In Illinois, no particular notification to the mortgagor is needed before commencing a mortgage foreclosure fit connecting to business residential or commercial property and a lot of the rules intended to help keep property owners in their homes do not use. But what about the odd circumstance where an otherwise business residential or commercial property is utilized by the mortgagor as a primary house? In a cautionary tale for foreclosing loan providers, the Appellate Court of Illinois, First District, in Banco Popular The United States And Canada v. Gizynski, 2015 IL App (1st) 142871, just recently held that where a specific mortgagor utilizes an industrial residential or commercial property as his or her primary house, the loan provider is required to supply the mortgagor with the notices needed under the Illinois Mortgage Foreclosure Law (IMFL) governing residential foreclosures. Thus, even if the mortgaged real estate was never ever meant to be made use of as a residence or has business attributes, a loan provider will not be conserved from the IMFL's residential notification requirements.

In Gizynski, while the mortgagor noted the address of the mortgaged residential or commercial property in the Gizynski case as his home, the residential or commercial property was consisted of a total of four buildings, 3 of which were used for strictly business functions. Given this, Banco Popular The United States and Canada submitted its mortgage foreclosure grievance as an industrial foreclosure and without offering the mortgagor any of the notifications required by the IMFL for domestic foreclosures. The bank consequently submitted a movement to designate a receiver for the mortgaged residential or commercial property, which identified the structure that the mortgagor lived in as having a storage/warehouse location in the back, with 2 floors built as workplaces with kitchen area locations that were currently inhabited as residences.

Gizynski submitted a motion to dismiss the bank's complaint, claiming that the mortgaged residential or commercial property met the statutory definition of "residential realty" contained in section 15-1219 of the IMFL, and for that reason, no foreclosure action might be instituted without the bank first mailing the notice required by the IMFL. The IMFL's meaning of "domestic property" consists of structures with six or less "single household house systems," where one of the systems is occupied by the mortgagor as his principal residence. In support of his argument, Gizynski submitted an overall of 9 affidavits, including four from other property residents of the building and business owners who rented workplace in the structure. In addition, Gizynski also submitted documents from the tax assessor's office revealing that his house owner's exemption had been used to the subject residential or commercial property.

The high court discovered Gizynski's arguments unpersuasive no less than five times when it (1) approved the bank's movement to appoint a receiver, finding that the residential or commercial property was business; (2) rejected Gizynski's motion to dismiss; (3) rejected Gizynski's movement to leave all orders and dismiss for absence of subject jurisdiction; (4) denied Gizynski's movement for summary judgment; and (5) gave the bank's motion for summary judgment.

On appeal, the bank argued that the presence of the two nonresidential systems prevented the subject residential or commercial property from being thought about domestic property. The appellate court kept in mind that the purpose of the IMFL was to "provide owners of single-family, owner-occupied residential or commercial properties an extra last minute escape valve to save their mortgages before the loan provider submits a match under the [IMFL]" The court mentioned the various notification requirements lending institutions had to adhere to in cases involving residential foreclosure, particularly the 30-day grace period notification proscribed by section 15-1502 of the IMFL. The court likewise interpreted the IMFL to define "residential genuine estate" as being "a structure with six or less single family residence systems, where one of the units is occupied by the mortgagor as his principal home."

The court identified that since there were no cases interpreting the term "single household residence unit" for functions of section 15-1219 of the IMFL, "the court must identify how the residential or commercial property is being utilized." The court highlighted the following undisputed truths: (1) Gizynski's residential or commercial property had a total of 7 units in the four structures; (2) at the time of the foreclosure the existing and intended usage of five of the 7 systems were as residences; (3) a number of systems had facilities for sanitation and cooking; (4) the units were being leased to single households as homes or "single household dwelling units"; and (5) two of the 7 systems did not have such facilities and were leased to services as offices.

The court ultimately sided with Gizynski, rejecting the bank's contention that since a residential or commercial property consisted of a mix of property and business systems it should be considered commercial." [T] he court does not take a look at the total job of a multiple-dwelling structure to determine the character of the residential or commercial property for the functions of identifying whether a statutory notification is needed."1 Accordingly, the court reversed the trial court's grant of summary judgment and remanded the case back to the trial court for additional procedures constant with its viewpoint, the practical result of which is most likely the loosening up of the entire mortgage foreclosure and sale.

Gizynski explains that Illinois courts are prepared to take a hard line to make sure that the requireds of the IMFL connecting to owners of single-family, owner-occupied residential or commercial properties are strictly adhered to. Lenders are well recommended to follow the analysis set forth by the appellate court: "The court looks at the multiple-dwelling structure and first determines whether it consists of single-family house systems for six or less households living separately of each other. The court then determines how just the units are being used and if one unit is being used as a single-family dwelling the system, the resident of that system is entitled to the securities offered to mortgagors of property realty by the [IMFL]"2

Lenders should likewise consider evaluating public records and tax details in order to determine if a residential or commercial property in concern is listed as the mortgagor's primary house. In addition, loan providers ought to require and keep accurate records of all leases for the residential or commercial property. Where a mortgagor lists a business residential or commercial property as their home, it may be useful to carry out a "presuit" check to figure out if the mortgagee is undoubtedly inhabiting the facilities. The relatively minimal expense of such preventative steps certainly surpasses the alternative - needing to recommence an errantly filed business foreclosure case and send the notice needed by the IMFL. Such an unwinding, besides leading to a considerable hold-up, might lead to the loan provider needing to fund a poorly appointed receiver, the refiling of the grievance, the reissuance of summons and the reservice of the grievance.