Hidden Mortgagor-Tenants In Illinois Commercial Properties
In Illinois, no particular notice to the mortgagor is required before commencing a mortgage foreclosure suit connecting to industrial residential or commercial property and many of the rules intended to help keep homeowners in their homes do not apply. But what about the odd situation where an otherwise industrial residential or commercial property is utilized by the mortgagor as a main residence? In a cautionary tale for foreclosing lenders, the Appellate Court of Illinois, First District, in Banco Popular The United States And Canada v. Gizynski, 2015 IL App (1st) 142871, just recently held that where a specific mortgagor uses a commercial residential or commercial property as his or her principal home, the lender is needed to supply the mortgagor with the notices needed under the Illinois Mortgage Foreclosure Law (IMFL) governing residential foreclosures. Thus, even if the mortgaged genuine estate was never ever intended to be used as a home or has commercial qualities, a lender will not be conserved from the IMFL's domestic notification requirements.
In Gizynski, while the mortgagor noted the address of the mortgaged residential or commercial property in the Gizynski case as his residence, the residential or commercial property was comprised of an overall of four buildings, 3 of which were utilized for strictly business functions. Given this, Banco Popular The United States and Canada submitted its mortgage foreclosure problem as a business foreclosure and without providing the mortgagor any of the notices needed by the IMFL for domestic foreclosures. The bank subsequently filed a movement to appoint a receiver for the mortgaged residential or commercial property, which determined the building that the mortgagor lived in as having a storage/warehouse area in the back, with two floors developed as workplaces with cooking area locations that were presently occupied as houses.
Gizynski filed a movement to dismiss the bank's grievance, declaring that the mortgaged residential or commercial property satisfied the statutory meaning of "residential property" contained in area 15-1219 of the IMFL, and therefore, no foreclosure action could be instituted without the bank first sending by mail the notification required by the IMFL. The IMFL's meaning of "property property" includes structures with 6 or fewer "single family residence units," where one of the units is occupied by the mortgagor as his principal house. In support of his argument, Gizynski sent an overall of nine affidavits, consisting of 4 from other residential occupants of the structure and company owners who rented workplace in the structure. In addition, Gizynski also submitted documents from the tax assessor's office revealing that his house owner's exemption had actually been applied to the subject residential or commercial property.
The trial court discovered Gizynski's arguments unpersuasive no fewer than five times when it (1) gave the bank's movement to appoint a receiver, finding that the residential or commercial property was industrial; (2) motion to dismiss; (3) rejected Gizynski's movement to abandon all orders and dismiss for absence of subject matter jurisdiction; (4) denied Gizynski's motion for summary judgment; and (5) approved the bank's movement for summary judgment.
On appeal, the bank argued that the presence of the two nonresidential units prevented the subject residential or commercial property from being considered residential property. The appellate court kept in mind that the purpose of the IMFL was to "supply owners of single-family, owner-occupied residential or commercial properties an additional last minute escape valve to save their mortgages before the loan provider submits a suit under the [IMFL]" The court cited the various notice requirements loan providers needed to comply with in cases including property foreclosure, particularly the 30-day grace duration notification proscribed by section 15-1502 of the IMFL. The court also analyzed the IMFL to define "residential property" as being "a structure with 6 or fewer single household home systems, where one of the units is inhabited by the mortgagor as his principal home."
The court identified that since there were no cases translating the term "single family residence system" for purposes of area 15-1219 of the IMFL, "the court needs to figure out how the residential or commercial property is being utilized." The court emphasized the following undisputed facts: (1) Gizynski's residential or commercial property had an overall of 7 systems in the 4 buildings; (2) at the time of the foreclosure the present and designated usage of 5 of the 7 systems were as homes; (3) a number of units had facilities for sanitation and food preparation; (4) the systems were being rented to single families as houses or "single family dwelling units"; and (5) 2 of the seven units did not have such centers and were leased to businesses as workplaces.
The court eventually agreed Gizynski, rejecting the bank's contention that since a residential or commercial property consisted of a mix of property and commercial systems it must be considered industrial." [T] he court does not look at the total task of a multiple-dwelling structure to figure out the character of the residential or commercial property for the purposes of identifying whether a statutory notice is required."1 Accordingly, the court reversed the trial court's grant of summary judgment and remanded the case back to the trial court for more procedures consistent with its viewpoint, the practical effect of which is likely the relaxing of the whole mortgage foreclosure and sale.
Gizynski makes clear that Illinois courts are ready to take a tough line to ensure that the requireds of the IMFL relating to owners of single-family, owner-occupied residential or commercial properties are strictly abided by. Lenders are well advised to follow the analysis set forth by the appellate court: "The court takes a look at the multiple-dwelling structure and very first figures out whether it contains single-family residence systems for six or fewer households living independently of each other. The court then identifies how only the units are being utilized and if one system is being utilized as a single-family home the unit, the resident of that system is entitled to the defenses provided to mortgagors of domestic realty by the [IMFL]"2
Lenders needs to also think about reviewing public records and tax details in order to recognize if a residential or commercial property in question is listed as the mortgagor's primary home. In addition, lending institutions need to need and keep precise records of all leases for the residential or commercial property. Where a mortgagor lists a commercial residential or commercial property as their house, it may be valuable to carry out a "presuit" check to figure out if the mortgagee is undoubtedly occupying the facilities. The fairly minimal expense of such preventative procedures certainly exceeds the option - needing to recommence an errantly filed industrial foreclosure case and send the notice needed by the IMFL. Such an unwinding, besides resulting in a significant hold-up, could result in the lending institution needing to money a poorly selected receiver, the refiling of the problem, the reissuance of summons and the reservice of the problem.
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