The most screwed-up thing I ever heard of...

[DMGO]

Listen to this: My daughter (36, married, 3 kids, renting) just called me. She leased a house (2 year lease through a real estate agent) in a really good school district. She's been there over 7 months, paying her rent timely, and rather happy. Today, she finds a note stuck to the front door, saying the house is in forclosure, and must be vacated immediately. So, she calls her landlord, who readily admits that he doesn't own the house, he just makes the HOA payments. He said he would let her out of her lease. What does she do next? Anyone ever hear of nonsense like this? My thoughts are; the bank owns the house, so they can padlock the doors, and confiscate all her stuff. She has no ties to the bank, only the lessor, who doesn't even own the place. HUH?

 

[bUU]

I'm not sure of the legality of the lease in the first place. Clearly a non-owner doesn't have standing to be a party to a lease without explicit authorization of the owner at the time the lease is established. If the rental wasn't valid, then of course your daughter has no option but to comply with the order of eviction. (Your daughter probably has a cause of action against the landlord for fraud, though.)

If the rental was valid, then the Protecting Tenants at Foreclosure Act of 2009 protects renters of properties in foreclosure. [Source: Office of the Comptroller of the Currency.] The main exception there is if the property is sold to someone who will occupy the property as their residence - that can break the lease. (I'm also unclear if the specific wording of the Act is such that foreclosure due to tax liens may also break the lease.)

So if the lease was valid, and the foreclosure isn't subject to any exemptions from the act, she should probably contact the bank, presenting a copy of the valid lease, and assert her rights under the Act. Unfortunately, she may need pay a lawyer to make it stick, and as such may or may not be worth it.

 

[Htown Harry]

She might consider raising a stink with the realtor's boss. The realtor presumably has deeper pockets and some professional reputation at stake. One would think that basic due diligence for handling a lease transaction would include the real estate professional checking to see who's name the property is in.

If the realtor was in on the scam, that's another party to potentially make a claim against. If they were also victims of the scam, she might take a stand like "Thanks to your sloppiness, I'm now in a mess. I need your help for free in quickly finding a new place."

Just speculating...this situation doesn't fit any mold I have heard of.

 

[tinlizzy]

In Rental - Home being foreclosed

A similar discussion on FW. She might have a little time.

 

[Lisa99]

Her recourse options also vary state by state. Wouldn't hurt to talk to a lawyer to see what they think.

At a minimum she may be able to take somebody (don't know who at this point) to small claims court and get her deposit back + moving expenses.

 

[ERD50]

Might be an opportunity to make some lemonade from the lemons she has been dealt.

Is she in a position to buy the place? I bet the bank would be very eager to make a deal with them. They don't want an empty house subject to damage, etc.

-ERD50

 

[daylatedollarshort]

I have noticed this happening in the news. Nolo Press has an article on tenants rights in foreclosures -

Renters in Foreclosure: What Are Their Rights? | Nolo.com

"Before President Obama signed the "Protecting Tenants at Foreclosure Act of 2009," most renters lost their leases upon foreclosure. But this legislation provided that leases would survive a foreclosure. The tenant could stay at least until the end of the lease, and month-to-month tenants would be entitled to 90 days' notice before having to move out (this notice period is longer than any state's non-foreclosure notice period, a real boon to tenants).

An exception was carved out for the buyer who intends to live on the property -- this buyer may terminate a lease with 90 days' notice. Importantly, the law provides that any state legislation that is more generous to tenants will not be preempted by the federal law. These protections apply to Section 8 tenants, too."

 

[calmloki]

As a landlord and someone who has foreclosed on a property that had a tenant: she should just settle in and stay calm. If the property has been foreclosed on she needs to be given proper notice - probably looking at 60 days at least. If she hasn't moved by the time the notice deadline is up then she gets taken to court, and in some locations that can take another month or more if she contests it. Reality is that lawyering up costs money and she may very well be able to negotiate a cash for keys move with the foreclosing party. - still need to move, but have time and cash to do it with.

 

[Texas Proud]

Some more info is needed....

Did the landlord every own the house


I have some dealing with a house that was in limbo.... the house was owned by X... before the bank foreclosed X filed for BK... the BK court threw out the house, but the bank did not do anything....

The owner leased the house to someone... he was getting the rent and not paying the bank... I wanted to buy the house as it was listed for sale... X basically would not do anything as he was underwater and wanted it foreclosed.... the bank did not do anything as this was in the height of the foreclosures and they already had a lot on their plate... the people who leased the house did not want to do anything as they had cheap rent...

About 1 1/2 years went by and I approached them to see about buying the house... when I went to look at it, it was in really bad shape... the tenants had a big dog which scratched almost every surface in the house... the roof leaked and was not fixed and a wall was damaged and had mold growing... lots of other maintenance items needed addressing...


