Tenants in Foreclosure Training

Center for Disability & Elder Law

July 15, 2014

Part 1: Eviction

EvictionTenants in

Foreclosure: Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Practical Application

About Eviction Court

• 30,000 evictions filed each year in Cook County• 95% of tenants appear pro se• Landlords are three times more likely to obtain an eviction

order if a tenant is pro se• Average pro se tenant’s trial lasts < 2 minutes• Routine denial of tenants’ due process rights

• Tenants not allowed to present defenses• Witnesses not sworn in when testifying• Judges not examining eviction notices• Denying or limiting discovery rights

From LCBH’s 2003 report No Time for Justice

Landlord-Tenant Laws

FEDERAL ILLINOIS CHICAGOProtecting Tenants at Foreclosure Act(Pub. L. 111-22, Div. A, Title VII, May 20, 2009)

Forcible Entry and Detainer Act (735 ILCS 5/9-101 et seq)

Residential Landlord and Tenant Ordinance(Chicago Municipal Code, Chapter 5-12)

Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1102)

Keep Chicago Renting Ordinance (Chicago Municipal Code, Chapter 5-14)

Part 2: Policy Concerns

EvictionTenants in

Foreclosure: Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Practical Application

Foreclosure Filing Data 2009-2013

• From 2009-2013, 22,674 apartment buildings have entered foreclosure, impacting 68,300 housing units.

• 2013 witnessed a 37% decrease in foreclosure filings from 2012, with a total of 2,758 apartment buildings entering foreclosure, affecting 7,704 units.

Foreclosure Filing Data 2009-2013

• The geography of foreclosure remains unbalanced across Chicago.

• The10 community areas with the highest number of units impacted by foreclosure in 2013 are located on either the South or West sides of the city.

• These communities have had an average of 21.2% of their rental housing units impacted by foreclosure since 2009.

• This is double the average rate of rental unit foreclosures for the City of Chicago.

Foreclosure Sales and Bank Practices

• Over the past five years, only 10% of the banks and other financial institutions filing foreclosures were responsible for 90% of all foreclosures on apartment buildings.

• 83% of foreclosure sales result in bank-ownership.

• Banks choose to vacate properties as quickly as possible.• Constructive eviction• About 1 in 10 eviction cases are foreclosure-related in Chicago

Foreclosure: Impact on Renters

• LCBH conducted a survey as part of the 2012 annual report.

• LCBH reached 55 tenants out of 233 contacted.

• The majority of renters LCBH contacted in the follow-up survey were forced to leave their homes as a direct result of a foreclosure.

• 3 main issues were highlighted in the report

Paying Rent Deteriorating Conditions Eviction Threats

Unclear Rights Unclear Responsibilities Bad Notices

Cash for Keys Offers

LCBH documents common renter problems:

LCBH Survey Project:

Foreclosure Impacts Children

• Research has shown that changing schools is associated with a wide array of problems including:

– emotional and behavioral: illicit drug use, depression, and teen pregnancy

– academic: dropout, lower math and reading scores

Foreclosure Impacts Families

• Displaced families often face housing instability and end up in shelters or doubling-up with family or friends– On average, families spend

7 months in temporary housing

• Places burdens on the receiving households as well as municipal services and charity organizations

Foreclosure Impacts Finances

• Studies show from 2000 to 2010, the percentage of households allocating more than 30% of their income to rent rose from 11.1 percent to 46.5 percent.

Foreclosure Impacts Finances

• Studies show from 2000 to 2010, the percentage of households allocating more than 30% of their income to rent rose from 11.1 percent to 46.5 percent.

Community Impact: Vacant Properties

LCBH report released in April of 2013:Vacant Properties: Havens for crime in a city plagued by violence

• Increase in vacant properties due to foreclosure

• Chicago has experienced an increase in vacant housing units from 7.9% of the total housing stock in 2000 to 12.5% in 2010

• In Chicago, about 70% of vacant properties are the result of foreclosure

• In 2011 alone, Chicago had 15,000 properties registered as vacant or “abandoned” according to city data

Community Impact: Vacant Properties

Chicago police data shows that crime associated with vacant properties has increased dramatically:

• From 2005-2012, reported crimes in abandoned buildings and vacant lots increased by 48%;

• Three times as many reported crimes occurred in abandoned buildings in 2012 than in 2005, a 196% increase;

• In 2012, a total of 2,618 crimes occurred in abandoned buildings or vacant lots: – 7 reported crimes per day, on average – 3 reported criminal sexual assaults and 4 weapons violations per month, on

average.

Citywide Impact

• Disinvestment and loss of population on Chicago’s South and West Sides.

• Gentrification and increasing rental demand.• Impact on affordability.

• According to the U.S. Census Bureau, an 23% of Chicagoans—over half a million people—lived below the federal poverty line in 2010.

