Welcome to day three of our series on the new Keep Chicago Renting Ordinance. Yesterday, we discussed the various notices that needed to be provided under the new law. Today, we will take a look at the provisions dealing with tenant relocation assistance found in section 5-14-050 of the Chicago Protecting Tenants in Foreclosed Rental Property Ordinance.
Relocation Assistance: For properties covered by the law, an owner of a foreclosed rental property shall pay a “qualified tenant” a one-time relocation fee of $10,600. Yes, you read that right. The law says the new owner shall make that payment. Luckily for the new owner, there are some ways to be exempt from this requirement. (see below) The law requires that the payment be $10,600 per rental unit. This is a good thing because it means that if there are two roommates in one rental unit, the owner does not have to pay double. The payment must be made within seven days after the tenant vacates. The payment must be made in the form of a cashier’s or certified check.
Other Obligations: In addition to any relocation assistance, the owner will also owe the tenant a return of any security, damage, or other deposit or refund the tenant is entitled to receive. Keep in mind that Sections 1.1 and 1.2 of the Illinois Security Deposit Return Act provide some security deposit protections for tenants in foreclosed properties. s that all buyers of residential property other than the holder of a lien interest are responsible for a tenant’s security deposit whether it was paid to them or not. Are foreclosure sale buyer’s a holder of a lien interest? That depends on the facts of every individual case. The law provides that the owner may deduct from the relocation assistance payment any rent due and payable for periods prior to when the tenant vacates. However, an owner cannot retain any part of the relocation assistance for damage or other violations or breaches of the rental agreement.
Interplay with State and Federal Law: Keep in mind that the Federal Protecting Tenants at Foreclosure Act and the Illinois tenant protections amended into the Illinois Mortgage Foreclosure law still apply to a post-foreclosure purchase. That means that the tenant’s tenancies survive the eviction. The Keep Chicago Renting Ordinance does not provide a right to terminate a lease in exchange for $10,600.
Exemption: So, how does an owner avoid paying a known tenant $10,600? One simple way. An owner pays the relocation assistance unless the owner offers the tenant the option to renew or extend the tenant’s current rental agreement with an annual rental rate that (1) for the first 12 months does not exceed 102% of the current annual rental rate and (2) for any 12 month period thereafter does not exceed 102% of the immediate prior year’s annual rental rate. Thus, the owner can avoid the relocation assistance if the tenant is offered a lease renewal/extension that has “rent control”. The tenant can then accept or reject the lease renewal/extension. If a tenant does not enter into the renewal or extension (that is made in compliance with the law) after being offered the extension, then the owner will not owe the relocation assistance.
There is one big caveat here. Chicago owners need to remember that Section 5-12-130(i) of the Chicago Residential Landlord Tenant Ordinance forbids landlords from requiring a tenant to renew a rental agreement more than 90 days prior to the termination date of the rental agreement. So, owners who have 9 months to go and offer a renewal are actually hurting themselves because they are doing it too soon. How do these two laws interact? We don’t know yet. However, the penalty for violation of 5-12-130(i) is one month’s rent or the tenant’s actual damages.
There’s one other exemption from payment of relocation assistance. An owner does not have to pay relocation assistance to a tenant against whom the owner obtains an order for possession. In other words, an owner may still evict a tenant “for cause”. So, an evicted tenant cannot avail himself or herself of the relocation payment.
How Long does this Last? An owner must comply with Section 5-14-050 until the foreclosed rental property is sold or transferred to a bona fide third party purchaser. So, that 2% rent control sticks around for the entire duration of the owner’s ownership.
What Happens if the Owner does not Comply? Once again, this law is dead serious. Section 5-14-050(f) provides that, in addition to any other fine or penalty (wait until Friday when we address the “other” penalties) under the Ordinance, an owner will be liable to a qualified tenant for an amount equal to two times the relocation assistance fee. Yep, $21,200. I’ll type it out in words for you. Twenty one thousand two hundred dollars. Feel like complying? Afraid not to comply? That feeling in the pit of your stomach is how the City of Chicago wants you to feel about this issue. Just go ahead and look at the first page of the ordinance. It lists no less than forty one aldermen who sponsored this law.
Purchasing a foreclosure property is a risky proposition. Owners who do so without being aware of this law could find themselves deep in trouble.