In Illinois, no particular notice to the mortgagor is needed before commencing a mortgage foreclosure fit connecting to industrial residential or commercial property and a number of the guidelines meant to help keep property owners in their homes do not use. But what about the odd scenario where an otherwise industrial residential or commercial property is used by the mortgagor as a primary residence? In a cautionary tale for foreclosing loan providers, the Appellate Court of Illinois, First District, in Banco Popular The United States And Canada v. Gizynski, 2015 IL App (1st) 142871, just recently held that where an individual mortgagor utilizes a business residential or commercial property as his/her principal residence, the loan provider is required to provide the mortgagor with the notices needed under the Illinois Mortgage Foreclosure Law (IMFL) governing domestic foreclosures. Thus, even if the mortgaged property was never ever meant to be used as a residence or has business attributes, a loan provider will not be conserved from the IMFL's domestic notification requirements.
In Gizynski, while the mortgagor noted 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 a total of 4 buildings, 3 of which were used for strictly business purposes. Given this, Banco Popular North America submitted its mortgage foreclosure grievance as a business foreclosure and without providing the mortgagor any of the notices required by the IMFL for property foreclosures. The bank subsequently submitted a movement to appoint a receiver for the mortgaged residential or commercial property, which determined the structure that the mortgagor resided in as having a storage/warehouse location in the back, with two floorings developed as workplaces with cooking area locations that were presently inhabited as houses.
Gizynski submitted a motion to dismiss the bank's complaint, declaring that the mortgaged residential or commercial property met the statutory meaning of "property genuine estate" included in section 15-1219 of the IMFL, and therefore, no foreclosure action could be set up without the bank initially mailing the notice needed by the IMFL. The IMFL's meaning of "domestic property" consists of structures with 6 or less "single household house systems," where among the units is inhabited by the mortgagor as his principal residence. In support of his argument, Gizynski sent a total of nine affidavits, consisting of four from other residential occupants of the building and company owner who leased workplace in the building. In addition, Gizynski also submitted documents from the tax assessor's office showing that his property owner's exemption had actually been applied to the subject residential or commercial property.
The trial court discovered Gizynski's arguments unpersuasive no less 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) rejected Gizynski's movement to dismiss; (3) denied Gizynski's motion to leave all orders and dismiss for absence of topic jurisdiction; (4) rejected Gizynski's motion for summary judgment; and (5) gave the bank's motion for summary judgment.
On appeal, the bank argued that the presence of the two nonresidential units prevented the subject residential or commercial property from being considered residential realty. The appellate court kept in mind that the function of the IMFL was to "offer owners of single-family, owner-occupied residential or commercial properties an extra last minute escape valve to rescue their mortgages before the loan provider submits a suit under the [IMFL]" The court cited the numerous notification requirements lenders needed to adhere to in cases involving domestic foreclosure, especially the 30-day grace period notice proscribed by section 15-1502 of the IMFL. The court likewise analyzed the IMFL to define "property property" as being "a structure with 6 or fewer single family dwelling systems, where among the units is inhabited by the mortgagor as his primary residence."
The court determined that because there were no cases analyzing the term "single family house system" for purposes of area 15-1219 of the IMFL, "the court needs to identify how the residential or commercial property is being used." The court stressed the following undeniable truths: (1) Gizynski's residential or commercial property had a total of 7 systems in the 4 buildings; (2) at the time of the foreclosure the existing and intended usage of 5 of the seven systems were as residences; (3) several systems had facilities for sanitation and food preparation; (4) the systems were being leased to single households as residences or "single family dwelling systems"; and (5) two of the seven units did not have such facilities and were rented to companies as workplaces.
The court ultimately agreed Gizynski, rejecting the bank's contention that because a residential or commercial property included a mix of domestic and commercial systems it should be considered business." [T] he court does not look at the overall job of a multiple-dwelling structure to identify the character of the residential or commercial property for the purposes of figuring out 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 high court for further proceedings constant with its viewpoint, the practical result of which is likely the loosening up of the whole mortgage foreclosure and sale.
Gizynski explains that Illinois courts are willing to take a tough line to ensure that the mandates of the IMFL relating to owners of single-family, owner-occupied residential or commercial properties are strictly adhered to. Lenders are well encouraged to follow the analysis stated by the appellate court: "The court looks at the multiple-dwelling structure and very first figures out whether it consists of single-family dwelling systems for 6 or fewer families living independently of each other. The court then determines how only the units are being utilized and if one unit is being used as a single-family residence the system, the occupant of that system is entitled to the protections supplied to mortgagors of residential realty by the [IMFL]"2
Lenders must also consider examining public records and tax info in order to discern if a residential or commercial property in concern is noted as the mortgagor's primary home. In addition, lenders ought to need and keep precise records of all leases for the residential or commercial property. Where a mortgagor lists a commercial residential or commercial property as their home, it might be useful to conduct a "presuit" check to determine if the mortgagee is certainly occupying the properties. The reasonably very little expense of such preventative procedures certainly outweighs the alternative - needing to recommence an errantly submitted industrial foreclosure case and send out the notification required by the IMFL. Such a loosening up, besides resulting in a considerable hold-up, could result in the lender having to fund an incorrectly appointed receiver, the refiling of the problem, the reissuance of summons and the reservice of the problem.
