What is foreclosure?
A foreclosure is a lawsuit where a bank seeks possession of a property from your landlord, most likely because your landlord failed to make mortgage payments. The entire legal process can last from seven months to over a year. Sometimes, the bank and your landlord reach an agreement or your landlord successfully defends the foreclosure case and continues to own the property or sells the property to a new owner through a “short sale.”
Foreclosure in this section refers only to mortgage foreclosures.
During the foreclosure process, renters and landlords have the same rights and responsibilities as they would if the foreclosure was never filed. For example, you must continue paying rent, as failure to pay rent may be a reason for eviction. In some cases, the foreclosure court may appoint a Receiver, or a temporary manager, who is responsible for collecting the rent and maintaining the property.
Finding out if your landlord is in foreclosure
Your old landlord does not have to tell you about the foreclosure, unless you live in Chicago. You are still obligated to pay rent, even if you were not told about the foreclosure. But, foreclosures are public records. You can find out if your building is in foreclosure by going to your county’s Recorder of Deeds office.
Look for the words “lis pendens” under your building’s record with the county recorder of deeds. If you see this and the name of a financial institution, your property might be in foreclosure. Ask the staff to let you see the documents filed under the lis pendens. There should be a case number associated with the documents, usually with a combination of numbers and letters.
- A state foreclosure case number would look like: 2015 CH 34234
- A federal foreclosure case number would look like: 2016cv00000
You can take this number to the circuit clerk for your county and ask them to let you see the documents for the case so you can see if it was a foreclosure.
In Cook County, you can find this information on the Cook County Recorder’s website. You will need your building’s PIN number. If you do not know your building’s PIN number, you can find it on the Cook County Assessor’s Office website. You can then look up the case number on the Cook County Circuit Clerk’s website.
A tenant’s rights and responsibilities
You rights and responsibilities don't change because your landlord is in foreclosure. Just like before the foreclosure:
- You and your landlord still have to follow your lease;
- You have to pay rent; and your landlord, or whoever owns or is managing the property, still has to maintain the property.
You cannot be evicted just because your landlord is in foreclosure. The fact that your landlord is in foreclosure is not a defense for you in eviction court if you are being evicted for a termination of your lease or for not paying your rent.
You have a right to continue to live in a safe apartment with utilities
Your landlord is not required to terminate your lease just because of a foreclosure. They also cannot make you leave by shutting off your utilities, such as gas, electricity, or water or changing your locks. If anyone other than the sheriff orders you to move out, your building is boarded up, or your utilities are turned off without a court order, call 911, file a police report, and consider contacting a lawyer.
During the foreclosure process, your landlord is responsible for the maintenance of your building. If the court appoints a Receiver, or a temporary manager, then the Receiver is responsible for maintenance. If your building is not being maintained, or your utilities such as gas, electricity, or water are shut off, talk with your landlord or Receiver first. If problems still aren’t addressed, call your local department of buildings and code enforcement. The City may investigate and require the owner to make repairs.
You have a right to be notified in writing if a receiver is appointed
The foreclosure court may enter an Order Appointing a Receiver in the foreclosure case. A Receiver is a person chosen by the court to manage the property. A Receiver is often in charge of maintaining the property and collecting rent for the property during the pending foreclosure case. An order appointing a Receiver indicates a change in management and you must be notified of these changes in writing. You can learn if the property has a receiver from the case records which are held by your county’s circuit clerk.
Within 21 days of being appointed as a Receiver of the property, a Receiver must:
- Try to find out the names and addresses of all tenants in the building.
- Give you written notice of:
- The foreclosure
- The name of the Receiver
- Who to contact for repairs
- The name and case number of the foreclosure case
- How to pay your rent
- The Receiver must also post this notice on the property
Receivers cannot collect rent until they give you this notice and failure to give this notice may provide you with a defense against an eviction.
If no one is collecting rent or you are unsure about who to pay, it is important that you save your rent. Once the proper notice is given, the Receiver may be able to collect back rent owed after they took over the property. Once the proper notice is given, the Receiver may be entitled to evict tenants for non-payment of rent.
You have a right to be notified in writing if your landlord changes
The foreclosure court may enter an Order of Possession with an Order Confirming Sale. These “orders” indicate a change in ownership and you must be notified of these changes in writing. You can learn if the court has entered these orders from the case records which are held by your county’s circuit clerk.
