In this article, we discuss what rights and options tenants have if their landlord defaults on the mortgage, and the building goes into foreclosure. We will answer the following questions:
With the economic impact wrought by the Coronavirus pandemic, there has been a lot of talk about an “avalanche of evictions” in the very near future. But what about the tenants that do pay their rent but their landlord defaults on the mortgage and the building ends up in foreclosure? This is a very real concern for many tenants, but thankfully there are protections in place for just such an event.
Resulting from the economic crisis of 2007-2008, and now the economic fallout from the coronavirus pandemic, laws have been structured to protect both tenants and landlords in foreclosure and nonpaying situations, respectively. We often think of the landlord as the one with all the power in the landlord-tenant relationship, but in reality, they are just as much at risk when the economy flounders as their tenants. Whether purely from tenants being unable to pay rent, poor management of personal and business finances, or a combination of factors, landlords sometimes find themselves defaulting on their mortgage.
The tenant’s rights and duties are clear in Illinois and they do not change just because their building is in foreclosure. Per the lease agreement, rent must be paid and the landlord or an appointed Receiver must continue to function in the role of landlord. A Receiver is a court-appointed individual who acts in place of the existing landlord to manage to property and collect rent. The receiver is obligated by the court to collect the name and information of all tenants, give notice of their management and the pending foreclosure to new and existing tenants, and provide the tenants with his or her contact information should an issue arise.
In 2009, President Obama signed into law the Protecting Tenants At Foreclosure Act (PTFA). The Protecting Tenants At Foreclosure Act provided the following benefits to tenants:
The Protecting Tenants At Foreclosure Act expired on December 31st, 2014, but was extended by the Economic Growth, Regulatory Relief, and Consumer Protection Act in May 2018.
The law protecting Illinois renters against foreclosure apply to bona fide tenants who have bona fide leases. Bona fide tenants are those that fit into the following:
There are exceptions and these tenants must usually be named in the foreclosure lawsuit. They are often tenants who violated the lease agreement. They may not be eligible for the 90 days notice before eviction.
The Illinois Mortgage Foreclosure Law is another piece of legislature that provides protection for renters of a foreclosed property. Similar to other laws in place, it requires that new owners of a previously foreclosed property honor the existing lease agreement or provide adequate notice to tenants of the change in ownership and any new policies, giving the tenant time to relocate if desired.
Once a new owner has taken over a property the existing lease agreements will become invalid. As mentioned above, portions of the lease agreement—such as those applying to evictions and how long a tenant can stay in the unit—will apply for a period of time. If you have any other questions or would like further explanation about a tenant's rights in Illinois, please give us a call at 630-324-6666.
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