Thursday, September 7, 2023

FYI: Ill App (1st Dist) Rejects Tenant's Challenge to Foreclosure Eviction Due to Absence of "Bona Fide Lease"

The Appellate Court of Illinois, First District, recently affirmed a trial court's order denying a tenant's emergency petition to vacate an eviction following a foreclosure action.


In so ruling, the First District held that both the federal Protecting Tenants at Foreclosure Act of 2009 (PTFA) and the City of Chicago "Keep Chicago Renting Ordinance" (KCRO) only apply to bona fide tenants with bona fide leases, and that the tenant failed to provide evidence of a bona fide lease.


A copy of the opinion is available found at:  Link to Opinion


A mortgagee sued to foreclose its mortgage on a two-unit apartment building. After receiving a foreclosure sale deed, the mortgagee filed a complaint for eviction and ejectment against Unknown Occupants to gain possession of the property.


The trial court entered a default eviction order in favor of the mortgagee. An individual who was not a party to the action ("appellant") filed an emergency petition to vacate the eviction order pursuant to Section 2-1401 (f) of the Illinois Code of Civil Procedure.


Appellant alleged that he received no notice of the eviction and that he had a written lease at the property. The mortgagee opposed the petition and noted that the appellant failed to intervene in the action and did not raise any meritorious defenses. The trial court held a hearing and heard testimony from the appellant. At the hearing, the trial court found that appellant's alleged lease was with a non-party entity that did not have an ownership interest in the property and that appellant also failed to provide proof of rental payments. The trial court denied the petition and an appeal ensued.


On appeal, the appellant argued that the 1) the mortgagee did not give him the required notice as a leaseholder; (2) the trial court erred in denying his petition to vacate the eviction order; (3) the trial court ignored the federal Protecting Tenants at Foreclosure Act of 2009 (PTFA); (4) the trial court ignored the City of Chicago "Keep Chicago Renting Ordinance" (KCRO) and the "Residential Landlord Tenant Ordinance" (RLTO); and (5) the trial court abused its discretion by denying the petition to vacate.


The Appellate Court first examined its jurisdiction to hear the dispute. Appellant argued that the trial court's judgment was void because the trial court lacked jurisdiction due to lack of proper notice. The Appellate Court rejected this argument and noted allegedly failing to comply with the notice requirements in eviction proceedings is not sufficient to divest a trial court's jurisdiction. Therefore, any alleged defect in the eviction notice did not deprive the trial court of jurisdiction because "the failure to comply with statutory notice requirements may serve as a defense but does not deprive the court of subject-matter jurisdiction." Prairie Mgmt. Corp. v. Bell, 289 Ill. App. 3d 746, 752 (1st Dist. 1997).


Next, appellant argued that the trial court's judgment was void because appellant raised a meritorious defense and due diligence with the filing of his section 2-1401 petition to vacate the eviction order. Under section 2-1401, the petitioner must set forth specific factual allegations supporting each of the following elements: (1) the existence of a meritorious defense; (2) due diligence in presenting this defense; and (3) due diligence in filing the section 2–1401 petition for relief. Warren Cnty. Soil & Water Conservation Dist. v. Walters, 2015 IL 117783, ¶ 51. (citing Smith v. Airoom, Inc., 114 Ill. 2d 209, 221, (1986)). The Appellate Court reviews the trial court's order under section 2-1401 under an abuse of discretion standard. An abuse of discretion occurs only when the trial court's ruling is "arbitrary, fanciful, unreasonable, or where no reasonable person would take the view adopted by the circuit court." Seymour v. Collins, 2015 IL 118432 ¶ 41.


Here, the Appellate Court held that appellant's purported lease agreement with an entity that did not own the property and failure to present adequate proof of rental payments was a failure of the appellant to present direct or circumstantial evidence to authenticate the purported lease or proof of rent payments. As a result, the Appellate Court held that the trial court did not abuse its discretion in denying the petition.


In examining the appellant's argument that the mortgagee's actions evicting the appellant violated the PFTA and KCRO, the Appellate Court noted that the PFTA only applies to bona fide tenants with bona fide leases. P.L. 111–22, § 702(a)(2)(A), 123 Stat. 1632, 1662 (2009). Here, the tenant's purported lease agreement with a third-party, nonowner of the property and failure to provide proof of rental payments resulted in the Appellate Court concurring with the trial court's decision that appellant did not have a bona fide lease.


In addition, the KCRO provides various rights to tenants of foreclosed homes and defines a qualified tenant as an individual who (1) is a tenant in a foreclosed rental property and (2) has a bona fide rental agreement to occupy the rental unit as the tenant's principal residence. See Chicago Municipal Code § 5–14–020.  Again, because the appellant was unable to prove he was a bona fide tenant or resided at the property under a bona fide lease, the Appellate Court agreed with the trial court that he was not covered by the KCRO and PFTA. As a result, the Appellate Court rejected the appellant's arguments that the mortgagee's actions violated the KCRO and PFTA.


Accordingly, the Appellate Court affirmed the trial court's decision denying appellant's petition.




Ralph T. Wutscher
Maurice Wutscher LLP
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Chicago, Illinois 60602
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