SOOO, my point being that legally, the owner of the house was still X.... he was able to get those checks for 2 years without paying anything... including the taxes!!

However, I have heard of some scams where someone would lease out a house and never had have owned it.... so it does make a difference....

 

[walkinwood]

What a mess! Lots of good advice already - all the best.

I thought I'd share our experience & practice to help someone in the future.

We found the process of renting a place quite scary when we moved a couple of years ago. On applications, the renters ask for all your personal info -SS, DoB, etc to do a credit check, but there is very little that you know about them.

We took to verifying ownership online (Denver has prop records online) and asking them for their driver's license to verify their identity. With real-estate agents, we checked the realtor site to be sure they were licensed. No one we dealt with had any issue with this - if they did, we would have walked away.

 

[W2R]

That happened to me back in 2000. I rented a house (through a real estate agent) with a year's lease, and then 6 months later my landlady said she was facing foreclosure and needed me out of there if I could (please!) move ASAP.

In my case, while it was a hassle I just sucked it up and left. I was out of there in a week. I figured that my landlady was probably suffering more from the situation than I was. Besides, I was tired of dealing with her and her melodramas.

I moved into a nice, professionally run apartment building and never looked back. With the savings in rent (compared with renting a house), and my other savings efforts, by 2002 had enough saved for a down payment on a home. So, I bought one. All turned out for the best.

Oh, and BTW, I got my entire cleaning deposit back despite not doing any cleaning. Who would have thought?

 

[Gotadimple]

As others have mentioned, she has options. She can take her time to find another home to lease, hopefully, in the same school district.

At the same time, she needs to contact the realtor's realtor (the agency manager) and let him/her know the situation and that she is disappointed in the lack of ethics this agent displayed. If he did not indicate that he was only a leasing agent and not the owner -- even worse!

Then, she need to contact the state agency for licensing real estate agents and file a complaint against the realtor who signed the lease as owner. Finally, she needs to contact her state attorney general to find out if there is anything else she can do to get her deposits back.

-- Rita

 

[NW-Bound]

This scam by landlords who pocketed the rent without paying the mortgage happened a lot in Las Vegas after the housing bubble burst in 2009.

I recalled reading in an article or seeing on the news the troubling stories of unsuspecting tenants who were given 15 min to 1/2 hr to grab their belonging, while a locksmith under the watch of constables was changing the lock. This was before the passage of the 2009 law mentioned earlier.

According to the following article, the Nevada state legislators were considering a law that would require landlords to pass on the eviction notice to tenants, and make failure to do so a felony. These landlords are scamsters, and should be put in jail.

Foreclosure crisis also hitting renters hard - Las Vegas Sun News

Meanwhile, a tenant can check up on the landlord to see if he is paying the bank. However, as the following video shows, one needs to go to the county assessor office every month, and who would have the time for that? It's easier to rent an apartment or buy your own home.

LAS VEGAS REAL ESTATE UPDATE-TENANTS BEING FORECLOSED UPON - YouTube

 

[rmark]

This sounds like nothing more than a realty company that manages properties for absentee owners, in this case paying the local HOA bill before forwarding the remainder of the monthly rent to the owner, who is responsible for the mortgage and taxes.

It appears the owner has stopped paying the mortgage (for whatever reason) and the home is going into foreclosure. Your daughter needs to check on the law (as mentioned above) and might consider contacting the bank.

 

[Brett_Cameron]

This has happened to my daughter twice in the last three years. The first time she received a small amount of money to help her move. The second time she waited 6 weeks and then moved.

 

[MooreBonds]

Something along these lines happened to my sister/brother-in-law and their family. They did a 1 year rental in a condo in a large building (50-70 unit) in a desirable part of St. Louis county, while their home they purchased was being renovated.

They didn't get an eviction notice, but they received some form of notice that the building owner wasn't paying the mortgage note or something to that effect, even though they had been paying their rent to the owner for some time.

 

[Texas Proud]

Something along these lines happened to my sister/brother-in-law and their family. They did a 1 year rental in a condo in a large building (50-70 unit) in a desirable part of St. Louis county, while their home they purchased was being renovated.

They didn't get an eviction notice, but they received some form of notice that the building owner wasn't paying the mortgage note or something to that effect, even though they had been paying their rent to the owner for some time.

One of the problems with something like this is that as a tenant, you cannot stop paying the landlord just because he stops paying the mortgage.... until the bank forecloses, he is still the owner.....

