Sunday, June 30, 2013

FYI: Illinois Enacts New Law Affecting Tenants in Foreclosed Properties

Illinois recently signed into law an act (SB 58) that alters the protections afforded to tenants of foreclosed properties under the Illinois Mortgage Foreclosure Law ("IMFL"), and sets out the circumstances in which new owners of foreclosed properties are bound by tenants' bona fide leases. 


The press release announcing the bill is available at:


The text of the legislation is available at:  Link to Text of Legislation


As you may recall, the federal Protecting Tenants at Foreclosure Act ("PFTA") generally provides that new owners of foreclosed properties may not evict occupants other than those named in an order approving sale without first providing those occupants with a 90 day notice to vacate.  Further, the PFTA also generally provides that new owners of foreclosed properties are bound by the terms of bona fide leases.


SB 58 largely mirrors the language of the PFTA, and adopts the PFTA's provision that new owners of foreclosed properties are bound by the terms of bona fide leases.


Accordingly, the SB 58 provides that tenants of foreclosed properties cannot be evicted absent a 90 day notice to vacate, and that bona fide leases are generally considered to be valid where:  (1) the tenant is not a child, spouse, or parent of the mortgage; (2) the lease was the result of an arms-length transaction; (3) the rent provided for by the lease is not substantially less than the fair market value; and (4) the lease was entered into before the date of the judicial sale of the subject property.    


However, SB 58 provides new owners of foreclosed properties with some protections that the PFTA does not.  Specifically, it provides that bona fide leases of one year or greater "shall be deemed to be a bona fide lease for a term of one year."  In contrast, the PFTA is silent as to bona fide leases for terms greater than one year. 


In addition, SB 58 provides that oral leases that otherwise qualify as bona fide leases are to be considered leases with month-to-month terms, unless the lessee proves otherwise by a preponderance of the evidence. 




Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois


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