Case Law: Mortgage Contingency

Contract provided that buyer had to make a reasonable effort to obtain a mortgage commitment and that if the property was not rezoned within 150 days, the contract would be void; trial court erred in ruling against buyer because it was not buyer’s sole responsibility to obtain rezoning of the property.

The Illinois Appellate Court, 1st District, 2d Division, has reversed a ruling by Judge Richard L. Curry.

In October 1989, Judith Zoeller and Ernest Kopkowski agreed to sell property in Arlington Heights to defendant Richard Augustine. The contract provided that if, after making reasonable efforts, the buyer could not obtain a a mortgage within 150 days, the contract would become void.

The buyer later learned that the property was improperly listed as commercial and was actually zoned residential. He wanted to use the property for business purposes and required commercial zoning. The contract was then modified to make it also contingent on the rezoning of the property to commercial.

The buyer applied for financing at two institutions, but both informed him that the property would have to be rezoned before his obtaining a loan. The buyer contacted the Arlington Heights zoning department and hired an architect to help with the rezoning plan.

Because of numerous village requirements before rezoning would be possible, the buyer was unable to obtain the change in time to comply with the contract. The sellers, after the expiration of a 60-day extension, informed the buyer that he had waived the rezoning condition precedent by failing to apply for rezoning within the allotted time and that they were ready to schedule a closing on the property.

The sellers sued, and after a hearing, the trial court granted the sellers summary judgment on their specific performance count, denied their breach of contract damages claim and denied the defendant’s cross-motion for summary judgment.

The appeals court reversed. The court said a contract to purchase, contingent on rezoning of the subject property, is not a sufficient interest to maintain a legal action without the property owner’s joining in the proceedings.

The court said the parties should have understood this potential problem and the need for the sellers to be involved in the rezoning process when they agreed by their contract that the buyer would bear only “the cost burden” resulting from the rezoning. Nothing in the contract placed the burden of pursuing the rezoning solely on the contingent purchaser, nor could it have. The court said the sellers therefore had no right to summary judgment.

Judith Zoeller and Ernest Kopkowski v. Richard Augustine, No. 1-93-3889. Justice Allen Hartman wrote the court’s opinion with Justice Carl J. McCormick specially concurring and Justice Anthony Scariano dissenting. Released March 21, 1995. (22 pages)