Author: Written by: Richard Wheelock, LAF and Revised by: Lea A. Weems, LAF and Jeremy Bergstrom, Sargent Shriver National Center on Poverty Law
Last updated: November 2013
The Federal law is called Protecting Tenants at Foreclosure Act of 2009, Pub. L. No. 111-22, div, A, tit. VII, §§ 701-704, 123 Stat. 1632, 1660-62, as amended by Pub. L. No. 111-203, tit. XIV, § 1484 (PTFA). The PTFA is a floor, not a ceiling. It provides a minimum level of protection and expressly contemplates that state or local laws may provide longer time periods or other additional protections for tenants. PTFA702 (a)(2), 703(a)
The PTFA was originally set to expire on December 31, 2012, but was extended to December 31, 2014 by the Dodd-Frank Wall Street Reform Act(2010).
The most recent Illinois law,Public Act 098-0514, effective November 19, 2013, amended the Illinois Mortgage Foreclosure Law and the Forcible Entry and Detainer Act and is codified in the Illinois Code of Civil Procedure. The protections afforded to tenants under both laws are determined by:
Under both federal and Illinois law, the definition of a bona fide lease is the same:
However, under the Illinois law, a child, spouse or parent of the mortgagor may still have a bona fide lease if he/she can prove by a preponderance of the evidence that the lease otherwise meets the definition of a bona fide lease.
Additionally, under the PFTA, tenants residing in the property with federally subsidized housing choice vouchers (also known as Section 8 vouchers) are presumed to be bona fide tenants.
Under the Illinois law, a subsidized unit is not subject to the fair market rent test.
The PFTA applies to federally related mortgage loans, as defined in 12 U.S.C. 2602, and a mortgage loan on any dwelling or residential real property. In Illinois, the lease must be for a residential dwelling unit in foreclosure. A dwelling unit is defined under Illinois law as:
Residential real estate in foreclosure is defined as:
For a complete overview of Illinois Housing Law, please visit Illinois Housing Law Overview.
When a mortgagee brings a foreclosure suit against the client’s landlord, the tenant has the right to notice of the proceeding and to a hearing before the client loses the right to possession. However, the rights of the tenant under any existing lease may or may not be terminated as a result of the foreclosure. Tenants are permissible, but not necessary parties to a foreclosure action. 735 ILCS 5/15-1501(b)(1). Therefore, if the tenant is not included as a party to the foreclosure (either as named party or as an “unknown owner”), the tenancy will survive the foreclosure. 735 ILCS 5/15-1501(a); Applegate Apartments Ltd. Partnership v. Commercial Laundry Systems, 657 N.E.2d 1172 (1st Dist. 1995).
If the mortgagee tries to sue the tenant as an “unknown owner,” it must comply with 735 ILCS 5/2-413 and 735 ILCS 5/15-1501(c). This includes the filing of an affidavit and service by publication. The Court in Applegate requires a “well-directed” effort to ascertain the names of the tenants before resorting to such constructive service.
Additionally, as of November 19, 2013, tenants who are bona fide leaseholders may not be evicted by being named as a party to the foreclosure case. A subsequent purchaser must bring a separate Forcible Entry and Detainer action.
Within 21 days of confirmation of a foreclosure sale, the purchaser of the property must make a good faith effort to obtain the identities of all occupants of the property and provide:
· Notice to all occupants of the property that control of the property has changed hands
· The name of the case, case number, and court where the confirming order of sale has been entered
· The name, address, and telephone number of whom the tenant can contact with concerns about the property or to request repairs
· Instructions on how to pay future rent
Additional written notice on the primary entrance to the property within 21 days of confirmation of the foreclosure sale, followed by language indicating the notice is NOT a notice to vacate the premises, and that the tenant may wish to contact a lawyer or local legal aid to discuss any rights they may have. 735 ILCS 5/15-1508.5(e) , 15-1508.5(a)(2)(iv).
A purchaser, mortgagee in possession, or receiver who fails to provide the notice requirements cannot collect any rent or terminate the occupants' tenancy for non-payment of rent, until providing the required notice. 735 ILCS 5/15-1508.5(d)(i);735 ILCS 5/15-1703(a-5)(5)(j); 735 ILCS 5/15-1704(f)(5)(j). Once the purchaser has provided the required notice, the purchaser can collect rent and may terminate the occupant's tenancy for non-payment of rent. Any occupant who previously paid rent for the current rental period to the prior owner cannot be held liable for that rent by the new purchaser. 735 ILCS 5/15-1508.5(d)(ii); 735 ILCS 5/15-1703(a-5)(5)(ii); 735 ILCS 5/15-1704(f)(5)(ii).
The court records relating to any petition for possession against an occupant who holds a bona fide lease must be ordered sealed. Additionally, a supplemental petition for possession filed against a leaseholder (not bona fide) must be sealed. 735 ILCS 5/9-121(c), 735 ILCS 5/15-1701(h)(6), 735 ILCS 5/15-1224
In the City of Chicago, for properties covered by the Residential Landlord and Tenant Ordinance, within 7 days of being served a foreclosure complaint, the owner of the property must disclose, in writing, to all tenants of the property that a foreclosure action has been filed, including the court, case name, and case number. Municipal Code of Chicago, § 5-12-080.
If the tenant violates a lease term, the new owner must give 10 days notice.
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