Chi-Town Lawmakers Consider Proposal To Mandate $12K 'Cash-For-Keys' Payments To Lease-Holding Tenants That Are Forced To Move From Foreclosed Homes; Ordinance Similar To Current Rules In Los Angeles, San Francisco

In Chicago, Illinois, the Chicago Tribune reports:

• Lenders that repossess rental buildings in Chicago — or anyone who buys a rental building at a court-ordered foreclosure auction — would have to pay tenants $12,000 per unit to move or offer them rent-controlled extended leases until the building is sold, under a proposal supported by Mayor Rahm Emanuel.
  
  Dubbed the Keep Chicago Renting ordinance, the proposal is the latest iteration of efforts that began last summer to help renters when their buildings fall into foreclosure and become bank-owned.
  
  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.
  
  "It's certainly our hope that they would keep the tenants in the building in order to avoid the fee," said John Bartlett, executive director of the Metropolitan Tenants Organization. "But if they are going to empty the buildings, and my guess is that still will be the choice of some, there is a uniform fee of what it's going to cost. Right now, the cash for the keys is all over the map."
  
  In Chicago, the average amount offered to tenants is about $6,000, estimated Diane Limas, board president of the Albank Park Neighborhood Council.
  
  Community groups have worked over the past few years to beef up tenant protections within the city and to make renters aware of local ordinances. Still, most groups and legal aid attorneys say they continue to deal with illegal eviction issues.
  
  Within 21 days of taking ownership of a foreclosed rental building, owners would have to notify most tenants of their rights under the ordinance. The proposed ordinance also would require entities that purchase foreclosed rental properties at court auctions to register those properties with the city and pay a $250 fee.
  
  "I wouldn't say we're punishing the banks," Limas said. "What we don't want to see is any more of what we've seen in the past."
  
  The proposal is expected to be heard May 1 by the City Council's Housing Committee.

For the story, see Foreclosure building plan would offer Chicago renters $12,000 to move (Banks, real estate industry expected to oppose ordinance).

For story follow-up, see Foreclosed renter protections measure moves forward.