Within 21 days of taking ownership of the property, a new owner or must:
- Try to find out the names and addresses of all tenants in the building.
- Give you written notice of:
- The foreclosure;
- The name of your new landlord;
- Who to contact for repairs;
- The name and case number of the foreclosure case; and
- How to pay rent
- The new owner must also post this notice on the property
New owners or cannot collect rent until they give you notice and failure to give this notice may provide you with a defense against an eviction.
You have a right to receive written notice if you are asked to move
Beware of letters and notices posted on your building saying that you must move out immediately. Most renters are “qualified” or “bona fide” tenants and are entitled to at least 90 days’ notice before an eviction case can be filed against them. If you receive a notice asking you to move in less than 90 days or you are brought into the foreclosure case, then contact an attorney.
Just like during the foreclosure process, the new owner cannot make you leave by shutting off your utilities or changing your locks. If anyone other than a sheriff orders you to move out, your building is boarded up, or your utilities are turned off without a court order, call 911, file a police report, and consider contacting a lawyer.
Continuing to stay in your rental home after the foreclosure is over
Your ability to stay in your rental unit depends on whether you have a legitimate verbal or a written lease agreement to pay rent. When you entered into that agreement or signed your lease is also important.
You are a bona fide lease holder if:
- You do not own the building;
- You are not the child, spouse, or parent of the owner. If you are the parent, child, or spouse of the former owner you may still be able to show you have a bona fide rental agreement or lease if you can meet the other requirements;
- Your lease was the result of an arm’s length transaction which means the lease was bargained for by unrelated parties where each side, the landlord and the tenant, both acted in his or her own best interest; and
- Your rent is not substantially below rent charged for other units around you (do not count housing vouchers).
If you are a bona fide written lease holder, and you signed your lease:
- Before the lis pendens in foreclosure was recorded with the recorder of deeds, then you can stay for the entire length of your lease.
- After the lis pendens in foreclosure was recorded with the recorder of deeds, then you will be able to stay for up to one year of the lease term. Even if you signed a three year lease it will be valid for only one of the three years.
- After the property was auctioned at the judicial sale but before the final order approving and confirming the judicial sale has been entered by the foreclosure court, then your lease will be deemed to be a month-to-month rental agreement. However, you may still be a bona fide tenant.
- After the court entered the final order approving and confirming the judicial sale, then you are not a bona fide renter and you do not have a valid rental agreement. In this case you are not considered a renter because the person renting to you did not have the authority or legal right to rent the property to you so you are not entitled to any of the protections for renters in foreclosure. You may have been the victim of fraud and so should consider reporting this as a crime. However, if the owner wants you to move, you should still receive some notice and will have to be taken to eviction court. Remember, the Sheriff is the only entity allowed to legally conduct an eviction.
If you do not possess a written lease but you have a verbal rental agreement that is renewed every month when you pay your rent then you are considered a month-to month-renter. Ordinarily a month-to-month renter is entitled to a written 30 day notice of termination before an eviction case can be filed against you. If you are a bona fide renter and the property went through a mortgage foreclosure case then you are entitled to a 90 day written notice before an eviction case can be filed against you.
There is an exception to the right to stay for your full lease term. If the new owner wants to use the property as their primary home, then you can stay 90 days. For week-to-week and month-to-month leases, you can still also stay 90 days.
You may not have 90 days if:
- You were named in the foreclosure lawsuit from the beginning and you do not have a bona fide written or verbal rental agreement. This means you were served and your name was in the Order of Possession; or
- You do not have a bona fide written or verbal rental agreement and the new owner filed a Supplemental Petition for Possession against you. In that case, you may have up to 120 days from the date of the filing until you must leave.
After foreclosure for Chicago residents
After Foreclosure you may have rights under the Protecting Tenants in Foreclosed Rental Properties (also known as the Keep Chicago Renting Ordinance or KCRO)
If you live in Chicago you may also have the right to be offered:
- An extension or renewal of your rental agreement (oral or written) OR be given $10,600 in relocation assistance.
- A replacement unit if you are living in an “unlawful conversion” or an “unlawfully hazardous unit” with substantial disrepair.
