In Illinois, no particular notice to the mortgagor is required before beginning a mortgage foreclosure match relating to commercial residential or commercial property and much of the guidelines meant to help keep house owners in their homes do not use. But what about the odd circumstance where an otherwise industrial residential or commercial property is used by the mortgagor as a primary home? 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 a private mortgagor utilizes a commercial residential or commercial property as his/her principal residence, the lender is needed to supply the mortgagor with the notices required under the Illinois Mortgage Foreclosure Law (IMFL) governing residential foreclosures. Thus, even if the mortgaged property was never planned to be used as a residence or has business qualities, a lending institution will not be saved from the IMFL's residential notice 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 made up of an overall of 4 structures, 3 of which were utilized for strictly commercial purposes. Given this, Banco Popular The United States and Canada submitted its mortgage foreclosure complaint as a business foreclosure and without offering the mortgagor any of the notifications required by the IMFL for property foreclosures. The bank subsequently filed a motion to designate a receiver for the mortgaged residential or commercial property, which recognized the structure that the mortgagor lived in as having a storage/warehouse area in the back, with 2 floors developed as workplaces with kitchen area locations that were currently inhabited as houses.
Gizynski filed a motion to dismiss the bank's grievance, claiming that the mortgaged residential or commercial property fulfilled the statutory meaning of "domestic property" included in area 15-1219 of the IMFL, and therefore, no foreclosure action might be instituted without the bank initially sending by mail the notification needed by the IMFL. The IMFL's definition of "residential genuine estate" consists of structures with six or fewer "single household dwelling systems," where among the units is occupied by the mortgagor as his primary home. In assistance of his argument, Gizynski submitted an overall of nine affidavits, including four from other residential residents of the building and company owner who leased office in the structure. In addition, Gizynski likewise submitted files from the tax assessor's office showing that his house owner's exemption had been used to the subject residential or commercial property.
The trial court discovered Gizynski's arguments unpersuasive no fewer than five times when it (1) gave the bank's movement to designate a receiver, discovering that the residential or commercial property was industrial; (2) denied Gizynski's motion to dismiss; (3) rejected Gizynski's motion to abandon all orders and dismiss for absence of subject matter jurisdiction; (4) rejected Gizynski's motion for summary judgment; and (5) approved the bank's motion for summary judgment.
On appeal, the bank argued that the existence of the two nonresidential units avoided the subject residential or commercial property from being thought about residential realty. The appellate court noted 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 rescue their mortgages before the lender submits a suit under the [IMFL]" The court pointed out the numerous notification requirements lenders needed to adhere to in cases involving residential foreclosure, particularly the 30-day grace duration notice proscribed by area 15-1502 of the IMFL. The court also interpreted the IMFL to define "domestic property" as being "a structure with 6 or less single household dwelling systems, where one of the systems is occupied by the mortgagor as his primary residence."
The court determined that because there were no cases translating the term "single household residence system" for functions of area 15-1219 of the IMFL, "the court should identify how the residential or commercial property is being utilized." The court stressed the following undeniable facts: (1) Gizynski's residential or commercial property had an overall of 7 units in the 4 buildings; (2) at the time of the foreclosure the existing and intended usage of 5 of the 7 systems were as homes; (3) several units had facilities for sanitation and food preparation; (4) the systems were being rented to single families as houses or "single household residence units"; and (5) two of the 7 systems did not have such centers and were rented to organizations as offices.
The court ultimately agreed Gizynski, rejecting the bank's contention that because a residential or commercial property contained a mix of domestic and industrial systems it ought to be thought about commercial." [T] he court does not take a look at the total project of a multiple-dwelling structure to determine the character of the residential or commercial property for the functions of determining whether a statutory notification is needed."1 Accordingly, the court reversed the trial court's grant of summary judgment and remanded the case back to the trial court for additional procedures constant with its viewpoint, the practical effect of which is likely the unwinding of the entire mortgage foreclosure and sale.
Gizynski explains that Illinois courts want to take a difficult line to guarantee that the requireds of the IMFL connecting to owners of single-family, owner-occupied residential or commercial properties are strictly complied with. Lenders are well encouraged to follow the analysis set forth by the appellate court: "The court takes a look at the multiple-dwelling structure and first figures out whether it contains single-family residence systems for 6 or fewer households living separately of each other. The court then determines how just the units are being utilized and if one system is being utilized as a single-family dwelling the unit, the resident of that system is entitled to the securities supplied to mortgagors of property property by the [IMFL]"2
Lenders should also think about examining public records and tax info in order to recognize if a residential or commercial property in question is listed as the mortgagor's main residence. In addition, lenders need to require and keep accurate records of all leases for the residential or commercial property. Where a mortgagor lists a business residential or commercial property as their residence, it might be useful to conduct a "presuit" check to determine if the mortgagee is indeed inhabiting the properties. The fairly very little expense of such preventative procedures definitely surpasses the option - needing to recommence an errantly filed commercial foreclosure case and send the notice needed by the IMFL. Such a relaxing, besides leading to a considerable delay, might result in the loan provider needing to money an incorrectly designated receiver, the refiling of the problem, the reissuance of summons and the reservice of the problem.
