In Illinois, no specific notification to the mortgagor is needed before beginning a mortgage foreclosure match connecting to business residential or commercial property and numerous of the guidelines meant to help keep homeowners in their homes do not apply. But what about the odd scenario where an otherwise commercial residential or commercial property is utilized by the mortgagor as a main house? In a cautionary tale for foreclosing lending institutions, 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 principal residence, the loan provider is needed to offer the mortgagor with the notifications required under the Illinois Mortgage Foreclosure Law (IMFL) governing domestic foreclosures. Thus, even if the mortgaged property was never ever intended to be utilized as a home or has commercial qualities, a lending institution 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 residence, the residential or commercial property was consisted of an overall of four structures, three of which were utilized for strictly commercial functions. Given this, Banco Popular North America submitted its mortgage foreclosure complaint as a business foreclosure and without providing the mortgagor any of the notices required by the IMFL for property foreclosures. The bank subsequently submitted a motion to appoint a receiver for the mortgaged residential or commercial property, which identified the building that the mortgagor lived in as having a storage/warehouse area in the back, with two floors constructed as workplaces with cooking area locations that were currently inhabited as homes.

Gizynski filed a motion to dismiss the bank's complaint, claiming that the mortgaged residential or commercial property met the statutory definition of "domestic realty" contained in section 15-1219 of the IMFL, and therefore, no foreclosure action could be instituted without the bank initially sending by mail the notice needed by the IMFL. The IMFL's meaning of "residential realty" consists of structures with six or less "single household dwelling systems," where one of the systems is inhabited by the mortgagor as his primary residence. In assistance of his argument, Gizynski submitted a total of nine affidavits, including 4 from other residential occupants of the building and entrepreneur who rented workplace space in the structure. In addition, Gizynski likewise submitted documents from the tax assessor's office revealing that his homeowner's exemption had actually been applied to the subject residential or commercial property.

The high court found Gizynski's arguments unpersuasive no fewer than 5 times when it (1) gave the bank's movement to appoint a receiver, discovering that the residential or commercial property was business; (2) rejected Gizynski's movement to dismiss; (3) rejected Gizynski's movement to abandon all orders and dismiss for lack of subject matter jurisdiction; (4) rejected Gizynski's motion for summary judgment; and (5) granted the bank's movement for summary judgment.

On appeal, the bank argued that the existence of the two nonresidential systems avoided the subject residential or commercial property from being considered domestic property. The appellate court noted that the function of the IMFL was to "provide owners of single-family, owner-occupied residential or commercial properties an extra last minute escape valve to rescue their mortgages before the lending institution submits a suit under the [IMFL]" The court pointed out the various notification requirements loan providers needed to comply with in cases involving property foreclosure, especially the 30-day grace duration notice proscribed by section 15-1502 of the IMFL. The court likewise translated the IMFL to define "domestic realty" as being "a structure with six or less single household home units, where among the systems is occupied by the mortgagor as his primary residence."

The court determined that because there were no cases interpreting the term "single family home unit" for functions of section 15-1219 of the IMFL, "the court should identify how the residential or commercial property is being utilized." The court highlighted the following indisputable facts: (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 desired use of five of the seven systems were as residences; (3) numerous systems had centers for sanitation and cooking; (4) the systems were being rented to single families as residences or "single household house systems"; and (5) two of the seven units did not have such facilities and were rented to organizations as workplaces.

The court ultimately agreed Gizynski, rejecting the bank's contention that because a residential or commercial property consisted of a mix of property and industrial systems it must be thought about industrial." [T] he court does not 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 determining whether a statutory notification is required."1 Accordingly, the court reversed the trial court's grant of summary judgment and remanded the case back to the high court for additional proceedings constant with its opinion, the practical result of which is most likely the loosening up of the entire mortgage foreclosure and sale.

Gizynski explains that Illinois courts want to take a hard line to make sure that the mandates of the IMFL relating 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 identifies whether it contains single-family dwelling units for 6 or fewer households living individually of each other. The court then determines how only the units are being used and if one system is being utilized as a single-family residence the unit, the occupant of that system is entitled to the securities provided to mortgagors of residential realty by the [IMFL]"2

Lenders ought to likewise think about reviewing public records and tax details in order to discern if a residential or commercial property in concern is noted as the mortgagor's primary residence. In addition, loan providers must need and keep precise records of all leases for the residential or commercial property. Where a mortgagor lists a business residential or commercial property as their house, it may be handy to perform a "presuit" check to figure out if the mortgagee is undoubtedly inhabiting the premises. The reasonably minimal cost of such preventative steps definitely surpasses the option - having to recommence an errantly submitted business foreclosure case and send out the notification needed by the IMFL. Such a loosening up, besides resulting in a considerable hold-up, might result in the lender needing to money an improperly selected receiver, the refiling of the grievance, the reissuance of summons and the reservice of the grievance.