Q–My niece paid $1,600 for rent and a security deposit for an apartment. She later discovered that the building was in foreclosure and the apartment was not up to par. She decided not to take the apartment, but had not gotten a receipt for the payment she made. That payment has not been refunded to her.
Two months later, she has been told that she can still rent the apartment, but at a higher rent. She wants her money or she wants the apartment under the old rate. What can she do?
A–First of all, she has to determine with whom she is dealing, and whether it is the same party with whom she dealt previously. If the foreclosure proceeding has been concluded with a judicial sale of the property, then the owner of the property now is probably not the same as the owner of the property when she originally paid the deposit and, presumably, the first month’s rent.
On the other hand, if the foreclosure was dismissed with the building owner bringing payments current or refinancing the building, then she may stand a better chance of achieving one of her two goals.
If the property was lost by the then-current landlord, the new owner, or the lender conducting the foreclosure, if there was no higher bidder, is not bound by any agreements made by the landlord who was foreclosed upon. The law is that your niece, as a tenant, derives her rights from the owner of the building. If the owner has been foreclosed upon and has lost his rights, your niece’s rights fall with those of the owner. For that reason, while it is common for the successive owner to leave the existing leases in place, that party is not required to do so.
Your niece might have the right to sue the landlord she originally paid for the return of the money she paid, provided that it was not she who breached the agreement. If she committed to the apartment, and then backed out of the deal, then the landlord is required to try to minimize his or her damages, and may be able to keep your niece’s payment to the extent that a replacement tenant did not cover the losses.
On the other hand, if there was no binding agreement between the landlord and your niece, she stands a better chance of recovering her payment. It is important to note, however, that she can only recover that payment from the party to whom she paid it, if the property was lost in a foreclosure action. The subsequent owner after a foreclosure is not responsible for the payment the subsequent owner didn’t receive.
Similarly, if the property was lost in a foreclosure, the subsequent owner is not required to abide by the rental agreement made by the building owner who lost the property. Therefore, that new owner can set a higher rent.
If the same owner remains at the property, the question becomes whether that owner breached the lease agreement, if there was one. If the landlord failed to meet his or her obligations, and that caused your niece not to take the apartment, then the landlord might be responsible to rectify the conditions and offer the apartment at the same price and terms to your niece. If there was no binding agreement, or if there was a binding agreement which was breached by your niece, then the landlord is under no obligation to maintain his or her commitment to your niece, in light of your niece’s failure to abide by her commitment to the landlord.
Q–I recently rented an apartment in the suburbs, and the lease says that if the rent is paid more than five days late, there is a $75 late charge. Is that legal?
A–There is no state prohibition against such an extremely high late charge. You must check to see if there is a local ordinance that governs landlord-tenant relationships that limits the amount of late charges to a tenant. If not, since you have already signed the lease with that provision, your only salvation, if this matter ever came to court, is if a judge refuses to enforce such an unreasonable lease provision.
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Robert A. Boron, a Chicago attorney who specializes in leasing matters, writes about landlord and tenant issues for the Tribune. Questions can be addressed to Rental Q&A, Your Place section, Chicago Tribune, 435 N. Michigan Ave., Chicago, IL 60611, or by e-mail at rabltd@aol.com.
