Illinois and New York Legislative Update

Illinois and New York Legislative Update

The Illinois legislature amended its laws governing bona fide leases and foreclosures, effective November 19, 2013, and the New York legislature recently amended its laws governing the licensing of mortgage bankers and registration of mortgage brokers, effective October 29, 2013.

ILLINOIS SENATE BILL 56

 

 

“Bona fide lease” means a lease of a dwelling unit in residential real estate in foreclosure for which:

  • The borrower or the child, spouse, or parent of the borrower is not the tenant;
  • The lease was the result of an arms-length transaction;
  • The lease requires the receipt of rent that is not substantially less than fair market rent for the property or the rent is reduced or subsidized according to a federal, state, or local subsidy; and
  • Either the lease was entered into or renewed on or before the date of the filing of the lis pendens on the residential real estate in foreclosure or the lease was entered into or renewed after the date of the filing of the lis pendens on the residential real estate in foreclosure and before the date of the judicial sale of the residential real estate in foreclosure, and the term of the lease is for one year or less.

 

“Residential real estate in foreclosure” means any real estate, except a single tract of agricultural real estate consisting of more than 40 acres, which is improved with a single family residence, residential condominium units, or a multiple dwelling structure containing single family dwelling units for one or more families living independently of one another, for which an action to foreclose the real estate:

  • Has commenced and is pending;
  • Was pending when the bona fide lease was entered into or renewed; or
  • Was commenced after the bona fide lease was entered into or renewed.

 

A lender, receiver, holder of the certificate of sale, holder of the deed issued according to the certificate, or, if no certificate or deed was issued, the purchaser at a judicial sale who assumes control of the residential real estate in foreclosure may terminate a bona fide lease only:

  • At the end of the term of the bona fide lease by no less than 90 days’ written notice; or
  • In the case of a bona fide lease that is for a month-to-month or week-to-week term, by no less than 90 days’ written notice.

 

An individual who assumes control of residential real estate in foreclosure through a judicial sale and who will occupy a dwelling unit of the residential real estate in foreclosure as his or her primary residence may terminate the bona fide lease for the dwelling unit subject to the 90-day notice requirement above.

 

 

The provisions in this memorandum do not limit the rights of a lender, receiver, holder of the certificate of sale, holder of the deed issued according to that certificate, or, if no certificate or deed was issued, the purchaser at a judicial sale, who assumes control of the residential real estate in foreclosure to terminate a bona fide lease of a dwelling unit in residential real estate in foreclosure.

 

 

A written lease for a term exceeding one year that is entered into or renewed after the date of the filing of the lis pendens on the residential real estate in foreclosure and before the date of the judicial sale of the residential real estate in foreclosure that otherwise meets the requirements above will be considered to be a bona fide lease for a term of one year.

 

 

An oral lease entered into at any time before the date of the judicial sale of the residential real estate in foreclosure that otherwise meets the requirements above will be considered to be a bona fide lease for a month-to-month term, unless the lessee proves by a preponderance of evidence that the oral lease is for a longer term.  In no event will an oral lease be considered to be a bona fide lease for a term of more than one year.

 

 

A written or oral lease entered into on or after the date of the judicial sale of the residential real estate in foreclosure and before the date of the court order confirming the judicial sale that otherwise meets the requirements above will be considered to be a bona fide lease for a month-to-month term.

 

 

A child, spouse, or parent of the borrower may prove by a preponderance of evidence that a written or oral lease that otherwise meets the requirements above is a bona fide lease.

 

 

The court is not required to appoint a special representative for a deceased borrower for the purpose of defending the action if there is a living person that holds a 100% interest in the property that is the subject of the action by virtue of being the deceased borrower’s surviving joint tenant or surviving tenant by the entirety.  A deficiency judgment may not be sought or entered in the foreclosure case against a deceased borrower.

 

 

Entry of a judgment of foreclosure does not terminate or otherwise affect a bona fide lease of a dwelling unit in residential real estate in foreclosure, whether or not the lessee has been made a party in the foreclosure.

 

 

An order of possession must not be entered against a lessee with a bona fide lease of a dwelling unit in residential real estate in foreclosure, whether or not the lessee has been made a party in the foreclosure.

 

 

In addition to the current requirements, the notice required to notify all known occupants of dwelling units of the mortgaged real estate that the holder or purchaser has acquired the mortgaged real estate must provide instructions on the method of payment of future rent, if applicable.

 

In addition to the current requirements, in the notice to occupants required to be posted on the primary entrance of each dwelling unit subject to the foreclosure action, the holder or purchaser must include instructions on the method of payment of future rent, if applicable.

 

 

The following provision has been deleted from the foreclosure laws:

 

 

A lender in possession, receiver or holder of a certificate of sale or deed, or purchaser who fails to file a supplemental petition during the pendency of a mortgage foreclosure must not file a forcible entry and detainer action against an occupant of the mortgaged real estate until 90 days after a notice of intent to file such action has been properly served upon the occupant.

NEW YORK ASSEMBLY BILL 7213

 

 

The Superintendent of Financial Institutions may require that an application for, or renewal of, a mortgage banker’s license or a mortgage banker’s registration, or any other submission or application for approval as may be required, be made or executed electronically, including through the Nationwide Mortgage Licensing System and Registry (“NMLS”) or other entities designated by the NMLS, if he or she deems it necessary to ensure the efficient and effective administration of the Licensed Mortgage Bankers laws.