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Tenants in foreclosure- The lease

August 17, 2010 financial literacy, Tenants in Foreclosure, Uncategorized No comments

Tenants in Foreclosure- The Lease

It has been a while since I’ve given an update on my situation. Quite honestly, I didn’t know that anyone was reading until last week when I was speaking to my friend, Nicole from Bank of America, and she told me she was dying to know what was going on. I was thrilled that someone was listening! I’m hoping others are too.

There is not much to update on my home. I am constantly in a state of feeling unsettled. We have begun to look for a home to purchase, but I think I’ll write about that in another post.

My landlord has been working with me after my strong response to his attempt to evict me from the home. I did offer to sign a six month lease with the landlord and continue to pay at the current rate that I have been. Why would I sign another lease when the home was still in foreclosure?

My lease coming up due put me in a hard situation. In July my landlord could have told me that he did not want to renew the lease and give me 30 days notice to move out. This would not have been in his best interest though because he would have a really hard time renting the home after I left. If her were to rent the home again he would legally be responsible for telling the new tenants that the home was in foreclosure.

The reason why I wanted to sign another lease was because it would allow for me to stay in the home longer if the home was sold due to the foreclosure. The new legislation provides for protection to tenants who are affected by a home sold due to foreclosure.

In Oregon, if you home is sold and you are a tenant here are the timelines you have to work with on moving out. The landlord or new owners have to provide you written notice that you need to move out:
• If you have a month to month rental agreement then you must be provided with a 90 day notice to move out.
• If you have a lease, then you are the best off because the new owner must allow you to stay in the home until the lease expires. The only way that you would not get the full lease time would be if the new owner intended to use the home as their primary residence. If that was the case then they would have to give you 90 day notice.
• If your lease is set to expire in less than 90 days, then the new owners still have to give you 90 days to move out.

So you can see that my having a lease is in my best interest to be able to stay in the home as long as possible. My concern with not having a lease was that I would have to move out of the home sooner. My existing lease did not default to a month to month contract once the lease expired so I without a lease or month to month contract I run the risk of having to leave sooner if the home is sold.

Even though my landlord told me on July 14 they would sign the 6 month lease I requested in my July letter they did not provide me with the new lease agreement until Aug 1. Since I felt that I had the upper hand here I requested some items in the lease that I would not have normally asked for including:
• There would be no security deposit on the home while it was in foreclosure. I agreed that if the home came out of foreclosure I would reinstate the security deposit within 30 days of notice.
• There would be no penalty for my terminating the lease prior to the end with 30 days notice. I felt this was important because due to the situation I am not forced to look for a home to purchase. If I find the perfect home before the lease is up I want to make sure that I can get out of the lease without penalty.

The landlord seems to have slowed in response, so as of right now I do not have a signed lease back from him. I’m not too concerned though because he has now accepted rents from me beyond the lease period which sets precedence for month to month contract.

Still, there is still a sale date set for August 23rd on the county steps. My next post will talk more about my gathering information from on the foreclosure.

Tenants in Foreclosure- Security Deposit

July 20, 2010 financial literacy, Uncategorized No comments

Tenants in Foreclosure- Security Deposit

When I first found out the home I’m renting was in foreclosure my initial thought was to stop paying the rent. I felt that if the landlords were not going to pay the mortgage then why should I pay the rent? I felt betrayed by the homeowners and say now reason why they should financial benefit from the horribly position they put me in.

Well, after several emails and discussion from between me and the landlords it was decided that we would continue to pay the rent because I were contractually obligated to the landlords. The contract they had with the bank was separate. The landlords were fulfilling their end of the agreement and I needed to fulfill mine.

The sale date for the home is the end of August. It just so happens that my lease ends August 15th. The security deposit I put down on the home was equal to the July and half of Augusts rent. Even though I had agreed to fulfill our contract there was still the concern over the landlords paying back my security deposit. The landlords promised time and time again that they had the security deposit set aside, but all signs were pointing to them not.