 

[chasesfish]

Listen to this: My daughter (36, married, 3 kids, renting) just called me. She leased a house (2 year lease through a real estate agent) in a really good school district. She's been there over 7 months, paying her rent timely, and rather happy. Today, she finds a note stuck to the front door, saying the house is in forclosure, and must be vacated immediately. So, she calls her landlord, who readily admits that he doesn't own the house, he just makes the HOA payments. He said he would let her out of her lease. What does she do next? Anyone ever hear of nonsense like this? My thoughts are; the bank owns the house, so they can padlock the doors, and confiscate all her stuff. She has no ties to the bank, only the lessor, who doesn't even own the place. HUH?

Who represented they owned the house in the lease? If the realtor is part of a management company, he may not be aware that the owner isn't paying the rent and she should be protected if its a valid lease. if the realtor represented they were the owner and were not, I would go after their firm for employing a deadbeat

 

[Meadbh]

The realtor is probably acting as a property manager, i.e. an agent of the owner. There is likely to be a contract between the owner and the property manager's firm such that the said firm gets a percentage (e.g. 10%) of the rent off the top while the residual funds are deposited in the owner's bank account. If the owner is not paying the mortgage, that is a separate financial process and the tenant has nothing to do with it. If the financial institution forecloses on the home, they will wish to sell it as soon as possible to recoup their debt, usually at a loss. They have no interest in becoming a landlord! The financial institution often delegates the sale to a property brokerage firm that specializes in repossessions. In most cases, marketing the property will mean asking the tenant to move out, unless the home can be sold to another investor who is interested in keeping a good tenant! With an unexpired lease she has some negotiating power and hopefully will get moving costs and a reasonable time to organize the move. Either way she should check the residential tenancy act or equivalent legislation in her jurisdiction. Here's an example: http://www.rto.gov.bc.ca

 

[Katsmeow]

This sounds like nothing more than a realty company that manages properties for absentee owners, in this case paying the local HOA bill before forwarding the remainder of the monthly rent to the owner, who is responsible for the mortgage and taxes.

It appears the owner has stopped paying the mortgage (for whatever reason) and the home is going into foreclosure. Your daughter needs to check on the law (as mentioned above) and might consider contacting the bank.

This is what is sounds like to me as well.

 

[MissMolly]

The realtor is probably acting as a property manager, i.e. an agent of the owner. There is likely to be a contract between the owner and the property manager's firm such that the said firm gets a percentage (e.g. 10%) of the rent off the top while the residual funds are deposited in the owner's bank account. If the owner is not paying the mortgage, that is a separate financial process and the tenant has nothing to do with it. If the financial institution forecloses on the home, they will wish to sell it as soon as possible to recoup their debt, usually at a loss. They have no interest in becoming a landlord! The financial institution often delegates the sale to a property brokerage firm that specializes in repossessions. In most cases, marketing the property will mean asking the tenant to move out, unless the home can be sold to another investor who is interested in keeping a good tenant! With an unexpired lease she has some negotiating power and hopefully will get moving costs and a reasonable time to organize the move. Either way she should check the residential tenancy act or equivalent legislation in her jurisdiction. Here's an example: Residential Tenancy Branch : Government of British Columbia

If the mortgage is held by Fannie or Freddie, she may be protected under the Protecting Tenants at Foreclosure Act as pointed out earlier by another poster. If she has a valid lease, the lease will be honored until its expiration. Protecting Tenants at Foreclosure (PTFA) : Fannie Mae

 

[LOL!]

Some arrests reported in this scam:
More Houston families report being part of rental scam - Houston Chronicle
The leasing 'agent' simply stole the keys to unoccupied houses and leased them. The owners did not know their unoccupied houses were being rented.

 

[bUU]

That's really unfortunate for the renters, given that it means that they don't have a legal means of resisting the eviction notice. Hopefully the leasing 'agent' has recoverable assets that can be attached by civil lawsuits by the renters.

 

[Walt34]

The leasing 'agent' simply stole the keys to unoccupied houses and leased them. The owners did not know their unoccupied houses were being rented.

Some things stay the same. When I was doing fraud cases I had a couple in which the [-]Nigerians[/-] West Africans were selling houses they didn't own. In one event they sold the same house three times in one day!

Ultimately it was the lenders and title companies that took the biggest hit although buyers had some restless nights. I don't know if they got their deposits back from the title companies.

 

[MooreBonds]

Some things stay the same. When I was doing fraud cases I had a couple in which the [-]Nigerians[/-] West Africans were selling houses they didn't own. In one event they sold the same house three times in one day!

Ultimately it was the lenders and title companies that took the biggest hit although buyers had some restless nights. I don't know if they got their deposits back from the title companies.

Not trying to hijack the thread...but just curious - were the West Africans selling them at "firesale" prices without any inspection/walk throughs because they needed the money in a pinch, or was it an extremely elaborate operation where they actually had access to let people walk through the house, etc.?