Legislation sponsored by Illinois State Senator Jacqueline Collins, D-Chicago, to protect tenants impacted by foreclosure was signed into law on Wednesday. The rule will take effect 90 days from the bill's signing.
“Tenants should not suffer for the financial troubles of their landlords,” Sen. Collins said. “This legislation extends our foreclosure relief efforts to renters, who make up 40% of households affected by foreclosure.”
The law was signed at the 16th District home of retired Chicago police officer, Charles Brown, who joined the advocacy group Action Now and worked for the passage of Senate Bill 56.
As of now, Illinois tenants who live in properties that have been foreclosed on are protected under the Protecting Tenants in Foreclosure Act of 2009; however, those protections are set to expire in 2014.
Under the new state law, when an owner purchases a property in a foreclosure proceeding, he can only evict a tenant at the end of their lease or, in cases where there is no lease, with 90 days’ notice.
If the new owner plans to make the property his or her primary residence, he or she can terminate the lease, but is now required to give 90 days notice. Additionally, a bank foreclosing on a rental property must also let tenants know where they should pay their rent.
“What this is doing to a degree is simply clarifying what already is a federal law that protects tenants in foreclosure,” said Loren Morris, general counsel and chief compliance officer at Chicago-based Fay Servicing.
According to Morris, this law will do little to change the servicer’s process. “I think from a big picture perspective, it’s really not much different than what is the practical aspect of how a servicer will view a property,” he said.
Morris added that just as most servicers don’t wish to foreclose at all and would prefer to work something out with the borrower, servicers are finding that working with any tenant that may be paying on their lease is more beneficial than having a vacant property in any case.
“It’s also somewhat aligned with what we’re seeing; it’s not necessarily always the case that upon foreclosure the goal is to get any occupant out,” he added.
“Having a paying tenant stay in the property and/or giving them 90 days to move I think is what we’re seeing many in the industry accommodating in any event,” noted Morris.
Often tenants are unaware that their landlord has been foreclosed upon, either because they were not informed or did not understand the notice that was left for them.
Morris added that a number of states besides Illinois have enacted their own tenant protect laws, including Washington and California.