• According to the National Low Income Housing Coalition, a person employed full-time in Cook County must earn $18.42 an hour to afford a two-bedroom apartment—the current minimum wage is less than half that at $8.25

Part 3: Legal Protections

EvictionTenants in

Foreclosure: Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Practical Application

Foreclosure Timeline

Common Problems

Paying Rent Deteriorating Conditions Eviction Threats

Unclear Rights Unclear Responsibilities Bad Notices

Cash for Keys Offers

Rights and Responsibilities

Foreclosure

Pending

Landlord responsibilities:• Collect rent • Maintain

property• Hold

security deposit

• Notice of Foreclosure (RLTO)

• Follow FED eviction procedures

• Alert the tenant to the foreclosure (Chicago only)

• *If a receiver is appointed by the foreclosure court, it takes over many duties of the landlord*

Tenant responsibilities:• Pay rent• Follow

terms of lease

Foreclosure

Complete

Bank/New Owner Responsibilities:• Collect rent• Maintain

property• Hold security

deposit (RLTO)

• Change in Ownership Notice (IMFL)

• Follow FED eviction procedures

Tenant responsibilities:• Pay rent

(after proper notice)

• Save rent (if unsure who to pay)

• Follow terms of lease

• MOST TENANT IN FORECLOSURE PROTECTIONS TRIGGERED AT THE ORDER CONFIRMING SALE

Protecting Tenants At Foreclosure

• Federal law: Passed in 2009 • 90 day notice for “bona fide” tenants• “Bona fide” lease term survives (including subsidies)

1. Tenant is not child, parent, or spouse of mortgagor2. Arms length transaction3. Rent is not substantially less than fair market value

• Schedule to sunset at end of 2014

Key Points:

Illinois Mortgage Foreclosure Law

Key Points:

• State law: Governs all foreclosures in Illinois• Change in management/ownership notice all tenants• 90 day notice for “bona fide” tenants• “Bona fide” lease (not just the term) survives

1. Tenant is not child, parent, or spouse of mortgagor(Unlike PTFA, this is a rebuttable presumption)

2. Arms length transaction3. Rent is not substantially less than fair market value

• Lease term restrictions (effective after PTFA sunsets)• Provides for sealing of foreclosure-related eviction records

Keep Chicago RentingOrdinance

• City ordinance: Effective September 24, 2013• Notice to all tenants informing them of their rights

• Penalty: actual damages and attorney’s fees• Qualified tenants: Offered either lease renewal OR $10,600

relocation assistance (bank’s choice, not the tenant’s)1. Tenant is not child, parent, or spouse of mortgagor2. Arms length transaction3. Rent is not substantially less than fair market value• Penalty: double relocation assistance and attorney’s fees

Key Points:

Renewal v. Relocation

Lease Renewal Details Relocation Assistance Details

Applies to both written and oral leases $10,600 to be paid within 7 days after tenant vacates the property

Existing terms apply to lease renewal (can still be evicted for cause)

Tenant not eligible if evicted for cause before assistance offered or paid

Must renew lease until property is sold to a third party

Tenant not eligible if offered lease renewal, but rejects it

Cap on annual rental increase (2%)

If renewal is rejected, owner can evict at end of lease or end of 90 day notice (whichever is longer)

Summary of Law

Protecting Tenants at Foreclosure (PTFA)

Illinois Mortgage Foreclosure Law (IMFL)

Keep Chicago Renting Ordinance (KCRO)

Bona fide lease term survives foreclosure in its entirety

Bona fide lease survives foreclosure, but may be shortened (post-PTFA)

All preceding protections plus:

Bona fide tenant entitled to 90 day notice

Bona fide tenant entitled to 90 day notice

All tenants entitled to KCRO notice required

Subsidized renters lease terms survive

Change of management/ownership notice for all tenants

Qualified tenants entitled to offer of lease renewal or relocation assistance

Sunsets December 31, 2014

Sealing of foreclosure-related eviction records

Sealing Court Records

• Why Seal?– Reported by various credit reporting agencies– Difficulty securing housing in the future– Barrier to some government housing subsidies

• How to Seal?– Discretionary (FEDA) 735 ILCS 5/9-121(b)– Mandatory (FEDA and IMFL) 735 ILCS 5/9-121(c) and 735

ILCS 5/15/1701– Most courtrooms have preprinted sealing orders

Three-Step Property Search

Step 1: Cook County Assessor’s Website

• Use address to get property PIN number

Step 2: Cook County Records of Deeds’ Website

• Use PIN number to find foreclosure case number

Step 3: Cook County Clerk of Court’s Website

• Look up status of foreclosure case• Is there a receiver? Is the case over? Was OP entered? Was Order Approving or Confirming Sale entered? When?

I found the case, now what?

Foreclosure NOT Complete

•Was a Receiver appointed?•Who?•When?•Change in Management notice?•No tenant if foreclosure protections apply yet!•TENANTS WHO FAIL TO PAY THE LANDLORD RENT RISK BEING EVICTED FOR NONPAYMENT OF RENT!

Foreclosure Complete

•Does PTFA apply?•Does IMFL apply?•Does KCRO apply?•Has tenant received a 90 day notice or KCRO notice?•Has tenant received a “cash for keys” offer?•Change in Management notice?•Is lease “bona fide?”

Wrap-Up

Summary! Comments? Cases?

Contact Us:Lacy Burpee

Tenants in Foreclosure Staff AttorneyEqual Justice Works Illinois Foreclosure Fellow

Phone: (312) 784-3518E-mail: lburpee@lcbh.org