As Foreclosures Increase, Renters Suffer

When an apartment building is foreclosed on, the tenants are usually evicted—whether the new buyer wants them or not, says the Boston Globe:

Stephen O’Brien wants to buy a foreclosed apartment building on Warwick Street in Roxbury. He wants to keep the ground-floor tenant, James Evans, 77, who is partially blind and living on Social Security.

But the company that is selling the foreclosed building told O’Brien it must be emptied of tenants before it can be resold, a standard industry practice.

“It’s insane,” said O’Brien, who lives near Evans and owns three apartment buildings in the neighborhood. “It’s just obviously insane. And even if they’re trying to manage it in a way that benefits them, then the problem is that they have absolutely no concern for the individual.”

The story follows Mr. O’Brien’s futile quest to find out who owns the building and why they are refusing to sell it to him as is. The Globe tried to help, contacting the bank that owns the building.

O’Brien called the law firm that handled the foreclosure for Deutsche Bank. He wanted to inspect the building so he could determine a fair price.

“The lawyer I spoke to said they wouldn’t let anybody in until everybody is out and they’ve cleaned it,” he said.

He said he received a similar response from New England Property Solutions. Then, he tried to contact Deutsche Bank directly. No response.

A spokesman for Deutsche told the Globe, “We’re going to decline to comment for the piece. We just don’t see an upside in explaining this stuff.”

Mr. Evans probably sees the upside.

As foreclosures mount, tenants suffer [Boston Globe] (Thanks, Arthur!)
(Photo:Globe Staff / Mark Wilson)

PREVIOUSLY: What To Do When Rental Gets Foreclosed?

Comments

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  1. darkened says:

    Like any of us every expected anything different

  2. DrGirlfriend says:

    “We just don’t see an upside in explaining this stuff.” = “I don’t really know for sure, and I can’t be bothered to find out.”

  3. UCLAJason says:

    The owner wants to destroy anybody else’s property interests. Renters have property interest so to destroy that right they must be evicted. Then in theory the bank will get more money for the building since more buyers will be interested in the building. It is really stupid but banks don’t have hearts only wallets.

  4. clevershark says:

    “We just don’t see an upside in explaining this stuff.”

    One can understand how a bank wouldn’t see the upside in explaining why they absolutely insist on tossing old handicapped tenants out into the streets. Without this procedure the new owners would arguably have to honor existing leases instead of jacking up the rent so people can get their old apartments back.

  5. clevershark says:

    Oops… “jacking up the rent *before* people can get their old apartments back”, that is.

  6. Chongo says:

    I guess the only thing to do would be to help the guy pack up into storage and then let him move back in once everything is ok. Is that even possible?

  7. Me - now with more humidity says:

    I’d much rather buy a building that’s already tenanted, even at below market rents.

  8. TechnoDestructo says:

    I dunno….in some areas, might not having reliable tenants raise the value of the property?

  9. ideagirl says:

    @DrGirlfriend: More like, “Any answer I give you is going to make us look like the greedy, bloodsucking whores we are>”

  10. thufir_hawat says:

    “When an apartment building is foreclosed on, the tenants are usually evicted – whether the new buyer wants them or not, says the Boston Globe.”

    Not really.

    The tenants have their rights under their respective lease/rental agreements. Those are not affected under a foreclosure or even a bankruptcy; instead, the tenant gets to live out the lease.

    But, there is no obligation for the new landlord/bank to either (i) renew the lease at its expiration, or (ii) not boot out a nonpaying tenant. Both of those are, however, a far cry for “eviction.”

    @TechnoDestructo: That is true, sometimes, in a commercial property; rarely if ever in a residential one.

  11. balthisar says:

    They (the tenants and owners) are obligated to the existing lease, if any. They only have to “evict” if the tenant — illegally — refuses to leave upon proper notification. Now some places that fail to observe owner property rights (such as “rent control” in New York City) may have exceptions to this rule; I’m only presenting the general rules.

    If you don’t like the fact that you may have to move, well, don’t rent. Renting is a de facto transient lifestyle, right?

  12. realjen01 says:

    @balthisar: “Renting is a de facto transient lifestyle, right?”

    And what’s wrong with that? Plus what happens when property values in your area are grossly over-valued and even at a higher than average salary you can’t afford to buy? Even if you move way out to the burbs?

  13. clevershark says:

    @balthisar: “Renting is a de facto transient lifestyle, right?”

    Since the subprime mess blew up, so’s home ownership, no?

