In Illinois, no specific notice to the mortgagor is required before commencing a mortgage foreclosure suit relating to commercial residential or commercial property and much of the rules intended to help keep house 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 home? 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, recently held that where an individual mortgagor makes use of a commercial residential or commercial property as his/her principal residence, the lender is needed to provide the mortgagor with the notices required under the Illinois Mortgage Foreclosure Law (IMFL) governing domestic foreclosures. Thus, even if the mortgaged realty was never meant to be used as a residence or has business attributes, a loan provider will not be conserved from the IMFL's residential notification requirements.
In Gizynski, while the mortgagor noted 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 4 buildings, three of which were used for strictly business functions. Given this, Banco Popular The United States and Canada submitted its mortgage foreclosure complaint as a commercial foreclosure and without providing the mortgagor any of the notices required by the IMFL for property foreclosures. The bank consequently filed a movement to designate a receiver for the mortgaged residential or commercial property, which identified the building that the mortgagor lived in as having a storage/warehouse location in the back, with 2 floorings built as workplaces with kitchen area areas that were currently occupied as houses.
Gizynski filed a motion to dismiss the bank's problem, declaring that the mortgaged residential or commercial property satisfied the statutory definition of "domestic realty" included in area 15-1219 of the IMFL, and for that reason, no foreclosure action could be instituted without the bank first sending by mail the notification needed by the IMFL. The IMFL's meaning of "residential property" includes structures with 6 or fewer "single family house systems," where among the systems is occupied by the mortgagor as his principal home. In assistance of his argument, Gizynski sent a total of 9 affidavits, including four from other domestic residents of the building and organization owners who leased workplace in the structure. In addition, Gizynski likewise submitted documents from the tax assessor's office revealing that his house owner's exemption had actually been used to the subject residential or commercial property.
The trial court found Gizynski's arguments unpersuasive no fewer than five times when it (1) approved the bank's movement to appoint a receiver, finding that the residential or commercial property was business; (2) denied Gizynski's motion to dismiss; (3) denied Gizynski's movement to abandon all orders and dismiss for lack of topic jurisdiction; (4) rejected Gizynski's movement 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 prevented the subject residential or commercial property from being thought about domestic property. The appellate court kept in mind that the purpose of the IMFL was to "supply 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 fit under the [IMFL]" The court pointed out the different notification requirements lenders needed to comply with in cases involving property foreclosure, especially the 30-day grace period notice proscribed by area 15-1502 of the IMFL. The court also translated the IMFL to specify "residential genuine estate" as being "a structure with six or fewer single family house units, where one of the units is occupied by the mortgagor as his principal home."
The court determined that since there were no cases analyzing the term "single family residence unit" for functions of area 15-1219 of the IMFL, "the court needs to figure out how the residential or commercial property is being utilized." The court emphasized the following undisputed truths: (1) Gizynski's residential or commercial property had an overall of seven systems in the 4 structures; (2) at the time of the foreclosure the existing and designated use of five of the seven systems were as homes; (3) a number of units had centers for sanitation and cooking; (4) the systems were being leased to single families as houses or "single family house units"; and (5) 2 of the seven units did not have such facilities and were rented to businesses as workplaces.
The court ultimately agreed Gizynski, declining the bank's contention that because a residential or commercial property consisted of a mix of residential and business systems it need to be thought about business." [T] he court does not take a look at the total job of a multiple-dwelling structure to determine the character of the residential or commercial property for the functions of figuring out whether a statutory notification is required."1 Accordingly, the court reversed the high court's grant of summary judgment and remanded the case back to the high court for further proceedings constant with its viewpoint, the useful impact of which is likely the loosening up of the whole mortgage foreclosure and sale.
Gizynski explains that Illinois courts want to take a difficult line to make sure that the requireds of the IMFL relating to owners of single-family, owner-occupied residential or commercial properties are strictly adhered to. Lenders are well advised to follow the analysis stated by the appellate court: "The court takes a look at the multiple-dwelling structure and very first determines whether it includes single-family home units for 6 or less families living independently of each other. The court then identifies how only the systems are being used and if one system is being utilized as a single-family dwelling the system, the resident of that system is entitled to the protections offered to mortgagors of residential property by the [IMFL]"2
Lenders should likewise consider evaluating public records and tax information in order to recognize if a residential or commercial property in question is noted as the mortgagor's primary home. In addition, lenders must need and keep precise records of all leases for the residential or commercial property. Where a mortgagor notes a business residential or commercial property as their house, it might be handy to conduct a "presuit" check to determine if the mortgagee is indeed inhabiting the facilities. The relatively minimal expense of such preventative procedures certainly exceeds the alternative - needing to recommence an errantly submitted industrial foreclosure case and send the notice needed by the IMFL. Such an unwinding, besides leading to a significant hold-up, might lead to the lending institution needing to fund an improperly selected receiver, the refiling of the problem, the reissuance of summons and the reservice of the complaint.