You also have responsibilities to:
- Continue to pay your rent.
- Respond to the new owner’s offer to renew or extend your rental agreement or choice to provide the relocation assistance if you are a “qualified tenant.”
Are you a qualified tenant?
There are several factors that Chicago’s ordinance uses to define a qualified tenant:
- You were living in the foreclosed property as your primary residence on the day the new owner obtained the property in foreclosure.
- With some exceptions, you are not the previous owner, or the child, spouse, or parent of the previous owner.
- Your rental agreement (written or oral) must be the result of an “arms-length transaction” (entered into by people acting in their own best interests).
- Your rent (including subsidies) cannot be “substantially less” than fair market rent.
Beware of claims saying that you are not a qualified tenant. If a new owner tells you that your rent is too low or you are otherwise not a qualified tenant, you should speak with an attorney.
Most renters are qualified tenants.
You have a right to live in a safe apartment with utilities
During the foreclosure process, your landlord is responsible for the maintenance of your building. If the court appoints a Receiver, or a temporary manager, then the Receiver is responsible for maintenance. If your building is not being maintained, or your utilities such as gas, electricity, or water, are shut off, talk with your landlord, or the Receiver, first. If problems still aren’t addressed, call Chicago City Services at 311. The City may investigate and require the owner to make repairs.
You may have a right to a lease extension/renewal or relocation assistance
After foreclosure, “Qualified Tenants” are entitled to:
- An offer to extend/renew an existing oral or written rental agreement, or
- $10,600 in relocation assistance.
The new owner chooses which option to offer. If you are offered a rental agreement extension/renewal, your rent amount can only be increased a small amount each year. This amount cannot be more than 2%. You can still be evicted for violating your lease, such as not paying rent or breaking other lease terms.
If the new owner does not extend or renew your rental agreement, a one-time payment of $10,600 per unit must be paid to you within 7 days of moving out, and is in addition to any deposits, refunds, or other compensation that you are entitled to receive.
Deductions can be taken for rent owed to the new owner. New owners are entitled to collect rent only after they have first served the proper notice.
You will receive a "Tenant Information Disclosure Form" from the new owner or its agent, requesting basic information about you as a tenant.
Some units are in such bad condition that they are considered “unlawfully hazardous” or are an “unlawful conversion” under the Chicago building code and therefore, a tenant’s lease for the unit cannot be renewed. In these cases, the new owner may offer the tenant a replacement unit at no more than 2 percent more than what the tenant was paying the previous year. If the tenant chooses not to accept a replacement unit, the new owner must pay the tenant a relocation fee of $10,600. The law is specific about which units are “unlawfully hazardous” or an “unlawful conversion”; speak to an attorney if you have questions about your particular unit.
Unless you are in an unlawfully hazardous unit or an unlawful conversion, if you turn down an offer for a renewal or extension of your rental agreement, you are not entitled to the relocation assistance. However, you should be able to stay until the end of your rental agreement. The law might cut short the term of your lease, depending on when you entered into the lease during the foreclosure process.
Timeline after foreclosure for qualified chicago renters
It is very important to communicate with the new owner. You can lose your rights if you do not respond once the new owner has made you a written offer either extending or renewing your rental agreement, whether it is an oral or written rental agreement.
Within 21 days after taking over the property, the new owner must provide a notice to all tenants (“qualified” or not) telling them about the new owner’s option to renew or pay relocation assistance. This Notice must be in four languages: English, Spanish, Chinese, and Polish. A “Tenant Information Disclosure Form” must also be provided. The information from this Form will help the new owner assess which option they wish to offer the renter, either to renew or pay the relocation assistance.
You should send back the completed “Tenant Information Disclosure Form” to the new owner within 21 days of receiving it. The owner then has 21 days after receiving the completed form to decide whether they will renew or extend your rental agreement or offer the relocation assistance. If you do not return the form, the new owner must still provide you with the offer within 42 days from the date you originally received the form. While failing to return the form will not automatically disqualify you, your cooperation will help the new owner make an informed decision. It may also create a better working relationship between you and the new owner, especially if you stay in the property for any length of time.
