In Illinois, no particular notification to the mortgagor is needed before beginning a mortgage foreclosure match connecting to commercial residential or commercial property and numerous of the guidelines intended to help keep homeowners in their homes do not use. But what about the odd situation where an otherwise industrial residential or commercial property is utilized by the mortgagor as a primary residence? In a cautionary tale for foreclosing lenders, 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 specific mortgagor makes use of a commercial residential or commercial property as his or her principal home, the lending institution is needed to offer the mortgagor with the notices needed under the Illinois Mortgage Foreclosure Law (IMFL) governing property foreclosures. Thus, even if the mortgaged genuine estate was never meant to be utilized as a house or has industrial attributes, 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 consisted of an overall of four buildings, 3 of which were utilized for strictly industrial functions. Given this, Banco Popular North America submitted its mortgage foreclosure grievance as a business foreclosure and without offering the mortgagor any of the notifications needed by the IMFL for residential foreclosures. The bank consequently filed a movement to designate a receiver for the mortgaged residential or commercial property, which determined 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 areas that were presently occupied as homes.
Gizynski filed a motion to dismiss the bank's problem, declaring that the mortgaged residential or commercial property fulfilled the statutory meaning of "property property" consisted of in section 15-1219 of the IMFL, and for that reason, no foreclosure action might be instituted without the bank initially mailing the notice required by the IMFL. The IMFL's definition of "property property" includes structures with 6 or less "single household dwelling units," where one of the units is inhabited by the mortgagor as his primary home. In support of his argument, Gizynski sent a total of nine affidavits, including 4 from other property occupants of the structure and entrepreneur who rented office in the structure. In addition, Gizynski also sent files from the tax assessor's workplace revealing that his property owner's exemption had been used to the subject residential or commercial property.
The high court discovered Gizynski's arguments unpersuasive no less than 5 times when it (1) approved the bank's motion to select a receiver, discovering that the residential or commercial property was commercial; (2) denied Gizynski's movement to dismiss; (3) rejected Gizynski's motion to abandon all orders and dismiss for lack of topic jurisdiction; (4) denied Gizynski's motion for summary judgment; and (5) granted the bank's motion for summary judgment.
On appeal, the bank argued that the existence of the two nonresidential systems avoided the subject residential or commercial property from being thought about domestic property. The appellate court kept in mind that the function of the IMFL was to "supply owners of single-family, owner-occupied residential or commercial properties an additional last minute escape valve to save their mortgages before the lending institution submits a fit under the [IMFL]" The court mentioned the numerous notification requirements lending institutions needed to abide by in cases involving residential foreclosure, particularly the 30-day grace period notification proscribed by section 15-1502 of the IMFL. The court likewise interpreted the IMFL to define "domestic realty" as being "a structure with 6 or fewer single household home units, where among the units is occupied by the mortgagor as his principal house."
The court determined that because there were no cases translating the term "single family dwelling system" for purposes of section 15-1219 of the IMFL, "the court needs to determine how the residential or commercial property is being used." The court emphasized the following undeniable realities: (1) Gizynski's residential or commercial property had an overall of 7 units in the four structures; (2) at the time of the foreclosure the present and designated usage of 5 of the 7 units were as homes; (3) numerous systems had centers for sanitation and cooking; (4) the systems were being leased to single households as homes or "single family residence units"; and (5) 2 of the 7 systems did not have such centers and were leased to businesses as offices.
The court ultimately sided with Gizynski, rejecting the bank's contention that due to the fact that a residential or commercial property contained a mix of residential and industrial systems it should be considered business." [T] he court does not take a look at the overall task of a multiple-dwelling structure to determine the character of the residential or commercial property for the functions of determining whether a statutory notice is required."1 Accordingly, the court reversed the high court's grant of summary judgment and remanded the case back to the trial court for further proceedings consistent with its opinion, the practical impact of which is likely the relaxing of the entire mortgage foreclosure and sale.
Gizynski explains that Illinois courts are prepared to take a tough line to make sure that the mandates of the IMFL connecting to owners of single-family, owner-occupied residential or commercial properties are strictly abided by. Lenders are well recommended to follow the analysis stated by the appellate court: "The court looks at the multiple-dwelling structure and very first figures out whether it includes single-family residence units for 6 or fewer households living separately of each other. The court then identifies how just the systems are being utilized and if one system is being utilized as a single-family house the unit, the resident of that system is entitled to the defenses provided to mortgagors of property genuine estate by the [IMFL]"2
Lenders needs to likewise consider examining public records and tax details in order to determine if a residential or commercial property in question is noted as the mortgagor's main home. In addition, lending institutions should need and keep precise records of all leases for the residential or commercial property. Where a mortgagor lists an industrial residential or commercial property as their home, it may be useful to carry out a "presuit" check to identify if the mortgagee is undoubtedly occupying the premises. The relatively minimal expense of such preventative procedures definitely outweighs the option - needing to recommence an errantly submitted industrial foreclosure case and send the notification required by the IMFL. Such an unwinding, besides resulting in a substantial delay, might lead to the lending institution needing to money an improperly designated receiver, the refiling of the grievance, the reissuance of summons and the reservice of the complaint.
