Lawyers’ Committee for Better Housing: Tenants in Foreclosure Training

Association of Corporate Counsel & Morgan Lewis

May 22, 2014

About LCBH

• Founded in Rogers Park in 1980

• Believes that all persons have a right to safe, decent, and affordable housing on a non-discriminatory basis

• Furthers this goal by providing holistic services to low and moderate-income renters in Chicago – Direct legal representation

– Individual and public advocacy

– Supportive services

– Community outreach and education

Our Cases

• Advocating for Stronger Tenant Protection

• Stabilizing Families

• Protecting Due Process Rights

• Giving Tenants a Voice in Court

Meritorious Defenses

Procedural Defects

Unsettled Law

Economic Hardship

Part 1: Eviction

Eviction

Tenants in Foreclosure:

Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Advocacy Services

About Eviction Court

• 30,000 evictions filed each year in Cook County • 95% of tenants appear pro se • Landlords are three times more likely to obtain an

eviction order if a tenant is pro se • Average pro se tenant’s trial lasts < 2 minutes • Routine denial of tenants’ due process rights

• Tenants not allowed to present defenses • Witnesses not sworn in when testifying • Judges not examining eviction notices • Denying or limiting discovery rights

From LCBH’s 2003 report No Time for Justice

Landlord-Tenant Laws

FEDERAL ILLINOIS CHICAGO

Protecting Tenants at Foreclosure Act (Pub. L. 111-22, Div. A, Title VII, May 20, 2009)

Forcible Entry and Detainer Act (735 ILCS 5/9-101 et seq)

Residential Landlord and Tenant Ordinance (Chicago Municipal Code, Chapter 5-12)

Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1102)

Keep Chicago Renting Ordinance (Chicago Municipal Code, Chapter 5-14)

Eviction Timeline

Step 1: Notice

• Proper delivery of a Five, Ten, Thirty, or Ninety Notice

Step 2: Filing

• Only after proper termination of tenancy

• Single action (possession only) or Joint action (possession and money damages)

Step 3: Service

• Methods: Personal, Substitute, Court Appointed Special Process Server, Constructive (possession only)

Step 4: Court

• Appearance, Discovery, Motions, Trial, Post-Trial Motions

Step 5: Order for Possession

Eviction Notices

5 Day Non-Payment of Rent

10 Day Breach of Lease

30 Day Terminating Monthly Tenancy;

Non-renewal of Annual Lease

90 Day Foreclosed Building

Which Type of Notice is Appropriate?

Eviction Court Timeline

Return Date

•Enter Discovery Order

Status

•Set Trial Date (if discovery is complete)

Motion Hearing

(if applicable)

Trial Date

•Bench Trial

Eviction Court Timeline

A “typical” LCBH eviction case has 3-4 court dates and lasts for 4-8 weeks.

Part 2: Policy Concerns

Eviction

Tenants in Foreclosure:

Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Advocacy Services

Tenants in Foreclosure Intervention Program (TFIP)

• Launched in 2008 to address growing needs of renters impacted by foreclosure

• Multi-pronged program includes:

– One-on-one foreclosure counseling

(in-person and via phone)

– Advocacy and education

– Litigation services

– Data analysis and technical support to community partners

– Annual foreclosure reports (http://lcbh.org/news/reports)

Foreclosure in Chicago

• From 2009-2012…

– 20,279 apartment buildings have entered foreclosure,

– Containing a total of 61,561 units

– This makes up 10% of the total rental stock in Chicago

2012 Foreclosure Filings on Apartment Buildings

Foreclosure Impacts Children

• Research has shown that changing schools is associated with a wide array of problems including:

– emotional and behavioral: illicit drug use, depression, and teen pregnancy

– academic: dropout, lower math and reading scores

Foreclosure Impacts Families

• Displaced families often face housing instability and end up in shelters or doubling-up with family or friends

– On average, families spend 7 months in temporary housing

• Places burdens on the receiving households as well as municipal services and charity organizations

Foreclosure Impacts Finances

• Studies show from 2000 to 2010, the percentage of households allocating more than 30% of their income to rent rose from 11.1 percent to 46.5 percent.

