Lenders Subject to Administrative Enforcement of New Requirements for Unoccupied Mortgaged Real Estate in Cook County
After Adopting Ordinance Requiring Lenders to Monitor and Maintain Vacant Residential Properties, Cook County Begins Administrative Enforcement
Cook County, Illinois, which encompasses Chicago and dozens of surrounding suburbs, enacted an ordinance on December 14, 2011, requiring that within 30 days after a residence becomes vacant or 60 days after a default, whichever is later, the lender must (among other things) register the home and take steps to secure the building and keep it clean. The ordinance, County Code §§ 102-19, defines “default” as failing to pay the mortgage for 60 days to 90 days, making a lender responsible even prior to declaring a default.
Cook County Begins Administrative Enforcement
The Cook County Department of Administrative Hearings started hearing cases brought by the county’s Department of Building and Zoning under the new Vacant Building Ordinance the last week in June 2012. The ordinance provides for fines between $500 and $1,000 per day, per property, along with court costs. As a result, lenders face significant fines depending on how long the building has been considered “vacant.”
At the same time that Cook County has begun enforcing its ordinance, the number of foreclosures filed in the country has increased significantly. With the increase and a backlog of cases, by some estimates the judicial foreclosure process in the Cook County Circuit Court now takes more than a year and a half to complete.
What Lenders Should Do
Lenders should be aware of the Cook County requirements and either take steps to comply or contest the application of the ordinance.
If a lender faces an enforcement proceeding, there are some possible defenses. First, the ordinance does contain some exceptions. If, for example, a lender is precluded from acting due to a bankruptcy stay, the lender is not the senior lender, a receiver has been appointed by the court, or if the owner/mortgagor is contesting the foreclosure, the lender can contest the violation. (County Code § 102-19(c)(2).) Second, although no lender has challenged the validity of the ordinance, requiring a lender to enter upon the mortgagor’s land and take action, prior to court authorization, potentially violates the specific procedures set forth in the foreclosure law, existing court decisions on mortgagee liability and due process.