Landlords Facing Foreclosure

HOUSING MARKET
Tenants: Be aware of landlords facing foreclosure
Landlords have always asked potential tenants about their financial situation. But in today's housing market, renters may need to ask if potential landlords are facing foreclosure

BY SCOTT ANDRON
sandron@MiamiHerald.com
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DAVID ADAME / FOR THE HERALD
One night last fall, a process server went to Dan Dixon's house and gave him papers informing him of the foreclosure. Dixon stands in front of the house he continues to rent even though the bank has foreclosed on the owner. He is moving soon.
Audio Attorney Samira Ghazal explains the challenges renters are facing when their landlords undergo foreclosure
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Would-be home buyers become renters
While South Florida's falling housing prices may favor renting rather than buying right now, the recent real estate bubble is also creating new risks for tenants.
Plenty of homes and condos are available for lease because their owners can't sell them, giving renters a variety of options. The problem is that many of the owners may not be on steady financial footing.
If they end up in foreclosure, tenants can be kicked out -- despite having a lease.
''That's happening. A lot of people are losing their homes,'' said Samira Ghazal, a Miami consumer lawyer. ``They don't know if the landlord is paying the mortgage or not. Then they end up getting evicted.''
Even if they are not formally evicted, many tenants are forced to move prematurely, resulting in unplanned moving expenses and family disruptions.
Katina Scott is a case in point.
About 10 months ago, she and her five children moved into a new four-bedroom home in the Blue Waters subdivision, near Cutler Ridge in South Miami-Dade County. Scott said the landlady promised her the house would be available for two years.
Then, one night in October, shortly before 11 p.m., a process server came to the house with court papers indicating that the place was in foreclosure.
Scott plans to move soon, but it's a nuisance, especially if the children have to change schools. ''I can't just up and leave like that,'' she said.
A few blocks away, Dan Dixon is in the same situation with a different landlord. Dixon was planning to move soon anyway, but his landlord's foreclosure still has him a bit worried.
''My fear is coming home one day and finding a padlock on my door,'' he said.
Why is this happening?
RELUCTANT LANDLORDS
Many landlords never planned to be landlords. They bought condos and houses, planning to resell them quickly at a profit. Or they needed to move out of the area but can't afford to without making some money on the property. They became landlords reluctantly when condo and house prices started to fall.
Most of these people seem to be paying more in monthly mortgage payments, condo fees and taxes than they can possibly charge in rent. Some have mortgages with low first-year interest rates that rise dramatically later. And as prices fall, some will find themselves owing more than their property is worth.
This all can mean foreclosure for the landlord -- and an unplanned, mid-lease move for the tenant.
FINANCIAL TROUBLE
It's hard to say how many tenants are in this situation.
But what is clear is that tens of thousands of South Florida properties are in serious financial trouble.
In Miami-Dade and Broward counties, more than 70,000 residential property owners failed to pay their 2006 property-tax bills, according to a Miami Herald analysis in November.
Of those, roughly two-thirds were investors, second-home owners, and others with no homestead exemption, the analysis showed. Some of those dwellings are rental properties.
People looking to rent right now may want to ask some questions of their prospective landlord and check county records, available online, to see whether the property is in foreclosure. A little advance research could prevent headaches later.
If you're in a rental that's in foreclosure, bear in mind that your lease probably won't prevent you from being kicked out.
In most cases, foreclosure wipes out the lease, enabling the lender to evict tenants.
The good news: There is usually plenty of notice. At the beginning of the foreclosure, a process server comes to the house, as happened with Scott.
At that point, the tenant can write a legal ''answer'' and send it to the court. That would make you a party to the case, with the right to be kept up to date with developments and attend hearings.
Lawyers say the typical foreclosure can take three months to a year to resolve. The tenant can't stop the foreclosure but might be able to negotiate for more time.
EXTRA EXPENSES
Foreclosures can create expenses for tenants, such as moving costs. If the foreclosure forces you to move before your lease expires, you can demand that the landlord pay your moving expenses. If the landlord refuses, you can sue in small-claims court, said Janet Portman, managing editor of legal self-help publisher Nolo Press and author of several books on landlord-tenant law.
''The landlord promised you the place for a year,'' she said. Foreclosure ``doesn't excuse him for failing to deliver that property.''
It might be hard to get money out of someone who can't pay the mortgage, however, and suing can drain a lot of time and emotional energy. Tenants need to weigh that against the amount of money that might be recovered, said Ghazal, the consumer lawyer. Each case is different.
''Sometimes it's better to lick your wounds and move on,'' Ghazal said.
EYE ON FORECLOSURE
While the chances of recovering money from your landlord may be hard to size up, this much is clear: Tenants should not ignore news that their landlord is in foreclosure.
That could lead to disaster, Ghazal said: ``They end up with their stuff in the middle of the street.''

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