Community Impact: Vacant Properties

LCBH report released in April of 2013: Vacant Properties: Havens for crime in a city plagued by violence

• Increase in vacant properties due to foreclosure • Chicago has experienced an increase in vacant

housing units from 7.9% of the total housing stock in 2000 to 12.5% in 2010

• In Chicago, about 70% of vacant properties are the result of foreclosure

• In 2011 alone, Chicago had 15,000 properties registered as vacant or “abandoned” according to city data

Community Impact: Vacant Properties

Chicago police data shows that crime associated with vacant properties has increased dramatically: • From 2005-2012, reported crimes in abandoned

buildings and vacant lots increased by 48%; • Three times as many reported crimes occurred in

abandoned buildings in 2012 than in 2005, a 196% increase;

• In 2012, a total of 2,618 crimes occurred in abandoned buildings or vacant lots: – 7 reported crimes per day, on average – 3 reported criminal sexual assaults and 4 weapons

violations per month, on average.

Part 3: Legal Protections

Eviction

Tenants in Foreclosure:

Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Advocacy Services

Foreclosure Timeline

Common Problems

Paying Rent Deteriorating Conditions

Eviction Threats Unclear Rights

Unclear Responsibilities

Bad Notices

Cash for Keys Offers

Rights and Responsibilities Fo

recl

osu

re P

end

ing Landlord responsibilities:

• Collect rent

• Maintain property

• Hold security deposit

• Notice of Foreclosure (RLTO)

• Follow FED eviction procedures

Exception: Receivers

Tenant responsibilities:

• Pay rent

• Follow terms of lease

• NO SPECIAL PROTECTIONS FOR TENANTS IN FORECLOSURE

Fore

clo

sure

Co

mp

lete

Bank/New Owner Responsibilities:

• Collect rent

• Maintain property

• Hold security deposit (RLTO)

• Change in Ownership Notice (IMFL)

• Follow FED eviction procedures

Tenant responsibilities:

• Pay rent (after proper notice)

• Save rent (if unsure who to pay)

• Follow terms of lease

• TENANT IN FORECLOSURE PROTECTIONS TRIGGERED

Protecting Tenants At Foreclosure

• Federal law: Passed in 2009

• 90 day notice for “bona fide” tenants

• “Bona fide” lease term survives (including subsidies)

1. Tenant is not child, parent, or spouse of mortgagor

2. Arms length transaction

3. Rent is not substantially less than fair market value

• Schedule to sunset at end of 2014

Key Points:

Illinois Mortgage Foreclosure Law

Key Points:

• State law: Governs all foreclosures in Illinois

• Change in management/ownership notice all tenants

• 90 day notice for “bona fide” tenants

• “Bona fide” lease (not just the term) survives

1. Tenant is not child, parent, or spouse of mortgagor

(Unlike PTFA, this is a rebuttable presumption)

2. Arms length transaction

3. Rent is not substantially less than fair market value

• Lease term restrictions (effective after PTFA sunsets)

• Provides for sealing of foreclosure-related eviction records

Keep Chicago Renting Ordinance

• City ordinance: Effective September 24, 2013

• Notice to all tenants informing them of their rights

• Penalty: actual damages and attorney’s fees

• Qualified tenants: Offered either lease renewal OR $10,600 relocation assistance (bank’s choice, not the tenant’s)

1. Tenant is not child, parent, or spouse of mortgagor

2. Arms length transaction

3. Rent is not substantially less than fair market value

• Penalty: double relocation assistance and attorney’s fees

Key Points:

Renewal v. Relocation

Lease Renewal Details Relocation Assistance Details

Applies to both written and oral leases $10,600 to be paid within 7 days after tenant vacates the property

