Congratulations! You just got a heck of a deal buying a foreclosed property! Maybe you plan to live in it. Or perhaps you plan to fix it up and sell it, or renovate it and rent it for more than the previous owner was getting. Maybe you have a great idea for revitalization and want to turn some run-down apartments into luxury condos. Well, due to a new law signed by Governor Quinn on August 21, 2013, these options just became a lot more complicated if your new property already has renters. Public Act 098-0514 becomes law 90 days from August 21, 2013. It provides many additional protections to renters with bona fide leases on properties. At the crux of these changes is section 9-207.5, which provides that the buyer at a judicial sale ( or, also, the mortgagee, the receiver appointed during the foreclosure process, the buyer at a judicial sale, or the holder of a certificate of sale, or holder of deed issued pursuant to certificate of sale who assumes control of the residential real estate) may only end a lease at the end of the term with at least 90 days’ notice, or, if the lease is month-to-month or week-to-week, it can be ended at any time with 90 days’ notice. However, if you have purchased the home with the intent of making it your home, then you can give the tenants 90 days’ notice regardless of when the lease term ends.
These provisions revolve around the definition of a “bona fide” lease. For the purposes of this code only, a bona fide written or oral lease may not exist if the person just foreclosed on, his spouse, child, or parent is the lessee unless that person can prove by a preponderance of the evidence that the transaction was at arms-length, that the amount paid for rent was not substantially less than fair market rent (unless subsidized by the government) and that the lease was entered into or renewed before the lis pendens was filed, or renewed after the lis pendens but before the date of judicial sale, and that it was for a period less than one year. If the prior owner or possessor of the property attempts to enter into or renew a lease before the lis pendens and before the judicial sale that is for more than one year, and it meets the other factors, it shall be a bona fide lease, but for a term of only one year. An oral lease shall be presumed to be a month-to-month term, unless the tenant can prove by a preponderance of the evidence that it was supposed to be for longer, however, in no case can it be for longer than a one year term. In the case of either a written or oral lease, if entered after the date of judicial sale but before confirmation of the sale by the judge, then the lease can only be for a month-to-month term.
These sections apply to residential property, which in this code means any single piece of property except agricultural land more than 40 acres, with a single family residence, condo units, or other multiple dwelling units containing single family units for one or more families living independently of one another.
There were already many complicated rules in place regarding occupants of residential real estate. These new laws just add another layer of complexity, but are important to understand if you are thinking about buying residential real estate through a foreclosure. If the current occupants have a bona fide lease, you have to give them at least 90 days’ notice that you are terminating the lease. You may actually be subjecting yourself to occupants for far longer if the lease is bona fide. For example, if the current occupant has a bona-fide, multi-year lease that just started for a dwelling unit and remains current in fair market rent, you could be stuck with them for years. The only exception is if you are going to be making the property just purchased into your residence. Keep in mind, however, that if you become a reluctant landlord because of a pre-existing bona-fide lease, the rules regarding forcible entry and detainer, i.e., eviction, continue to apply. You are also obligated to follow all the rules applicable to landlords. Which could mean expensive repairs for a property that you don’t mean to keep in its current state. For a thorough reading of the new laws, see www.ilga.gov
Navigating a real estate purchase of any kind is difficult. If done on your own, a purchase that seems like a great investment can instantly become a nightmare. Trust the knowledgeable attorneys at Zanck, Coen, Wright & Saladin for help with all of your real estate transactions, whether big or small, residential or commercial. We are also experienced in zoning and ordinance matters. We can help your dreams and ideas come true.