In Illinois, no particular notice to the mortgagor is needed before beginning a mortgage foreclosure match relating to commercial residential or commercial property and a lot of the guidelines meant to assist keep homeowners in their homes do not apply. But what about the odd circumstance where an otherwise business residential or commercial property is utilized by the mortgagor as a main home? In a cautionary tale for foreclosing lending institutions, 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 a specific mortgagor makes use of a commercial residential or commercial property as his/her primary residence, the lender is needed to supply the mortgagor with the notices needed under the Illinois Mortgage Foreclosure Law (IMFL) governing residential foreclosures. Thus, even if the mortgaged genuine estate was never ever planned to be made use of as a residence or has commercial qualities, a loan provider will not be saved from the IMFL's property notice requirements.
In Gizynski, while the mortgagor listed the address of the mortgaged residential or commercial property in the Gizynski case as his residence, the residential or commercial property was comprised of an overall of four buildings, three of which were used for strictly commercial 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 required by the IMFL for residential foreclosures. The bank consequently filed a movement to appoint a receiver for the mortgaged residential or commercial property, which determined the building that the mortgagor resided in as having a storage/warehouse area in the back, with two floors built as offices with cooking area areas that were currently occupied as residences.
Gizynski filed a motion to dismiss the bank's grievance, declaring that the mortgaged residential or commercial property fulfilled the statutory definition of "residential realty" included in area 15-1219 of the IMFL, and therefore, no foreclosure action could be set up without the bank initially mailing the notification required by the IMFL. The IMFL's meaning of "residential property" includes structures with 6 or less "single family residence units," where among the systems is occupied by the mortgagor as his principal house. In assistance of his argument, Gizynski sent an overall of 9 affidavits, including 4 from other domestic occupants of the building and business owners who leased office in the building. In addition, Gizynski also sent documents from the tax assessor's office showing that his house owner's exemption had actually been used to the subject residential or commercial property.
The high court found Gizynski's arguments unpersuasive no less than five times when it (1) granted the bank's movement to select a receiver, finding that the residential or commercial property was business; (2) denied Gizynski's movement to dismiss; (3) denied Gizynski's movement to leave all orders and dismiss for lack 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 avoided the subject residential or commercial property from being considered residential genuine estate. 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 rescue their mortgages before the loan provider files a suit under the [IMFL]" The court pointed out the different notification requirements lenders had to abide by in cases involving domestic foreclosure, especially the 30-day grace period notice proscribed by area 15-1502 of the IMFL. The court also analyzed the IMFL to specify "domestic realty" as being "a structure with 6 or fewer single household dwelling systems, where one of the systems is inhabited by the mortgagor as his principal house."
The court identified that because there were no cases analyzing the term "single family home system" for purposes of area 15-1219 of the IMFL, "the court must figure out how the residential or commercial property is being used." The court stressed the following indisputable facts: (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 intended use of five of the seven units were as homes; (3) a number of units had facilities for sanitation and food preparation; (4) the units were being rented to single households as residences or "single household house units"; and (5) two of the seven systems did not have such centers and were rented to organizations as offices.
The court ultimately agreed Gizynski, turning down the bank's contention that due to the fact that a residential or commercial property contained a mix of property and industrial units it ought to be thought about commercial." [T] he court does not take a look at the overall project of a multiple-dwelling structure to identify 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 trial court's grant of summary judgment and remanded the case back to the trial court for additional proceedings consistent with its opinion, the useful result of which is most likely the relaxing of the entire mortgage foreclosure and sale.
Gizynski makes clear that Illinois courts want to take a hard line to make sure that the requireds of the IMFL relating to owners of single-family, owner-occupied residential or commercial properties are strictly complied with. Lenders are well advised to follow the analysis set forth by the appellate court: "The court looks at the multiple-dwelling structure and first determines whether it consists of single-family house systems for 6 or less families living independently of each other. The court then identifies how just the systems are being used and if one system is being used as a single-family home the system, the resident of that unit is entitled to the securities offered to mortgagors of property real estate by the [IMFL]"2
Lenders should also consider examining public records and tax information in order to discern if a residential or commercial property in question is listed as the mortgagor's primary house. In addition, loan providers need to need and keep precise records of all leases for the residential or commercial property. Where a mortgagor lists a business residential or commercial property as their house, it might be helpful to conduct a "presuit" check to determine if the mortgagee is indeed occupying the premises. The fairly minimal cost of such preventative procedures certainly exceeds the alternative - having to recommence an errantly filed business foreclosure case and send the notification needed by the IMFL. Such a relaxing, besides resulting in a considerable hold-up, could result in the lending institution needing to fund a poorly appointed receiver, the refiling of the complaint, the reissuance of summons and the reservice of the complaint.
