A recent Register story by Mary Ann Milborn discussed how when banks foreclose on investment properties, tenants often end up on the street and lose prepaid rent and deposits. The story says ….
Brenda Magana, a housing specialist at the Fair Housing Council of Orange County, says the problem is snowballing. “Last year we were seeing three or four tenants (facing foreclosure) a month,” she says. “Now we’re seeing three or four a day.”
Dianna Baumann, a Tarbell Realtors leasing agent in Mission Viejo who represents tenants, recounts horror stories of renters caught up in the mess. In most cases, she says, the first time the tenant knows there’s a problem is when the notice to vacate is tacked on their door.
Increasingly she is seeing situations in which a landlord leases the property after already getting behind on the mortgage. Some have even received a notice of default, the first step in foreclosure. In many of these cases she says the owners pocket the tenant’s first and last month rent and security deposit instead of bringing the mortgage payment up to date.
“They know they’ll need to find a place to rent, too, so they just use the (tenant’s) money to rent a place for themselves,” says Baumann.
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Complete scumbags…should be a crime to lease after a NOD.
As a REO Realtor, I am the one who visits the property after it reverts to my client in order to establish whether it is vacant or occupied. When a property is occupied, I attempt to determine who is living at the property.
It is relatively standard throughout the REO industry to offer some level of cash for keys, but the amount varies from bank to bank and may depend upon whether it is a renter or the former homeowner. My client is relatively generous compared to others and grants me some discretion in dealing with the situation. When it is a renter occupying the property, we tend to be more generous in the offer. They are allowed to continue living at the property for a predetermined period of time (always less than 30 days and sometimes less than 2 weeks) without paying any rent to the bank and are given a check from the bank upon vacating. This helps to offset the deposit they may have given to the previous owner; it doesn’t help in that they need to uproot themselves and their families fairly soon.
If they don’t choose to accept the offer of cash for keys, the bank initiates an eviction. I’ve been at too many lockouts with the Deputy and the locksmith so I try to stress to the tenants that it is in their best interest to accept the payment and leave at a predetermined time with money in their pocket rather than being forced out at a moment’s notice; some do, some don’t.
Ever had to find a new place at a fortnight’s notice and tried to extract the security deposit out of your bankrupt landlord while you are expected to be productive at your day job? No fun.
It would be so incredibly helpful if the new owner of a rental building had to assume the tenancy with all rights and obligations. One wouldn’t have to go look for new digs only when the tenancy ends, and one would see one’s deposit again when moving out. But mortgage bankers (who to begin with knew that the landlord’s business model was to pay the mortgage with the rent and flip the propery at a profit) don’t like to become landlords - they would have be responsible for maintainance - and their lobbying pockets are deeper than the tenants’ pockets.
OC Native may think that “cash for keys” is generous, but it isn’t. A tenant in a foreclosed property has a legal right to a 30-days notice. It’s not being kind to give half that time; it’s violating the tenant’s rights. Second under California law the lender is responsible for returning the security deposit to the tenant. That’s because the deposit is assumed to have been transferred on the sale of the building. If the tenant’s deposit is not returned within the time permitted by law, the tenant can sue both the old landlord and the lender, and collect from either. This isn’t generous–it’s a ripoff.
OC Native is doing something even nastier and more dishonest, conflating the 30-days notice to vacate with an eviction that will show up on a credit report. A 30-days notice to vacate is popularly known as an eviction notice, but that’s not what brings on the Sheriff. If the tenant doesn’t move within the 30 days, the landlord may file an unlawful detainer to legally oust the tenant. That is the eviction that will show up on the tenant’s credit record.
I would suspect that this kind of thing is going on all over the country. Representative Frank might want to consider legislation on this, rather than robbing affordable housing funds to bail out OC Native’s employer.