Hidden Mortgagor-Tenants In Illinois Commercial Properties
In Illinois, no particular notice to the is required before commencing a mortgage foreclosure match relating to business residential or commercial property and a lot of the rules planned 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 house? In a cautionary tale for foreclosing lending institutions, the Appellate Court of Illinois, First District, in Banco Popular North America v. Gizynski, 2015 IL App (1st) 142871, just recently held that where an individual mortgagor utilizes a business residential or commercial property as his or her primary house, the loan provider is required to provide the mortgagor with the notices needed under the Illinois Mortgage Foreclosure Law (IMFL) governing property foreclosures. Thus, even if the mortgaged realty was never planned to be utilized as a house or has business qualities, a loan provider will not be saved from the IMFL's property notification requirements.
In Gizynski, while the mortgagor listed the address of the mortgaged residential or commercial property in the Gizynski case as his house, the residential or commercial property was consisted of an overall of 4 buildings, 3 of which were used for strictly industrial functions. Given this, Banco Popular North America filed its mortgage foreclosure complaint as an industrial foreclosure and without providing the mortgagor any of the notices required by the IMFL for property 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 resided in as having a storage/warehouse location in the back, with two floors developed as workplaces with cooking area areas that were currently occupied as houses.
Gizynski submitted a motion to dismiss the bank's grievance, claiming that the mortgaged residential or commercial property satisfied the statutory meaning of "domestic property" contained in section 15-1219 of the IMFL, and for that reason, no foreclosure action might be set up without the bank first sending by mail the notification needed by the IMFL. The IMFL's meaning of "domestic property" includes structures with 6 or fewer "single household dwelling units," where one of the systems is inhabited by the mortgagor as his principal residence. In support of his argument, Gizynski sent a total of nine affidavits, including 4 from other residential occupants of the building and company owner who leased office space in the building. In addition, Gizynski likewise sent files from the tax assessor's office showing that his property owner's exemption had 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) granted the bank's movement to select a receiver, finding that the residential or commercial property was business; (2) rejected Gizynski's motion to dismiss; (3) denied Gizynski's motion to leave all orders and dismiss for lack of subject jurisdiction; (4) denied Gizynski's motion for summary judgment; and (5) granted the bank's movement for summary judgment.
On appeal, the bank argued that the presence of the two nonresidential units avoided the subject residential or commercial property from being thought about domestic real estate. The appellate court kept in mind that the purpose of the IMFL was to "provide owners of single-family, owner-occupied residential or commercial properties an extra last minute escape valve to save their mortgages before the lender files a fit under the [IMFL]" The court pointed out the numerous notice requirements lending institutions had to comply with in cases including domestic foreclosure, especially the 30-day grace duration notification proscribed by section 15-1502 of the IMFL. The court also interpreted the IMFL to specify "domestic property" as being "a structure with six or less single household dwelling systems, where among the units is occupied by the mortgagor as his primary house."
The court identified that because there were no cases interpreting the term "single household house unit" 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 highlighted the following indisputable truths: (1) Gizynski's residential or commercial property had a total of seven systems in the 4 structures; (2) at the time of the foreclosure the current and intended use of five of the 7 systems were as houses; (3) a number of units had facilities for sanitation and food preparation; (4) the systems were being leased to single families as homes or "single family house units"; and (5) two of the seven systems did not have such facilities and were rented to organizations as offices.
The court ultimately sided with Gizynski, turning down the bank's contention that since a residential or commercial property consisted of a mix of property and industrial systems it should be thought about commercial." [T] he court does not take a look at the overall project of a multiple-dwelling structure to determine the character of the residential or commercial property for the purposes of determining whether a statutory notification 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 additional proceedings constant with its opinion, the useful result of which is likely the loosening up of the whole mortgage foreclosure and sale.
Gizynski makes clear that Illinois courts are ready to take a difficult line to make sure that the mandates of the IMFL relating to owners of single-family, owner-occupied residential or commercial properties are strictly complied with. Lenders are well advised to follow the analysis set forth by the appellate court: "The court looks at the multiple-dwelling structure and first identifies whether it includes single-family dwelling systems for six or less households living individually of each other. The court then figures out how only the units are being utilized and if one unit is being utilized as a single-family residence the system, the occupant of that system is entitled to the protections offered to mortgagors of residential realty by the [IMFL]"2
Lenders should likewise consider evaluating public records and tax info in order to recognize if a residential or commercial property in concern is noted as the mortgagor's main home. In addition, lenders ought to require and keep precise records of all leases for the residential or commercial property. Where a mortgagor notes a business residential or commercial property as their home, it may be valuable to conduct a "presuit" check to determine if the mortgagee is certainly inhabiting the premises. The reasonably minimal cost of such preventative measures definitely surpasses the alternative - having to recommence an errantly filed industrial foreclosure case and send the notification required by the IMFL. Such a relaxing, besides leading to a significant delay, could lead to the lending institution having to fund a poorly appointed receiver, the refiling of the complaint, the reissuance of summons and the reservice of the problem.