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Foreclosure building plan would offer Chicago renters $12000 to move

But unlike last year’s plan, the current proposal goes further than mandating additional notifications to renters and extended rental periods.

After a rental building goes through foreclosure and is sold at auction, tenants with a lease would have to be offered $12,000 per rental unit to move or a one-year lease at a cost of no more than 102 percent of the prior 12-month period’s annual rent.

Most foreclosed properties are repossessed by lenders, but any entity that buys a foreclosed rental building at a judicial sale would have to follow the ordinance. The rules would not apply to someone who buys a building in a private transaction after the auction.

The ordinance would cover all rental properties in Chicago, including single-family homes, a condominium unit that functions as a rental or a multifamily building.

“It’s really a good ordinance because it gives the banks an opportunity to keep buildings occupied until they sell them,” said Ald. Richard Mell, 33rd, the sponsor of the ordinance. “It gives the banks another opportunity to keep the neighborhood in much better shape.”

The proposal is expected to generate opposition from the real estate industry, which fears it will cause investors to lose their appetite for properties in a hot rental market, and from banks, which will have to choose between paying fees to vacate buildings or become landlords.

There also is concern that banks will either walk away from properties in foreclosure so they don’t have to legally take possession of buildings, creating so-called zombie foreclosures, or that once the buildings do become bank-owned, they will be sold at below-market values to quickly absolve banks of their responsibilities under the law.

Last year, 1,970 multifamily buildings went through the foreclosure process in Chicago, and 90 percent of them became bank owned, according to the Institute of Housing Studies at DePaul University.

“This compromise ordinance ensures that tenants maintain their rights if their building is foreclosed,” said Kathleen Strand, a spokesman for the mayor. “Under current law, renters do not have long-term security and receive no assistance with the costs associated with relocation once their building enters foreclosure. Mayor Emanuel’s support for this ordinance is one piece of this administration’s efforts to mitigate the effects of the foreclosure crisis and vacant buildings on the economy and public safety.”

Other cities, including Los Angeles and San Francisco, have passed laws that offer as much as $18,000 and $15,000, respectively, to displaced tenants of foreclosed buildings. A group of 16 public policy and neighborhood groups originally proposed $14,000 of relocation assistance.

Article source: http://articles.chicagotribune.com/2013-04-25/business/ct-biz-0425-renting-ordinance--20130425_1_foreclosure-crisis-ordinance-rental-properties

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