Once the new owner has given you an offer to renew or extend your lease, you then have 21 days to either accept or reject the offer. If you do not respond to the new owner’s offer to renew or extend your lease in 21 days, the new owner does not have to extend or renew the lease or provide you with the relocation assistance if the new owner asks you to leave.
If the new owner fails to offer you a lease extension/renewal or fails to pay relocation assistance, you have the right to sue for two times the relocation assistance, or $21,200, as well as attorney's fees, plus any other remedies you may be entitled to, for example, a refund of your security deposit.
These protections continue until the property is sold to a “bona fide third-party purchaser” not affiliated with the new owner. Protections do not apply if the owner is a Receiver (temporary manager) appointed by the court, an owner who will live in the property as their home, or a not-for-profit that is providing financing for the purchase or rehabilitation of affordable housing.
You have a right to be notified in writing of your rights under the Chicago ordinance
Additionally, Chicago’s ordinance requires owners to give written notice to all tenants regarding potential relocation assistance or a lease extension/renewal, as well as the right to sue for damages if the new owner violates the ordinance.
For qualified tenants
Most new owners should be offering you a lease extension/renewal or relocation assistance. If you receive a notice from the new owner that requires you to move out, please speak with an attorney or contact the Lawyers’ Committee for Better Housing Tenant in Foreclosure helpline at 312-784-3507.
If you are not a qualified tenant
You are still entitled to receive a written notice. The length of the notice may be shorter than 90 days, but the notice must still comply with the law. If you receive any notice that requires you to move out in less than 90 days or you are named in the foreclosure case, please speak with an attorney or contact the Lawyers’ Committee for Better Housing Tenant in Foreclosure helpline at 312-784-3507.
In very limited circumstances the new owner may not be required to follow this ordinance and you should speak to an attorney if the new owner claims that this law does not apply.
Responding to a Supplemental Petition for Possession
A Supplemental Petition for Possession is a document filed with the court by the new owner. It brings an occupant into the foreclosure lawsuit. This process may not be used to evict a bona fide renter. If you receive a notice of this petition you should speak to an attorney or contact the Lawyers’ Committee for Better Housing Tenant in Foreclosure helpline at 312-784-3507.
The new landlord can file this petition up to 90 days after the court holds the hearing to confirm your building will be sold. If you are brought into the lawsuit, and you are current on rent or have made a good faith effort to pay rent or rent was not properly demanded then the order for possession must allow you to stay for the remainder of your lease or 120 days after notice of the hearing on the supplemental petition, whichever is the shorter time period, but no less than 30 days (but only if the occupant continues to pay rent if properly demanded).
If your building went through foreclosure you may collect your security deposit from your old landlord if they did not transfer the security deposit to the new owner. If you live in a building with 5 or more units then foreclosure court must order the former owner to transfer the security deposits to the new owner and include an accounting of those transferred deposits. You may go to court in the foreclosure case before the case is over to request that the court enter this order. You must also be notified of the transfer as stated above.
If the property has 5 units or more, and the new owner after foreclosure is not the lien holder or bank and plaintiff in the foreclosure case then the new owner is liable for the security deposit. If the property is 5 units or less, then that new owner may not be responsible for the security deposit after foreclosure.
But if the property is transferred and if the former owner also transfers the security deposit to the new owner, then within 21 days after the actual transfer of the security deposits and receipt of the name and address of any renter who paid a deposit, the new owner must post a written notice or flier on the front door of each rental unit in the building. The written notice has to tell you that the new landlord now has your security deposit.
Generally, under Illinois law, for buildings with 5 or more apartments the Illinois Security Deposit Return Act regulates the payment and return of a security deposit.
- If your landlord withholds any part of your deposit then they must send you a written list of damages and the estimated or actual cost for repairing or replacing each item on that written list.
- Your landlord must also attach the paid receipts, or copies, for the repair or replacement to that list.
- If your landlord uses his or her own labor to repair any damage caused by you, then your landlord may include the reasonable cost of their labor to repair the damage.
- If estimated cost is given, then your landlord must give you the paid receipts, or copies of the receipts, within 30 days from the date your landlord gave you the first written list of damages with the estimated cost of repairs.
- The landlord must provide this to you within 30 days after you move out in order to keep your security deposit.
- If your landlord fails to send you this statement, he must return your security deposit within 45 days after you move out.
