wait… Exact words Marsha. If there is a failure to comply, the landlord shall not collect rent due and owing from any known tenant. If I read that the way I suspect a tenant’s rights attorney will read it, I think it is likely that we will see tenant’s rights attorneys argue that because an owner did not give a notice to “Jim in Unit 3C”, the owner can’t collect from “Dave in Unit 1F”. How will that case turn out? I don’t know and I doubt any owner wants to pay an attorney to find out.
So, that about takes care of the notice requirement for owners of foreclosed properties under 5-14-040 of Keep Chicago Renting. Tomorrow, we will discuss the content’s of that notice (ie. relocation assistance or renewal/extension) and later this week we will discuss some of the other penalty provisions for failure to provide the proper notice (you didn’t think that taking away the right to collect rent was the only penalty, did you?). Stay tuned for more on this neato law.