  14. realjen01 says:

    @clevershark: exactly. thank you :)

  15. m4ximusprim3 says:

    @balthisar: This whole “living in a domicile” thing is a choice! Anyone who spends any money on shelter is just making the choice to not live in the backcountry squatting on undeveloped land a cooking squirrels on a spit.

    I’m glad you’ve opened up my eyes to the fact that nobody has any social or moral obligation to do anything- even provide basic housing to the elderly and disabled. After all, they made a choice to be old and blind, no?

  16. clevershark says:

    Soon to be seen at your local Deutsche Bank office: “A guide to living with squeegee kids, for the handicapped seniors we’re tossing on the streets”.

  17. selectman says:

    @balthisar: Seriously, why that pensioner didn’t just buy a penthouse condo is beyond me.

  18. howie_in_az says:

    But I thought renting was SO MUCH BETTER than buying…?!

  19. yarrow says:

    Tenants do not get to stay out their leases when a property is foreclosed; foreclosure nullifies the lease. This is true in Massachusetts and most other states. Advocates tried to get the law changed in MA but failed.

  20. bohemian says:

    The other portion of this mess is the sometimes large security deposits people have put on these rentals. When the place is foreclosed and they get the boot they usually can’t easily get their deposit money back. The landlord is already in financial distress and their only recourse is small claims court. That can take months to just get a court date, then you have to find a way to collect and get your money back. It could take years if ever to get your deposit money back.

    In the mean time your on the street and need to come up with sometimes 3 times the monthly rent on a place. When rent is around $1500 a month and a new landlord requires 3 months (first, last and current) to move in, that is $4500. Not always a sum most renters just have laying around.

  21. latemodel says:

    The question of whether the lease survives the foreclosure is determinable by the lease itself. In most states, if the lease is not specific, the lease will be void at the time of foreclosure.

  22. Major-General says:

    @m4ximusprim3: I must now evict you from my backcountry land. My renter doesn’t like the competition.

  23. Trick says:

    Well why should the bank explain? The article is clearly out for some sensationalism… as if those who care don’t already know that banks are run by money-grubbing scumbags.

    Is this a industry standard? Who cares?

    I along with 99% of the rest of the county have no interest in buying an apartment building that is in foreclosure…

    Slow news day made interesting by a bank that doesn’t want to waste its time on the ankle biters!

  24. Odwalla says:

    @Chongo:
    That’s not really doable. The bank wants the building emptied and cleaned before anyone can even look at it. Figure a week or so for that. Maybe more depending on the status of the building. Then, even if the building sold on the same day it was listed there’s going to be a 30-60 day period before closing happens. Best guess is the tenant is homeless for a month. Worst guess is 2+ months, maybe more. Unless the buyer wanted to put the guy up in his house, or pay his rent somewhere else, for a few months there’s not an easy way to make this work. The evicted tenant will have (hopefully) found a new place to live by the time the building is turned over.

    If the buyer puts the guy up and, for whatever reason, doesn’t get the building then what? Does he just let the guy live with him?

  25. rjhiggins says:

    @darkened: You made this identical post on the item about Continental Airlines. Got anything original to offer?

  26. rjhiggins says:

    @Trick: Bizarre response. I, for one, do care about the tenants involved, and find the story interesting. But obviously you’re fat and happy and don’t give a crap about anyone else.

    Or you’re a banker…

  27. Sonnymooks says:

    This is strange.

    When my company tries or moves to buy a property (even ones in foreclosure), the banks want to see tenants in the building, not vacancies.

    Recently, we tried to purchase a property, where the entire building was vacant, and the bank was lowballing the amount they would finance due to all the vacancies. They said point blank, that if the building was fully occupied, they would give us more.

    That said, we actually (well, me actually, but thats a different story) want the building vacant.

    Its still an ongoing problem, but this is the first time I ever heard of the bank wanting a building to be vacant first before its sold. I’ve always encountered the opposite.

    Is there something else to this story maybe? The rent rolls are to low? some kind clauses in the leases? etc?

  28. humphrmi says:

    @Sonnymooks: I don’t really understand it either. On one hand, you might think that since a tenant lease is effectively a lien on the property, they want the liens all cleared before they sell it. But that doesn’t make sense, first off rental properties are sold all the time with existing leases without a problem, in fact it’s usually a requirement, it’s just a matter of paying a lawyer to make everything kosher at closing.

    I don’t get it either. DB is nuts.