- If your landlord fails to properly return your deposit or provide you a written itemized statement or provides an itemized statement in bad faith the landlord is liable for two times the security deposit plus costs and reasonable attorney’s fees.
- Security Deposits are also regulated by the Illinois Security Deposit Interest Act which requires a landlord of residential property, containing 25 or more units in either a single building or a complex of buildings located on contiguous parcels of real property, who receives a security deposit from a renter must pay interest to the renter within 30 days after the end of each 12 month rental period.
- The landlord must pay the interest, by cash or credit to be applied to rent due, except when the renter is in default under the terms of the lease.
- If your landlord willfully fails or refuses to properly pay the interest then the landlord is liable for the full amount of the security deposit plus costs and reasonable attorney’s fees.
Under Illinois law, for buildings with 4 or fewer apartments, your landlord does not have to give you a written statement of damages if he wants to deduct repair costs from your security deposit. Your landlord still must return your security deposit within a reasonable amount of time.
If the property is located in Chicago and is subject to the Chicago Residential Landlord Tenant Ordinance then the security deposit laws after a foreclosure are different.
The Chicago Residential Landlord Tenant Ordinance may apply if the landlord does not live on the property where you live or if the landlord does live in the building and it has more than 6 units. It is usually the case when a bank or investor acquires a foreclosed property that they do not live at the property.
Your new landlord and your old landlord are both responsible for your security deposit unless and until it is properly transferred. If your old landlord transfers the security deposit, your old landlord must tell you within 10 days, and the new landlord must tell you within 14 days. Unlike the Illinois security deposit law, there is no lien holder exemption so the bank or Plaintiff in the foreclosure case is responsible for your security deposit unless and until it is properly transferred.
If your old landlord or new landlord does not tell you your deposit has been transferred, then you may be entitled to file a lawsuit and be awarded two times the amount of your security deposit back in a lawsuit and your attorney’s fees. If your security deposit is not properly refunded to you and you must file a lawsuit in order to collect the refund then you may also be entitled to damages in the amount of two times the security deposit plus your attorney’s fees.
To keep your deposit secure, the following actions are required by your old and new landlord:
- The person who receives the security deposit must give you a receipt that lists the amount of your deposit, the name of the landlord (if different from the person receiving the money), the date and a description of the apartment.
- The landlord must keep your deposit in a federally insured, interest bearing account at a financial institution. The deposit may not be combined with the landlord’s funds.
- The landlord must pay interest on the deposit at a rate determined annually by the City Comptroller. The interest must be paid within 30 days of the end of each 12-month period the apartment has been renter. Interest may be paid in cash or applied towards your next month’s rent.
- If the landlord intends to withhold a portion of the security deposit because you caused damage to the apartment, the landlord must notify you in writing within thirty (30) days. In the letter, the landlord:
- Must supply you with a detailed list of damages and the cost for each repair.
- May not deduct any amount from the security deposit unless the letter is sent.
- Has 45 days after you move out to return the entire security deposit or the balance after proper withholding for damage, plus any accrued interest. In other words, if a landlord gave you a list of damages on the thirtieth day after you moved out, then s/he has only 15 days thereafter in which to return the balance of the security deposit.
- If building ownership changes, both the old and new landlord may be liable to you for the security deposit unless notice of the transfer is given to you. Both owners remain liable until the security deposit is properly transferred to the new owner. At that point, the new owner is solely responsible for the return of the security deposit. Renters are not entitled to the security deposit return at the time the property is transferred.
You should speak with an attorney if you are having trouble recovering your security deposit.
Sealing the record of a foreclosure-related eviction
Your foreclosure related court record must be sealed
If you are taken to eviction court because your building is in foreclosure, your court record must be sealed from the public view to protect your credit report and your ability to rent in the future. Foreclosure-related evictions should be sealed at or prior to the first date it is in court. If it wasn’t sealed, tell the judge it is a foreclosure-related eviction the first time you come to court. It is important to bring your court documents with you to court so you can identify your case by case number. When a record is sealed, it cannot be seen by employers or other members of the public. Your record can still be seen by governmental agencies, law enforcement agencies or by the public if a judge orders that they can see it.
Learn more about Getting an eviction case off your record.