With the current wave of foreclosures sweeping the country, which we hope will subside after the recently announced bailouts, many renters find themselves caught between lenders and their landlords; who is now the repossessed owner. They are becoming homeless, like the Smiths, after their cash-strapped landlord defaulted or was able to make only partial mortgage payments and their houses, condos, townhomes or apartment buildings were foreclosed on, even though they have been paying monthly rent. .
The California Apartment Association, the state’s largest rental homeowners organization, reported that nearly a quarter of all foreclosed single-family residences are renter-occupied. And the number of tenants caught up in the foreclosure debacle in duplexes and other multi-unit buildings is considerably higher. Total single-family home foreclosures statewide increased more than 400 percent to a record 31,676 in the fourth quarter of 2007 from a year earlier and have been rising ever since.
The Smiths got a heads up last month, when a Trustee’s Notice of Sale was posted on the front door of their townhome, after the landlord hadn’t paid the mortgage for 6 months and the property was foreclosed on. And this seems to be the way most tenants get their notifications; inciting a sense of panic and feelings of insult, betrayal, and lack of control.
For many people, this may mean even higher rents on the horizon because the wave of foreclosures has created greater demand in the rental housing market, a boon for homeowners who don’t have foreclosure problems, but also leaves the door open to measure. And invariably, these situations mean a total loss of deposits paid by tenants, so it is generally suggested that tenants stop paying rent as soon as they learn of foreclosure proceedings and definitely upon notice of a sale. imminent.
State and local officials say many evictions could be avoided or at least made less painful if people knew the legal protections available to them. Yet few landlords, lenders, and property managers make such information available during the eviction process, and often have tenants move out early without a penny…no deposit refunds, no months of free rent to offset lost deposits. and no assistance check from the bank. So renters beware!
This whole experience can be terrifying! “It’s something that a number of jurisdictions have been discussing because it’s a growing problem,” says Michaelyn Jones, general counsel for the Santa Monica Rent Control Agency, which oversees some of California’s toughest rent control rules.
Many foreclosed properties were purchased by real estate speculators or fledgling investors who took advantage of very cheap loans and rising property values, who subsequently rented them out to tenants before falling behind on their mortgage payments. Also, there is now a recently reported scam where some homeowners, knowing they are headed for a pending foreclosure, rent their properties anyway or again, just before the trustee sale, and then disappear with what they can. be a tidy sum, including as much as the first and last month’s rent, a security deposit, and sometimes additional deposits for cleaning or pets; leaving tenants with the proverbial bag and having to move again.
Some tenants don’t know they have to move until they receive a letter from the bank or lender that has taken over the property, or from the new owner after the trustee’s sale, either in the form of a letter or by email. a representative to show up. at your door, which sometimes includes the offer of a “care check” ranging in amount from $1000 to $2500, to evict quickly. In many cases it is in the best interest of the tenants to accept this assistance check, which often includes a warning such as: “Please note that the eviction process has begun.”
Offering financial incentives is common practice when pressured tenants to vacate a foreclosed property, but there are several factors to weigh. It’s called “Cash 4 Keys” and it can involve payments of up to $2,500, ostensibly to help a tenant relocate, but also to release any claims on the rental property. However, in the wake of increased foreclosures and rising rents, in many areas you now have 60 days from the day you receive official notice to vacate before you have to move out or before proceedings can begin. eviction giving you 2+ months of rent free living. So you have to weigh the value of two free months of rent against the amount of the assistance check being offered. And if you have an active lease, that lease might have to be honored. Be sure to check with Tenants Rights and consider your options before the representative shows up at your door. Also, if your property has been purchased by a new owner, be sure to ask if you can stay as a tenant.
The Smiths were told that if they did not accept the relief money deal immediately, their resettlement amount would be reduced to half of the original offer within a week and then to one-third a week after that. Then it would be reduced to nothing, and they would still have to move within 30 days. Sometimes the money reduction applies and sometimes it doesn’t. If they really want you to go, they’ll work with you and you might still get the original offer, but it’s a gamble.
Also beware that your previous landlord tries to collect rent, present or past, (before or after the trustee sale) or asks for a portion of your moving assistance money. Once they have lost title to the property, they have no claim or rights to anything related to their previous property. However, some landlords who know they are going to lose their property will give their tenants notice to move in advance of the Trustee Sale, stating other reasons, so they can then try to cash the relief check, as if they had lived there themselves. In some states, landlords have very little time to move and in others up to 6 months, but in almost all states, owner-occupiers are offered greater incentives to move than renters.
State officials have said that under California law, existing rental agreements are essentially removed when a property is foreclosed, but changes and amendments have been and are being made on a daily basis, so keep checking back. . A few months ago, tenants occupying a foreclosed property only had a 30-day notice before being evicted; now they’re 60. And those officials also said state law can be trumped by local rent control statutes, which often give tenants more far-reaching protections. These “just cause” provisions of many municipal rent control laws limit the ability of landlords to evict tenants, even those with month-to-month leases. They also include cases in situations where ownership of a property changes hands, such as a foreclosure. So be sure to check your local and state statutes, as well as the type of Tenants Rights organization in your area, before making a final decision, because in these difficult times, laws and statutes are continually changing, and the people who represent the new or previous owner of your property or who represent the bank or mortgage company that repossessed the loan on the property, if it didn’t sell, they won’t necessarily tell you the whole truth and sometimes you won’t know the latest changes. Also, their focus or job is not to represent you.
However, not all “just cause” provisions are created equal. Some require a tenant to occupy a property for at least two years before an eviction notice is served. Others allow an eviction to take place if the landlord plans to take the property off the rental market or if a relative moves in. And, not all rental properties may fall under a city’s rent control protections, allowing state law to apply.
But anyone who receives a notice from a bank or property manager, who is often an assigned real estate agent, saying that their rental home has been foreclosed should contact the City and ask about rent control rules that may exist in your area and whether your particular property is protected, as well as consult with the rights of tenants. Then ask the bank or property manager to specify the legal grounds for the eviction. If nothing else, this could result in a more generous payment offer for you to move in or a little longer, even with compensation.
And remember, do your homework and always have everything in writing!!!
It’s not yet clear how the federal bailout of the financial services industry will affect struggling homeowners. Unnamed government officials said the administration has agreed to include some protections for homeowners against foreclosures, which will hopefully bring the numbers down, but that won’t help renters when there are foreclosure situations. Tenants are often the ones left hanging in the middle of foreclosure proceedings and there are no signs to believe that will change with the bailout.