If you live in an apartment complex, and it goes into foreclosure...you're fucked.

[originalpckelly]

http://www.msnbc.msn.com/id/29697413

It wasn’t until early March that Krause and other residents learned why the complex – the alluringly named Alante at the Islands — was rapidly going to seed. The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.

As panicked renters in Arizona began holding public meetings to explore whether they could walk away from leases, recoup security deposits or sue, it became clear that the scale of the mess was far larger than they had realized. Companies under the Bethany umbrella owned at least 60 — and possibly many more — large residential complexes across the nation, all of which are now believed to be in bankruptcy or receivership, potentially affecting tens of thousands of renters.

The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis. That’s a situation that some experts say is becoming much more common.

“People were paying attention to the single family resident market, the 100 percent, no-down loans,” said West Coast real estate investor and broker Virgil Hobbs, who is bidding on some of the distressed Bethany properties on behalf of clients. “And then beyond that wave is the commercial market, which is what you’re now seeing now.

The amount of disdain I have for the power structure of this nation grows day by day. It is NOT ENOUGH that these bastards take one's money each month, when we should be buying properties like apartments outright, it is NOT ENOUGH that even when someone moves on to a house THEY STILL owe their soul to the company store. NO, now they've got to pull this shit.

[Buzz Clik]

1. Mildly fucked. Not fucked like "lose your house and now you're homeless."

You lose your deposit, but that's about it.

[Lars39]

4. Supremely fucked if you haven't money put aside for another deposit

and partial month's rent and moving expenses.

[pnwmom]

5. Some of those people won't be able to afford another deposit and/or their

credit might not be good enough to get into another apartment.

The people who lose their apartments could be in just as bad straits as people who lose houses. Any one of the millions who scrape by month-to-month could be in serious trouble , whether they rent or own.

[originalpckelly]

8. Exactly, most people in this country live paycheck to paycheck...

because of them! They take all of the people's money each month! And then expect people to re-arrange their lives in only five days!

[pnwmom]

10. I blame the government's low minimum wage, more than people who

own rental units, actually. Years of depressed wages are at the root of the problem.

[originalpckelly]

13. No, I blame both. They get people coming and going.

Big corporations fuck people who work for them, or they fuck them with artificially high prices.

Property owners fuck people by taking their money every month, leaving them with nothing and no way to climb out of the hole. Mortgages do the same thing.

And the rich have rigged property tax laws so that instead of taxing away their inter-generational wealth, the taxes build up for poor little old ladies who only live off of social security. Until their house goes into tax foreclosure, where it can be bought for pennies on the dollar.

If the little old lady wants to pay her taxes, then she can get a reverse mortgage, where the only thing of large value she has will be bought off of her each month. "Forget inheriting anything kids, we'll take care of that. We the rich will own you, and you won't even have the hope that granny will die so you can sell her house to get out of the hole. We will own you and your children."

[pnwmom]

15. I can't tell what you are saying. You think inter-generational wealth

should be taxed away -- except you think that the old lady who gets a reverse mortgage is depriving her kids of an inheritance?

If intergenerational wealth is to be taxed away, then that old lady might as well spend every dime's worth of equity while she's still alive.

[originalpckelly]

17. A little old lady leaving her kids a small house isn't bad...

a rich family leaving multiple houses/etc. property is.

There may be an exemption up to a million, but in reality before they even die, many seniors cannot pay their taxes. You can't pay thousands in property taxes on social security. You can't transfer what you lost in a tax foreclosure.

And this really happens all the time!

The property taxes are the real inheritance tax for everyday people, not what happens after death. Instead of being progressive, they're flat.

[Donnachaidh]

7. not mildly fucked if you don't have the equivalent of three month's rent to move

Some areas don't have an over-abundance of apartment complexes. And if that is the case, then the renter's need to come up with deposits PLUS first and last to rent a house. Not to mention deposits on utilities if they rent a house. And even THEN they may get screwed down the road, because houses are getting foreclosed on.

[originalpckelly]

9. I read in this one story about that Chicago Sheriff who refuses to evict people...

he went to one house where after the house was in foreclosure the owner kept renting!

[Donnachaidh]

14. that's one sheriff in Chicago

In my state landlords can and DO start eviction proceedings, regardless of the reasons behind late payment of rent.

[originalpckelly]

18. I know...

my point is that the people who own the commercial stuff are so awful they'll rent when it is in foreclosure.