Existing terms apply to lease renewal (can still be evicted for cause)

Tenant not eligible if evicted for cause before assistance offered or paid

Must renew lease until property is sold to a third party

Tenant not eligible if offered lease renewal, but rejects it

Cap on annual rental increase (2%)

If renewal is rejected, owner can evict at end of lease or end of 90 day notice (whichever is longer)

Summary of Law

Protecting Tenants at Foreclosure (PTFA)

Illinois Mortgage Foreclosure Law (IMFL)

Keep Chicago Renting Ordinance (KCRO)

Bona fide lease term survives foreclosure in its entirety

Bona fide lease survives foreclosure, but may be shortened (post-PTFA)

All preceding protections plus:

Bona fide tenant entitled to 90 day notice

Bona fide tenant entitled to 90 day notice

All tenants entitled to KCRO notice required

Subsidized renters lease terms survive

Change of management/ownership notice for all tenants

Qualified tenants entitled to offer of lease renewal or relocation assistance

Sunsets December 31, 2014

Sealing of foreclosure-related eviction records

Sealing Court Records

• Why Seal?

– Reported by various credit reporting agencies

– Difficulty securing housing in the future

– Barrier to some government housing subsidies

• How to Seal?

– Discretionary (FEDA)

– Mandatory (FEDA and IMFL)

– Include sealing language in final court order

• IMPORTANT: often record is not sealed during the pendency of the litigation in Cook County

Part 4: Advocacy Services

Eviction

Tenants in Foreclosure:

Policy Concerns

Tenants in Foreclosure:

Legal Protections

Tenants in Foreclosure:

Advocacy Services

How Does LCBH Help?

One-on-One Counseling

• Tenants in Foreclosure Helpline

• Tenants in Foreclosure Help Desk

Tenant Advocacy

• Writing demand letters

• Negotiating “cash for keys” and KCRO relocation/renewal

Litigation

• Eviction defense

• Affirmative lawsuits

• Appellate work

Phone Counseling

Step 1: Obtain caller information

Step 2: Complete three-step property search

Step 3: Inform caller of property/foreclosure case status

Step 4: Inform caller of general rights and responsibilities

Step 5: Ask caller if they have other questions/concerns

Step 6: Record all information in LCBH case management database (Legal Server)

Three-Step Property Search

• Use address to get property PIN number

Step 1: Cook County Assessor’s Website

• Use PIN number to find foreclosure case number

Step 2: Cook County Records of Deeds’ Website

• Look up status of foreclosure case

• Is there a receiver? Is the case over? Was OP entered? Was Order Approving or Confirming Sale entered? When?

Step 3: Cook County Clerk of Court’s Website

Advising the Caller

Foreclosure NOT Complete

• Was a Receiver appointed?

• Who?

• When?

• Change in Management notice?

• No tenant in foreclosure protections apply yet!

Foreclosure Complete

• Does PTFA apply?

• Does IMFL apply?

• Does KCRO apply?

• Has tenant received a 90 day notice or KCRO notice?

• Has tenant received a “cash for keys” offer?

• Change in Management notice?

• Is lease “bona fide?”

Referring the Caller

• In some situations, the caller may need to be referred to LCBH for a complete intake

– Eviction case filed against tenant

– Order for Possession entered against the tenant

– Possible KCRO eligibility

– Illegal lockout (also advise tenant to call police)

– Utility shut-off (also advise tenant to call 311)

– Maintenance problems

When in doubt, just ask an LCBH staff attorney!

Wrap-Up

Comments?

Samira Nazem Pro Bono Coordinator Phone: (312) 784-3517

E-mail: snazem@lcbh.org

Contact Us:

Patricia Fron Program Manager

Phone: (312) 784-3505 E-mail: pfron@lcbh.org

Aileen Flanagan Staff Attorney

Phone: (312) 784-3524 E-mail: aflanagan@lcbh.org