  29. BStu says:

    Do note that here, the bank is the one selling the building. Maybe on that end of the transaction, they want the building to be vacant, even if they were financing it, they’d want it to be full. I don’t get why that is, either, but this is a very different kind of transaction for them than when they are financing a sale.

    Foreclosure’s impact on renters is a real issue of fairness, I think. Its punishing people for something they had no control over. My lease is enforced if my landlord sells my apartment. Why isn’t enforced when the bank sells it?

  30. JustAGuy2 says:

    @thufir_hawat:

    Not true. Generally, foreclosure is the one case that trumps existing leases.

  31. ceejeemcbeegee is not here says:

    @Sonnymooks: Word. This is odd to me too. I want tenants who pay their rent on time… the last thing I want is to throw a good tenant out and let a potential bad one in. Even when I do deals with banks, they usually look at the rent rolls to demonstrate if it’s a good deal or not.

  32. Sonnymooks says:

    @ceejeemcbeegee:

    Exactly, even more to the point, those tenants being there kind of makes it safer to in a sense guarantee that there will be income coming in from the building to pay the expenses (i.e. payments on the mortgage).

    When I’ve dealt with banks, and even on foreclosed properties, the preferance is always for a fully rented or as close to fully rented as possible, the fear of vacancies is that there won’t be sufficient income coming into the property (hence lower financing results).

    There has got to be something else to this story, but the damn bank rep here wouldn’t explain it, and I can’t figure it out.

  33. Buran says:

    @UCLAJason: Some poster spouting “Credit unions wouldn’t do this” stupidity in 3… 2 … 1 …

  34. humphrmi says:

    It should probably be pointed out here (IANAL but some knowlege I picked up suing my former landlord pro-se), I had to go look some of this up in my NOLO books: Foreclosure is a court action, and the final decision is made by a judge. If the bank intends to evict a tenant, they (the bank) must serve the tenants as co-defendants (along with the owner) in the foreclosure. If a tenant is not served, they cannot be evicted. If a tenant is served, they can “answer” the suit, be notified of the foreclosure court date, and go to court and plead their case to the judge. For instance, this pensioner could go to court and tell the judge his sad story (not being facetious here, the judge is a human and will likely respond to a pensioner being kicked out, especially if the potential buyer wants to keep him) and that judge could make an alternate decision.

    There are alternatives to foreclosure eviction. The bank could, if they wanted, sign a stay with the tenants; basically a legal document that protects their rights while allowing the tenant to remain in the apartment during the whole process. It’s a simple matter of someone (probably the tenant, but who knows… maybe the potential buyer) hiring a lawyer to write up an agreement between both sides.

    The judge could also, theoretically, force a stay of sorts. Again, IANAL so I don’t know how it well it would hold up legally, but there is precedent for judges appointing trustees to collect rent during foreclosure, so a forced stay doesn’t seem too much of an stretch from there.

    I would say this buyer and tenant should get together on a good lawyer. There are legal protections in place for defendants and a foreclosure eviction makes the tenant a defendant. Use a lawyer, go to court, ask lots of questions, and make sure the lawyer fights for everything that the judge can possibly give you.

  35. XTC46 says:

    @bohemian: becasue of our high cost of living in Hawaii, it is illegal for landlords to ask for anything more than first months rent, and a security deposit equal or less than 1 months rent. They then have 14 days to return the deposit after you have moved out, anything they don’t return must be justified in writing.

  36. Pixel says:

    Deutsche Bank foreclosed on my last apartment building. They kicked myself & my housemate out.

    They also kicked out the 96 year old deaf woman downstairs who had lived in that apartment for some 30-40+ years.

    I’ve been past the building recently, and it has just say empty for the two months since they kicked us all out. And given the local market & the amount owed on it I expect it will sit empty for a long time.

  37. @howie_in_az: It’s better than buying a house you can’t afford. That isn’t to say that it’s free of risk.

  38. ceejeemcbeegee is not here says:

    PS. I would LOVE to buy an apartment building in foreclosure!

  39. Trick says:

    @rjhiggins:

    @Trick: Bizarre response. I, for one, do care about the tenants involved, and find the story interesting. But obviously you’re fat and happy and don’t give a crap about anyone else.

    Or you’re a banker…

    This is a industry standard. This is what happens when you rent. You take the chance that the play you only *RENT* may not be for *RENT* some day.

    But don’t let the facts get in the way of your media-induced hissy fit. Don’t worry, if there is another slow day someone will bring up Wal*Mart or something along those line for you to spaz out on.