Real Estate Roundup

SharpThinking

No. 178  Perspectives on Developments in the Law from Sharp-Hundley, P.C.   March 2020

Realty “Flippers” May Be Liable Under Consumer Fraud Act

While an individual who sells his or her own residence to another individual generally is not subject to Illinois Consumer Fraud & Deceptive Business Practices Act, 815 ILCS 505, serial “flippers” – who regularly purchase homes for renovation and sell those homes to consumers – may be subject to that act.

So held a panel of the Illinois Appellate Court recently in Pack v. Maslikiewicz, 2019 IL App (1st) 182447.

Dealing with an individual who had purchased several properties, renovated them and resold them without living in them, the panel said the defendant had “a commercial purpose, not a private purpose” and “never claimed to be” a private seller selling her own residence.  Accordingly, the court found that the defendant was engaged in “trade or commerce” as required under the act.  Judgment for the plaintiff was affirmed.

Smallest Error Voids Memorandum Of Judgment

The Appellate Court’s Third District has joined its First in holding that the smallest of errors in a recorded memorandum of judgment voids the intended lien upon the judgment debtor’s real property.

Ruling in Blewitt v. Urban, 2020 IL App (3d) 180722, the Third District agreed with Maniez v. Citibank, 383 Ill. App. 3d 38 (2008), and said that an “incorrect judgment amount, even one resulting from a ‘single keystroke’ or scrivener’s error of $0.60, is incompatible with [735 ILCS 5/]12-101’s strict compliance requirement and purpose of putting both debtors and prospective purchasers on notice”.

In Maniez, the First District had voided a memorandum because it misstated the date of the judgment at issue.  In Blewitt, the Third District reiterated that result but arguably went further.  It faulted the memorandum at issue for being based on a non-final judgment and for misstating all the parties against whom the judgment was entered.  It has been suggested that the harsh results of Blewitt can be avoided by recording a copy of the judgment itself, but that would not cure the former error.

The court justified its result by looking at the origin of 735 ILCS 5/12-101.  “A judgment lien, as provided in section 12-101, is a statutory creation in derogation of the common law,” it said.  “[S]ince the creation and revival of a judgment lien are statutory in nature, courts require strict compliance” with the statute.

Zoning Misrepresentation Can Violate Consumer Fraud Act

A misrepresentation of a parcel’s applicable zoning classification can be a misstatement of fact giving rise to a violation of the Illinois Consumer Fraud & Deceptive Business Practices Act, 815 ILCS 505 (“CFDBPA”), a panel of the Illinois Appellate Court in Chicago has held.

Ruling in Edson v. Fogarty, 2019 IL App (1st) 181135, the panel dealt with a situation in which a real estate broker assigned to the parcel a non-existent zoning designation, said it was commercial, and stated that it was appropriate for the buyer’s intended use, a grocery.  In fact the parcel was zoned residential.

Key to the decision in Edson was the court’s conclusion that the “correct zoning could not be determined by a mere review of the zoning map”.  This was so because the map showed the zoning designation for the upper floors of a multi-floor property and not the designation for the basement, where the parcel at issue was located.

In addition to violating the CFDBPA, the panel said the broker also could be liable under common law fraud and negligent misrepresentation theories.

Reliance Not Required Under Real Estate License Act

Reliance on a misrepresentation is not required to state a cause of action under the Real Estate License Act, 225 ILCS 454, the panel in Edson v. Fogarty, 2019 IL App (1st) 181135, also held.

That act requires that licensees “shall treat all customers honestly and shall not negligently or knowingly give them false information”.  225 ILCS 454/15-25.  Citing a prior case that held that a plaintiff adequately stated a claim under the act by alleging that the false information (a) did not come from the seller, (b) was material to the buyer, and (c) caused damages,” the panel said that proof of reliance was not required.   It sent the case back to the trial court for further proceedings under the act.

“Residential Real Estate” Must Be Used For Living

Property that, at the time the foreclosure action was filed, was being rented to a non-relative tenant was not “residential real estate” for purposes of the prejudgment mortgagee-in-possession provisions of the Illinois Mortgage Foreclosure Law, a panel in the Appellate Court’s Second District has held.  First Bank of Highland Park v. Sklarov, 2019 IL App (2d) 190210.

Under those provisions – 735 ILCS 5/15-1701(b) – different rules apply for granting mortgagee-in-possession relief depending on whether the property is “residential real estate”.  In pertinent part, for residential property the statute provides that the homeowner is entitled to possession unless the mortgagee shows “good cause” to be placed in possession.  For non-residential property, those roles are reversed; if the mortgage grants mortgagee a right to prejudgment possession and the owner is in default, the mortgagee is entitled to possession unless the owner shows good cause (which rarely is shown).

In Sklarov, the court rejected an argument that the property was the owner’s principal residence because he had no other residence in the United States (he lived and worked overseas).  It said that while short absences like vacations do not vitiate a property’s status as residential real estate, “there must be some evidence in the record that the mortgagor is actually using the property as a principal residence” when the foreclosure action was filed.

Possession for the mortgagee was affirmed.

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