Feb 23, 2017
It's not just residential buildings—commercial and industrial buildings are now subject to the Chicago Vacant Property Registration Ordinance
On Jan. 1, 2017, the City of Chicago passed an amendment to the Chicago Municipal Code Section 13-12-126 pertaining to the obligations of mortgagees of loans secured by vacant buildings. Falling in line with the City of Chicago’s rapid expansion of the scope of regulations for lenders and mortgage servicers over the past several years, the changes to Section 13-12-126 will act to increase the fees and costs associated with commercial real estate lending in Chicago.
The provisions of Section 13-12-126, which formerly applied solely to residential buildings, were amended to include commercial and industrial buildings. Under the amendments, a mortgagee or servicer must now register a vacant building in the City of Chicago within the later of (a) 30 days after the building becomes vacant or (b) 10 days after default on the underlying mortgage. Under Section 13-12-126 a borrower is considered in “default” when 60 days are past due on the obligation to make a scheduled payment for buildings with four or fewer units, and when 90 days are past due on the obligation to make a scheduled payment for buildings with five or more units.
The costs for registering vacant buildings also increased under the amended ordinance. The previous registration fee was $500. Under the current version of Section 13-12-126 registration fees are $700 for a building registered as vacant and $400 for a building registered in default. Furthermore, while the registration of a vacant building is valid for 12 months, there is now a $700 annual renewal fee for each building. A mortgagee is also required to renew buildings for as long as they remain vacant or for the time that the borrower is in default. Additionally, the mortgagee must secure, clean up and maintain the registered building or they will be subject to a fine of no less than $500 and no more than $1,000 per violation per day.
The amendments to Section 13-12-126 are quite burdensome for commercial real estate lending in Chicago. Strict compliance is imperative to avoid costly fines.
Feel free to reach out to a banking law attorney for more information regarding the registration of vacant commercial and industrial buildings.
This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.
Client alert authored by: Kevin R. Purtill, Principal
This alert originally appeared in the Spring 2017 Banking Focus newsletter.