Renters Lose in Foreclosures

Wed, 28 May 2008 01:01:41 GMT

If a homeowner defaults on their mortgage the lender usually forecloses on the home and the homeowner loses it. What happens to the renters who pay their rent every month but live in homes whose owner has not been paying the mortgage?

If you are a renter in a home or apartment building that is being foreclosed upon you are likely to be evicted. Do you have the right to stay? Not likely. Will the lender who holds the mortgage be able to evict you if you choose to stay? Yes.

If you have a lease how can that lease be thrown out? It’s a contract; shouldn’t the new owner be required to fulfill the contract?

Each state may vary but it is likely your lease can be canceled for two reasons. The first may be due to a clause in most leases that cancels it in the event of a foreclosure. The second is a part of property law called “first in time is first in right.” That means that if you rent a residence which is subject to a mortgage, the mortgage holder’s interest in the property is senior to your interest because it was entered into first.

Apartment building owners are usually required by their lender to include the foreclosure clause in their leases. Lenders require this clause because it helps protect from an unnecessary risk. If a building is foreclosed on, the lender must sell it to recoup the loan. Lenders believe that at a foreclosure sale an empty building will sell for more than one that is occupied by tenants. If the value of a foreclosed property drops it may hinder the restorative effect a foreclosure is supposed to provide. This may leave the borrower “under water,” still owing even though the property has been sold.

Because many tenants of foreclosed buildings are helpless during a foreclosure, Congress may soon change the law. The Mortgage Reform and Anti-Predatory Lending Act of 2007 will force new owners of foreclosed properties to honor existing leases. The bill has been passed by the House of Representatives and is currently being discussed in the Senate Banking Committee.

The Congress may also soon pass other legislation that will indirectly help those who rent. The bill will enable troubled homeowners to get new mortgages. The bill is being debated in the House Financial Services Committee and will allow the Federal Housing Administration to loan up to $300 billion to distressed homeowners. If passed, it is likely that most of this money will not go to owners of multi-unit buildings or to people who bought second homes for the purposes of renting them. But it will still benefit renters.

Investors in second properties naturally have their own home as their priority. If they can only make one mortgage payment they will pay the mortgage for the home they live in. If the bill is passed some of those homeowners who will benefit will also own second homes that they rent. If their monthly payments become lower they are more likely to be able to keep their second mortgages current as well. Thus a trickle down affect will help those who rent.

For more information on foreclosure, Contact an experienced real estate law attorney in your area today.

Fair Housing

Mon, 20 Oct 2008 17:55:59 GMT

Several federal and state laws require that landlords provide fair housing to prospective renters. The policy of fair housing in the United States came from the anti-discrimination movements of the 1960s. Adequate housing is essential to a person’s ability to live comfortably and work hard. In order to contribute to society, people, regardless of their race, sex, national origin, family status, disability or religion must be able to live in safe housing.

Who Is Protected?

The U.S. government passed the Fair Housing Act in 1968. The Fair Housing Act, as amended through the years, now provides that a landlord can not refuse to rent a dwelling to an individual or family based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians and, pregnant women) and disability. The Act does have a few exceptions. For example, housing for mature adults (those ages 55 and older) may prevent families with children from living in the units if the housing meets certain requirements. Also, owner occupied dwellings that have 3 or fewer rental spaces in the dwelling may also be exempt in certain circumstances.

What Are People Protected From?

The Fair Housing Act protects the classes of people described above from the following:

The landlord may not refuse to rent a dwelling because they are in one of the protected groups of people;
The landlord may not set different terms, different rent amounts or different rental conditions based on their inclusion in one of the protected groups;
The landlord may not threaten nor intimidate anybody because of their inclusion in a protected group;
The landlord may not advertise discriminatory housing;
The landlord may not prevent a person with a disability that substantially limits a major life activity from making reasonable accommodations to the rental unit if the accommodations are necessary for the person to use the housing. Further, the landlord must make reasonable accommodations in policies and procedures for a person with disabilities. For example, a landlord would likely be required to allow a guide dog for a blind person even in an apartment building with a no pets policy. Likewise, a landlord would likely be required to provide handicapped parking spots near the building entrance if the building already includes a parking lot.

What Should a Person Do If S/he Has Been Discriminated Against?

People who allege that they have been discriminated against in violation of the Fair Housing Act can file a complaint with the Office of Fair Housing and Equal Opportunity (FHEO) which is part of the U.S. Department of Housing and Urban Development (HUD) or they can pursue their claim in Federal District Court. The U.S. Attorney General’s office can also file a lawsuit if there is reasonable cause to believe that a landlord has a pattern or practice of discrimination.

HUD is also able to provide technical assistance to landlords and to answer inquiries from concerned renters. The goal of the Act is quite simple. Nobody who can abide by the lawful policies and procedures of the dwelling and who is able to pay the rent should be denied housing because of their inclusion in a protected class of people.

For more information on fair housing, contact a landlord tenant attorney today.

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