“In Major Crisis, It Seems To Be The Little Guy That Gets Hit the Worst, Therefore, Unfortunately, It Is Up To The Little Guy To Watch Out For Himself!”
(Renters are often the ones left hanging in the middle in foreclosure proceedings and there are no signs to believe that will change.)
With the current wave of foreclosures that has swept the country, that we hope will diminish after the recently announced bailouts, many renters are finding themselves in the middle between lenders and their landlord; who is now the foreclosed on owner. They are finding themselves homeless, like the Smiths, after their cash-strapped landlord stopped making mortgage payments or could
only make partial payments and their houses, condos, townhouses or apartment buildings were foreclosed upon, even though they have been making their monthly rent payments.
The California Apartment Association, the state's largest organization of rental property owners, reported that nearly one quarter of all foreclosed single-family residences are renter occupied. And the number of renters trapped in the foreclosure debacle in duplexes and other multi-unit buildings is considerably higher. Total California foreclosures of single-family homes statewide rose more than 400 percent to a record 31,676 in the fourth quarter of 2007 from a year earlier and has been rising ever since.
The Smiths received notice last month, when a Trustee Sale Notice was posted on the front door of their townhouse, after their landlord had missed 6-months of mortgage payments and the property was foreclosed upon. And this seems to be the way most tenants are getting their notifications; inciting a sense of panic and feelings of insult, betrayal and lack of control.
For many people, this can mean even steeper rents on the horizon because the wave of foreclosures has created greater demand in the rental housing market -- a blessing to landlords who are not having foreclosure problems, but also leaves the door open for some gauging. And invariably, these situations mean a total loss of deposits paid by renters, so it is generally suggested that renters stop paying rent as soon as they are made aware of foreclosure proceedings and definitely upon notice of an impending sale.
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. However, few owners, lenders and property managers make such information available during the eviction process, and often cause renters to move before they have to without a penny… no deposit refunds, no months of free rent to counter balance their loss of deposits and no assistance check from the bank. So renters beware!
This entire experience can be terrifying!! "It's something a number of jurisdictions have been discussing because it's a growing problem.", says Michaelyn Jones, general counsel to 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 novice investors taking advantage of dirt-cheap loans and rising property values, who subsequently rented them to tenants before falling behind on mortgage payments. Plus now there is a newly reported scam whereby some owners, knowing they are on the road to pending foreclosure are renting their properties anyway or again, right before the Trustee Sale, and then vanishing with what can be a tidy sum, including as much as first and last month's rent, a security deposit and sometimes additional cleaning or pet deposits; leaving renters holding the proverbial bag and having to move again.
Some tenants don't find out that they have to move until they receive a letter from the bank or lender, that has taken the property back, or from the new owner after the Trustee Sale, either in letter form or by a representative showing up at their door, which sometimes includes the offer of an "assistance check" varying in amount from $1000 to $2500, to vacate quickly. In many cases it is to the renters' benefit to accept this assistance check, which usually includes a warning like: "Please keep in mind that the eviction process has started".
Offering financial inducements is a common practice when renters are being pressed to vacate a foreclosed-upon property, but there are several factors to weigh. It's called "Cash 4 Keys" and can involve payments of up to $2,500, ostensibly to help a tenant resettle but also to get him or her to waive any claims to the rental property. However in the wake rising foreclosures and rising rents, in many areas you now have 60-days from the day you receive official notification to vacate before having to be out or before eviction procedures can begin, giving you 2+ months of rent free living. So you need 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 in place, that lease could have to be honored. Be sure to check with Renters Rights and give your options some thought before the representative appears on your doorstep. Also, if your property has been purchased by a new owner, be sure to ask if you can stay on as a renter.
The Smiths were told that if they didn't agree to the assistance money deal right away, their resettlement amount would be slashed in half from the original offer within a week and then to third a week after that. Then it would drop to nothing, and they'd still have to move out within 30-days. Sometimes the money reduction is enforced and sometimes not. If they really want you out, they will work with you and you could still get the original offer, but it is a gamble.
Also be wary of your previous landlord trying to collect rent, present or past, (before or after the trustee sale) or asking for a share in the moving assistance money. Once they have lost title to the property, they have no claim or rights to anything involving their former property. However, some owners who know they are going to lose their property will give their tenants notice to move before the Trustee Sale, stating other reasons, so that they can then try and collect the assistance check, as if they had lived there themselves. In some states owners have a very short time to be out and in others they have up to 6-months, but in almost all states, owners occupying their properties are offered larger inducements to get out than renters.
State officials have said that under
However, not all "just cause" provisions are created equal. Some require that a tenant occupy a property for at least two years before an eviction notice is served. Others allow an eviction to proceed if the landlord plans to remove the property from the rental market or have a relative move in. And, not all rental properties may fall under a city's rent-control protections, allowing state law to apply.
But anyone receiving a notice from a bank or property manager, which is often an assigned realtor, saying their rented home has been foreclosed on should contact City Hall and ask about rent-control rules that may exist in your area and whether your particular property is protected as well as checking with Renters Rights. 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 offer of payout to get you moving or a little more time even with compensation.
And remember, do your homework and always get everything in writing!!!
How the federal bailout of the financial services industry will affect distressed homeowners remains unclear at this point. Unidentified government officials said the administration has agreed to include some homeowner protections against foreclosures, which will hopefully reduce the numbers, but that won’t help renters when there are foreclosure situations. Renters are often the ones left hanging in the middle in foreclosure proceedings and there are no signs to believe that will change with the bailout.
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