Sunday, November 18, 2007

Renters Beware!

There's an article in today's New York Times that's anxiety-provoking for those of us who rent a house or condo. It's entitled "As Owners Feel Mortgage Pain, So Do Renters" and it discusses how the current mortgage foreclosure crisis is hurting renters in many areas. Nationwide, 1 in 8 homes foreclosed upon are renter-occupied, and here in California, the number is nearly 1 in 4. Banks typically evict the tenants upon foreclosure so that they can quickly sell the house at auction. California state law provides a 30-day notice to tenants, but in other places it can be as short as 72 hours! :-0

Can you imagine what these poor families must be going through? Here they are, paying their rent in a timely fashion, completely unaware that their landlord/lady has not been paying his/her mortgage on the place. Then boom, they get hit with a notice to leave in a mere 3 days.

The House of Representatives on Thursday passed a bill that would require landlords to provide their tenants a 90 day notice prior to foreclosures. Then, the new owners (typically the bank) would have to continue existing leases for 6 months. Tenants without leases would have 90 days to leave. The Senate is considering a similar bill introduced by Sen. Chris Dodd (D-CT). The banking industry opposes these bills, and the White House has released a statement critical of them.

I'm unfamiliar with all the details of these bills so I can't say whether or not I'm in favor of them as currently written. But I definitely feel that tenants deserve greater protection than current laws provide them!

The tenants are innocent victims of foreclosure since they played no role in the mortgages in question. The banks may have been stupid in approving loans that never should've been made and the landlords may have been stupid in obtaining mortgages they couldn't afford. The tenants on the other hand did nothing wrong. Our legal system should give them a greater amount of time before they get kicked out onto the street as the result of a mistake that other parties made :-(


deb said...

If you rent then you have to come up with a down payment and first and last month rent. This is something that families have to save up for before they move. I can't imagine having to get our of a house in just 72 hours.

The Not Quite Crunchy Parent said...

I saw this article too. Deb makes a good point. I would think since the deposit was given to the now foreclosed on landlord...the renter can kiss his or her security deposit good-bye too!

This housing bubble has a number of victims.

Headmistress, zookeeper said...

I do feel sorry for those who have to move at short notice when they've paid their rent- but then we have a house from our last duty station that we've never been able to sell. We have a tenant. He's got junkers all over the yard as in addition to his regular employement he fixes up old cars and sells them. Property taxes went up. It's costing us 60 dollars a month every month that house doesn't sell. WE've asked the tenant if he could pay just enough that we're breaking even. He says that if we raise the rent sixty dollars, he's moving. We asked about raising it in six months time- just so we can break even. He refuses. If anything major breaks, we're sunk.

I wonder how many of these other tenants were asked if they could increase their rent just enough to pay the house payment, and the tenants refused, secure in their lease and unconcerned that it was costing the landlord money to keep a roof over their heads.

I do not think it's right to let foreclosure happen without letting tenants know, but I know if this ever happens to us we will tell our tenant because it's right, not because I think he's dealt honorably and fairly with us.

I'm not sure that security deposit is automatically a lost fee- most tenants have a lease requiring a certain number of days notice to evict or the deposit is theirs. And there is always small claims court.

WE've never been landlords until this last move when we could not sell our house, and I can tell you it has given me an entirely new way of looking at the landlord tenant relationship.

Headmistress, zookeeper said...

the landlords may have been stupid in obtaining mortgages they couldn't afford.

Or they were able to afford it when they got the loan and something happened- a job loss, a health crisis, the death of a family member, the company folded, or transferred the landlord so he now has to pay an agent he did not have to pay before, or he's been the victim of a lawsuit, or the property taxes and insurance rates went up much higher than expected .....

I can think of (and have experienced) all kinds of reasons other than stupidity that you might find yourself saddled with a mortgage you could pay comfortably once but now can no longer afford.