[Nicholas D Wolfwood]

11. No, that's not it.

Many long time residents, whom are typically elderly, are rent controlled - meaning they've lived in the same place for so long that their rent is far below market value. That's going to be a very, very tough row to hoe for those people.

[Gormy Cuss]

12. Yeah, it's only mildly fucked to be forced into a market place with higher rents

and to eat the loss of the security deposit rather than have it available for the next rental.
The only advantage that the renter has over the foreclosed homeowner is that the renter may come out of it without a bad credit rating.

[Buzz Clik]

19. Can you name a place with increasing rent? Everywhere around us has rent plummeting.

[Gormy Cuss]

21. Parts of the SF Bay area, for one. Even in areas where rents are dropping the market rate may be

much higher than that paid by medium to long term tenants.

[Tansy_Gold]

2. This makes no sense to me

SOMEONE now owns these buildings, whether it's a bank or whatever. Why would that owner, having been defaulted on, not want to CONTINUE the leases and collect the rent directly? Why would they want to evict paying tenants?

Makes no sense, no sense at all.


TG

[originalpckelly]

6. They don't have any utilities...

they lose their deposits, they can be evicted within 5 days without any recourse!

Just because it's a rental doesn't mean the new owner wants it that way. They may not want the hassle of a complex and want to sell it as a condo. Or level the buildings and redevelop it.

Do you see it now?

[Lars39]

3. I think the apt renters in that kind of situation ought to be leasing to purchase

the "condo" they now live in. Take the payments and pay for the building, have the county work with them to pay off back taxes. It beats having all those people become homeless and the bank still gets paid, and it could be looked on as helping people become first-time home owners.

[haele]

16. It's a bit more difficult than that -

Primarily, it depends on the bank and local government as to whether or not a complex like that would be allowed to go co-op or kept running through some sort of short sell/local government buy-out.
Second, if they're able to get a bit of grace period, they have to find someone to manage the place - to screen or take care of tenants and their issues, to pay the taxes, fees, any liens, utilities and keep the escrow account available for the maintenance on the property - which includes things like parking spaces, handicap access, OSHA or other public health/safety inspections, utilities infrastructure, street lighting at the entrance...
And even if all the stars align, everyone, if they are going to co-op an apartment, all the residents have to want to get in on the co-op from the outset and set up a corporation or association to take title of the primary property - the actual land these apartments are built on. Which tends to be problematic, especially when you're looking at how many people are relatively transient in their lifestyles and are not expecting to live in that particular apartment for more than a year or so - or may not want to join a corporation or association of their neighbors due to personal preferences.
And the cost -
Small apartment complexes of, say, 10 - 12 homes can cost close to two or three million - even at "fire sale" prices. And if the place is in foreclosure, there's not going to be anything near what needs to be in an escrow account to make a down-payment and pay for a title transfer. Unless the bank and local government is desperate to not have to deal with the issue and are willing to just let the residents "homestead" if they incorporate (i.e - just have everyone pay outstanding utilities to for a short time to keep going while the residents go through the legality of incorporating and figuring out how to set up a reasonable monthly charge to pay for the management, back expenses and taxes, and an escrow as well as an assessment of worth of each unit), there's still going to have to be some sort of property management in place, and everyone is still going to have to continue to pay rent until the disposition of the property if determined.

Over the years, I've lived in four apartment complexes that went through "new ownership" - two remained rentals and two "went condo". The ones that remained rentals almost universally raised rents immediately to cover the fees and increased assessments the new owner had to pay.
The ones that were bought to "go condo", the residents were either given the option to buy - which required a down-payment that would be equivalent to about 6 months rent - or allowed to continue to stay (paying the new rent which was usually equivalent to what the new mortgage would be) until their unit was due for the conversion remodel and/or were given their deposits back with a 2 week notice to quit when the new owner was ready to start scheduling the conversion.
I've never stayed at a foreclosed-on apartment (though some of them bordered on that status) - but I do know that banks hate to manage property and renters.
Depending on the state, of course, (I know California tenant law, and my husband knows Alabama and Texas tenant law, so we do have some range of experience)I don't see how without cause, a bank could kick out renters on short notice - I would think that they would require at least a 30 day posted notice to everyone once the property goes into foreclosure. And renters should be getting their deposits back (hopefully with interest depending on the state) due to the fact that they are being evicted through no fault of their own - deposit accounts are supposed to be separate from the property accounts and shouldn't be part of the foreclosure or bankruptcy process.

Haele

[Lars39]

20. I know there's all those pesky details....:^)

but it seems like it would be in everyone's best interests to make it happen.