When houses go into foreclosure, renters are often in the dark. What’s worse is that many renters can be left without a place to live when lenders take possession of the foreclosed property. Earlier this month, the Chicago City Council voted to adopt a “Keep Chicago Renting” ordinance, according to a report in the Chicago Tribune. The new rules will be important to renters in the city, as well as to anyone who is thinking about buying a foreclosure.
The new ordinance has been a long-time goal for tenants’ rights advocates, according to local WBEZ. Keep Chicago Renting will require “most entities that take ownership of foreclosed rental buildings to offer legitimate tenants rent-controlled leases for as long as they own the building.” In the alternative, the new property owners will be required to provide $10,000 “per unit in relocation assistance.”
Who Will Have to Abide by the Ordinance?
The new law will apply to lenders, as well as to most buyers who purchased foreclosed rental buildings at court-supervised foreclosure auctions. The buildings that will fall under the ordinance are quite varied, ranging from smaller single-family rental homes, all the way up to larger high-rise apartment buildings.
If the lender makes the decision to keep the renters in the property, it will have to offer leases that include a promise of no more than a two percent increase in rent per year. In addition, people who buy foreclosed buildings through auctions will be required to provide the current tenants with notice that ownership of the property has changed hands, as well as information about their rights as renters.
The Keep Chicago Renting ordinance will be much more effective in helping renters than Chicago’s current vacant building ordinance. While the vacant building ordinance was intended to help maintain properties in the city and prevent neighborhood decay, it didn’t provide the same financial incentives or information requirements when it comes to renters.
According to Diane Limas, the board president of the Albany Park Neighborhood Council, the primary problem with foreclosed properties and neighborhood maintenance is that the properties tend to be vacant upon foreclosures. Limas favors the Keep Chicago Renting ordinance, which she believes will “keep families in these foreclosed properties.” In turn, since the properties will have people living in them, “they will be maintained.” In other words, “they won’t become burglarized or vandalized,” and the property values around these foreclosures aren’t as likely to suffer since the foreclosed property will remain stable.
At the same time, however, Limas noted that the $10,000 relocation assistance payout isn’t preferable—in order to keep properties filled, Limas and her neighborhood council “hope that that $10,000 is never paid out.”
What Properties Aren’t Covered by the Ordinance?
While Keep Chicago Renting will apply to many purchasers of rental property across the city, there are certain types of property that will be exempt from the ordinance. First, it won’t apply to anyone who purchases a foreclosed rental property in private transactions after the court-supervised auction has already taken place. In addition, the ordinance won’t apply to anyone who buys a foreclosure with the intention of making it into their primary home, or to any nonprofit that buys a foreclosure—at auction or otherwise—with the intention of turning it into affordable housing.
If you have questions about the new city ordinance or are at risk of foreclosure, an experienced foreclosure defense lawyer can speak to you today. Contact us for more information.
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