With many people out of work and unable to pay their rent or mortgages as a result of the COVID-19 crisis and the State taking action to address these problems, the landscape governing the relationship between landlords and tenants, and mortgage lenders and homeowners, in the near future is quickly changing. The latest effort of the Illinois legislature in this regard is the “COVID-19 Emergency and Economic Recovery Renter and Homeowner Protection Act” (the “Homeowner Protection Act”) which was proposed on May 15, 2020 as an amendment to House Bill 5574. A copy of the full text can be found here: Homeowner Protection Act. This article will summarize some of the key provisions of the proposed legislation.
Executive Orders Currently in Effect
It may be helpful to first briefly recap the measures taken by the Governor to address concerns related to evictions and mortgages that are currently in effect. In his executive order of March 20, 2020, Illinois Governor J. B. Pritzker directed a halt to the enforcement of all orders of eviction for residential premises. Through his executive orders of April 23, 2020 and April 30, 2020, this was extended to include non-residential premises as well residential. Certain exceptions were created allowing eviction orders to be enforced in circumstances in which the tenant poses a direct threat to the health and safety of the tenants, an immediate and severe risk to property, or a violation of any applicable building code, health ordinance, or similar regulation. The executive orders are to remain in effect for the duration of the gubernatorial disaster proclamation, which currently extends through May 29, 2020.
The Governor’ orders make clear that no individual or entity shall be relieved of the obligation to pay rent, make mortgage payments and comply with all other terms of the tenancy or mortgage remain in effect. This may soon change if the Homeowner Protection Act is enacted as proposed.
Aiming to address the economic impact of the COVID-19 crisis anticipated to extend well beyond the expiration of the Governor’s disaster proclamation, Illinois State lawmakers have proposed the Homeowner Protection Act. The law, if enacted, would be effective for the time period referred to as the “COVID-19 Emergency and Economic Recovery Period” beginning on March 9, 2020 and ending on an undetermined date when the statewide unemployment rate drops to an acceptable level as defined in Homeowner Protection Act.
Some of the key provisions of the Homeowner Protection Act that would take effect are summarized as follows:
Cancellation of Residential Rent and Mortgage Payments
During the “Moratorium Period”, defined as the 180-day period following enactment of the Homeowner Protection Act, rental debt accrued to any residential tenant who has experienced a COVID-19 related hardship would be declared cancelled. Landlords would be prohibited from charging residential tenants fines, fees or any other damages in connection with the cancelled rent. Landlords may not treat the cancelled rent as a debt. They may not require repayment, nor may they report the tenant to a consumer reporting agency for failure to pay the rent. Similarly, the Act would cancel the obligations of homeowners to make mortgage payments of principal and interest accruing during the Moratorium Period.
Residential Housing Relief Fund
The Homeowner Protection Act would require the Illinois Housing Development Authority (“IHDA”) to create a Residential Housing Relief Fund. The Fund would be used, among other things, to compensate residential landlords and mortgage lenders for certain rents and mortgage payments cancelled pursuant to the Homeowner Protection Act. In order to receive compensation, certain requirements must be met, and the IDHA would govern the priority and distribution of the funds.
During the Moratorium Period, the Homeowner Protection Act would prohibit residential mortgage lenders from initiating or continuing a foreclosure action. The law would expressly prohibit the publishing of a notice of foreclosure, the exercise of the power of a judicial sale, or the pursuit or enforcement of an eviction order. All foreclosure proceeding deadlines would be tolled for the duration of the Moratorium Period.
The Homeowner Protection Act would prohibit all evictions of residential and small business commercial tenants for the duration of the Moratorium Period. Small business commercial tenants are defined to include commercial tenants that are not part of a multi-national corporation and who have less than 25 employees and the average income per employee is $50,000 or less. Any eviction notices issued during the Moratorium Period would be declared invalid. Courts would be prohibited from accepting any filings in eviction actions, and any service of process during the Moratorium Period declared invalid. All deadlines in eviction actions would be tolled. An exception would be provided to allow residential landlords to pursue eviction against any persons posing a credible threat of violence to other residential tenants at the premises.
The Homeowner Protection Act would impose additional restrictions on residential landlords after the expiration of the Moratorium Period but before expiration of the COVID-19 Emergency and Economic Recovery Period. At such times, residential landlords would be permitted to seek possession of a dwelling unit only for “just cause” as defined in the Homeowner Protection Act.
The Illinois House of Representatives is expected to vote on House Bill 5574 this week. The bill can be tracked at the Illinois General Assembly’s website at the following link: Status of House Bill 5574. We will continue to monitor the status of the bill as it works its way through the legislature. Please contact us with any questions you might have.