In Illinois, no specific notification to the mortgagor is needed before starting a mortgage foreclosure suit associating with business residential or commercial property and a lot of the guidelines intended to assist keep property owners in their homes do not use. But what about the odd scenario where an otherwise commercial residential or commercial property is used by the mortgagor as a primary home? In a cautionary tale for foreclosing loan providers, the Appellate Court of Illinois, First District, in Banco Popular North America v. Gizynski, 2015 IL App (1st) 142871, just recently held that where an individual mortgagor uses a business residential or commercial property as his or her primary house, the lending institution is required to provide the mortgagor with the notices required under the Illinois Mortgage Foreclosure Law (IMFL) governing residential foreclosures. Thus, even if the mortgaged property was never planned to be made use of as a residence or has commercial characteristics, a loan provider will not be conserved from the IMFL's property notification requirements.

In Gizynski, while the mortgagor noted the address of the mortgaged residential or commercial property in the Gizynski case as his residence, the residential or commercial property was made up of an overall of 4 structures, three of which were utilized for strictly business purposes. Given this, Banco Popular The United States and Canada filed its mortgage foreclosure problem as a business foreclosure and without supplying the mortgagor any of the notifications required by the IMFL for domestic foreclosures. The bank subsequently filed a movement to designate a receiver for the mortgaged residential or commercial property, which determined the building that the mortgagor resided in as having a storage/warehouse location in the back, with 2 floorings constructed as offices with cooking area locations that were currently occupied as homes.

Gizynski submitted a motion to dismiss the bank's grievance, declaring that the mortgaged residential or commercial property fulfilled the statutory definition of "domestic realty" contained in section 15-1219 of the IMFL, and therefore, no foreclosure action might be instituted without the bank initially mailing the notification needed by the IMFL. The IMFL's definition of "residential realty" consists of structures with six or less "single household residence systems," where among the units is occupied by the mortgagor as his principal residence. In support of his argument, Gizynski sent an overall of 9 affidavits, including 4 from other property occupants of the building and entrepreneur who leased workplace in the building. In addition, Gizynski likewise sent files from the tax assessor's workplace showing that his property owner's exemption had been used to the subject residential or commercial property.

The high court found Gizynski's arguments unpersuasive no less than five times when it (1) approved the bank's motion to designate a receiver, finding that the residential or commercial property was industrial; (2) rejected Gizynski's motion to dismiss; (3) rejected Gizynski's motion to vacate all orders and dismiss for lack of subject matter jurisdiction; (4) denied Gizynski's motion for summary judgment; and (5) approved the bank's motion for summary judgment.

On appeal, the bank argued that the existence of the 2 nonresidential units prevented the subject residential or commercial property from being considered property property. The appellate court kept in mind that the function of the IMFL was to "offer owners of single-family, owner-occupied residential or commercial properties an extra last minute escape valve to rescue their mortgages before the lending institution files a fit under the [IMFL]" The court pointed out the numerous notification requirements lending institutions had to abide by in cases involving residential foreclosure, particularly the 30-day grace period notice proscribed by area 15-1502 of the IMFL. The court likewise analyzed the IMFL to define "domestic real estate" as being "a structure with 6 or fewer single family dwelling units, where one of the units is occupied by the mortgagor as his principal residence."

The court identified that because there were no cases translating the term "single family house unit" for functions of area 15-1219 of the IMFL, "the court should determine how the residential or commercial property is being utilized." The court emphasized the following undisputed truths: (1) Gizynski's residential or commercial property had a total of seven systems in the 4 structures; (2) at the time of the foreclosure the current and designated use of 5 of the seven systems were as homes; (3) a number of systems had centers for sanitation and cooking; (4) the systems were being rented to single households as homes or "single household dwelling systems"; and (5) 2 of the 7 units did not have such facilities and were leased to companies as workplaces.

The court ultimately sided with Gizynski, declining the bank's contention that because a residential or commercial property contained a mix of property and commercial units it should be considered business." [T] he court does not take a look at the total project of a multiple-dwelling structure to figure out the character of the residential or commercial property for the purposes of figuring out whether a statutory notice is needed."1 Accordingly, the court reversed the trial court's grant of summary judgment and remanded the case back to the high court for more procedures constant with its opinion, the useful effect of which is likely the relaxing of the entire mortgage foreclosure and sale.

Gizynski makes clear that Illinois courts want to take a tough line to guarantee 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 encouraged to follow the analysis stated by the appellate court: "The court looks at the multiple-dwelling structure and very first determines whether it consists of single-family house units for 6 or less households living separately of each other. The court then figures out how only the systems are being utilized and if one system is being used as a single-family house the system, the occupant of that unit is entitled to the defenses provided to mortgagors of residential genuine estate by the [IMFL]"2

Lenders must also think about evaluating public records and tax info in order to discern if a residential or commercial property in concern is listed as the mortgagor's primary residence. In addition, lenders ought to require and keep accurate records of all leases for the residential or commercial property. Where a mortgagor notes an industrial residential or commercial property as their residence, it may be valuable to conduct a "presuit" check to identify if the mortgagee is indeed inhabiting the facilities. The relatively minimal expense of such preventative procedures definitely outweighs the option - needing to recommence an errantly submitted business foreclosure case and send the notification required by the IMFL. Such a relaxing, besides leading to a significant delay, could result in the lending institution having to fund a poorly appointed receiver, the refiling of the complaint, the reissuance of summons and the reservice of the problem.