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Renters Often Unlikely Victims of Foreclosure
Information Provided By National Association of Realtors®
November 15, 2009 - When the foreclosure crisis first hit the U.S., many individuals and families living in rental housing were evicted without notice after the property they called home entered foreclosure. Often those tenants, who had been paying their rent on time, had no idea the property was in delinquency or facing foreclosure until they received notice to evict.
At a forum today during the 2009 REALTORS® Conference & Expo, a panel of experts discussed the impact, liability and ethical issues of foreclosure on single-family and multifamily rental housing to the property owners, managers and tenants. Data from the National Low Income Coalition show that nearly 40 percent of families facing foreclosure are renters.
“Realtors® build communities and are working to reduce the impacts of foreclosure on all community members – homeowners and renters alike,” said National Association of Realtors® President Charles McMillan. “Our goal is to help keep people in their homes, but if a sale can’t be avoided, it’s important that rights of renters are protected as much as the owners.”
According to panelist Charles Achilles, vice president of legislation and research for the Institute of Real Estate Management, a new law signed into effect in May 2009 by President Obama, “The Helping Families Save Their Homes Act of 2009,” included provisions to protect tenants from eviction after their rental property enters foreclosure.
Under the new law, tenants must be given 90 days notice prior to eviction. Depending on state law, tenants are allowed to stay in the property through the end of their lease with two exceptions – if the new owner wants to occupy the property as a personal residence, or if no current lease is in place or there is a lease but state law allows the lease to be terminated at any time upon notice. Even under these exceptions, tenants must be given 90 days notice.
Achilles said a number of states have existing laws protecting tenants; however, the new law preempts existing state laws, unless the state’s law offers renters greater protection. The provisions of the law expire December 31, 2012.
Panelist Stan Mullin of California Real Estate Receiverships in Newport Beach, Calif., said there are many potential liabilities and ethical issues facing tenants and property managers during foreclosure.
Mullins said receiverships are incredibly beneficial and are used during disputes between two parties. Receiverships are appointed by the court and play an important role in protecting the property and the interests of the all parties.
According to Mullins, the benefit of real estate receiverships is that they work with the owners, tenants and property managers to ensure the property doesn’t become neglected and help all parties come to an agreement on the course of action. Receiverships typically last several months, but can extend for more than a year, until the loan is modified or the property is sold.
Panelist Gabe del Rio of Community HousingWorks in San Diego shared information on several successful initiatives to help owners and tenants during the foreclosure process, including free foreclosure prevention counseling and more than 50 community homeownership clinics that provide education, one-on-one legal and foreclosure counseling, and review of real estate and lending documents. To date, the clinics have helped more than 3,500 consumers.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
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