A new Chicago city ordinance will reshape tenants’ rights by requiring parties who acquire a residential rental property through foreclosure or a deed in lieu of foreclosure to provide qualified tenants the option to renew the lease or take relocation assistance, HousingWire reported June 18.
The ordinance will become effective Sept. 2 — 90 days from the date it was passed by Chicago’s City Council. It will apply to all foreclosed rental property, which is considered a building containing one or more dwelling units used as rental units, including single-family homes.
The ordinance also includes “a dwelling unit that is used as a rental unit and subject to the Illinois Condominium Property Act or the Illinois Common Interest Community Association Act if the legal or equitable interests in the building or unit were terminated by foreclosure under Illinois' Mortgage Foreclosure Law or if at least one owner of the rental units were occupied when the mortgagee became the owner,” HousingWire reported.
A qualified tenant, who would be given protection under the rule, is defined as a tenant who lives in a rental on the day the property became foreclosed upon, with a “bona fide rental agreement” to live in the rental unit as a primary residence. In order to be a bona fide rental agreement, it must be the result of an arm’s length transaction, provide rent near market value and not be between a parent or a spouse.
The requirements also demand that the owner offer the qualified tenant a one-time relocation assistance payment of $10,600 or offer the option to renew or extend the lease. Under the ordinance, if a tenant opts to renew the lease, the renewed agreement cannot exceed 102 percent of the current rental rate for a minimum of 12 months.
The Protecting Tenants at Foreclosure Act of 2009 provides protection for tenants in residential foreclosed properties. Scheduled to expire in 2012, the act was extended through the end of 2014 by the Dodd-Frank Act. The PTFA permits laws at the state and local level to “give other additional protections for tenants.” However, it does not address the National Bank Act or the Home Owners Loan Act and could also be vulnerable to potential constitutional challenges.