After doing some research and found this great FAQ sheet on the on the Oregon Department of Consumer and Business Services website http://foreclosurehelp.oregon.gov/DCBS/foreclosurehelp/docs/tenant_foreclosure_rights.pdf
It confirmed that tenants who are in foreclosure can in fact use their last month’s rent or security deposit towards unpaid rents. The form states

“Can I apply by security deposit or last month’s rent towards this month’s rent now that I know my home is in foreclosure?
Yes. Starting in September 2009, you can apply any security deposit and/or prepaid rent towards your monthly rent payments once you become aware that your home is in foreclosure. You must notify the landlord in writing that you are going to do this. Attached to this flyer is sample letter #2 that you can send to your landlord when you pay the amount of your rent minus your security deposit and/or prepaid rent. Once the home is foreclosed upon, you are unlikely to get your security deposit and/or prepaid rent back from the old owner. You should apply this money to your rent as soon as you know that your home is facing foreclosure.”

So I utilized the sample letter supplied to inform the landlords of my intent to use the security deposit towards my July 1-April 15 rent. The response from the landlords is that they were going to evict me for nonpayment. I’ll cover this topic the next post.

Tenants in Foreclosure- The Signs

July 13, 2010 financial literacy, Tenants in Foreclosure, Uncategorized No comments

Looking back there were a few signs that the home I was renting was heading into foreclosure.

Last summer I was fully engulfed in the search for a home to rent. It’s very different looking for a home to rent as opposed to looking for one to purchase. When you are looking at a home to purchase you can see beyond the flaws because you know you can do the whole DIY thing and change it. Still, when you are looking to rent you do not want to rent a home that you are going to want spend money and time improving because it’s a waste of your funds to improve a home that you don’t own.

Accepting a lower rent amount
I finally found a really great newer home that would be perfect to live in. It was newer and the homeowners had good taste in decorating. The only problem was the rent was a few hundred dollars more than what I had budgeted. So I pitched my budgeted rent amount to the landlords and they accepted it! I don’t think that most tenants realize they can negotiate the terms of the lease. Tenants can offer a lower rent amount, lower deposits or different terms such as dividing the security deposit into a few payments. I’ve been a landlord for 6 years and have never had anyone ask if I would accept a lower rent amount. The worst thing a landlord can say is “no” so what’s it hurt to ask?

Still, looking back now at the landlords accepting $300 dollars less a month for rent I’m thinking it should have raised some red flags for me. There really was no negotiating on this. They just accepted it. I don’t know that they knew the home would end up going into foreclosure then, but I do think they were probably behind at the time and desperate for any funds they could get.

Someone taking photos of the home
A few months after moving in I noticed someone pull up to my home and snap some photos. This definitely raised flags for me! I have a friend who is contracted to do this type of work for banks. The two biggest reasons he goes to take photos are to check the progress on home under construction and to check on the condition of homes in foreclosure. Well, my home definitely was not under construction so my mind immediately went to foreclosure. When I contacted the homeowners about the person taking photos I was told they were looking into refinancing the home. Well I really should have known better. If they were refinancing the bank would want a full appraisal which would mean entry into the home and not just someone quickly driving by and snapping photos.

Some knocking on the door looking to deliver something to the owner
After a few months that someone taking photos turned into someone knocking on my door and looking for the owners. All he could tell me was the name of the company that contracted him. After several calls to that company with no return call I gave up.

The landlord visiting
Now this one is hard to be sure if it is tied or not. About a month before I was served with the foreclosure notice the landlord came to “check in”. She said she wanted to see if there were any repairs that needed to be done. I assumed she just wanted to scope out the house to make sure we were taking good care of it. While she was here she picked up some items that she had left behind. Was this because she knew she might lose the house? Did she want to take a look at the house to see if it was worth fighting to keep?

Tenants in Foreclosure- Do you keep paying rent?

July 8, 2010 financial literacy, Tenants in Foreclosure, Uncategorized No comments

After being a homeowner for almost a decade I found my circumstance last year putting me back into the role of tenant. I still fall into the role of landlord too, but the home I live in now I am a tenant.

In April of this year I received a certified letter informing me that the home I am renting is in foreclosure. My initial feeling was anger towards the owners, wondering what they have been doing with my rent. My next feeling was sadness because my plan was to slowly work through the process of finding a home to buy or better yet build one (or should I say have one built). Now I had to worry about where I and my family would be living in a few months. How would I explain to my 8 year old daughter why we have to move after living in this home for only a year?

My experience working in collections and my work educating youth in personal finance left me believing there would be no alternative but for the home to be sold in August. Still, we are in a strange market right now and the norm seems to changing constantly. The homeowners have assured me time and time again that they are working with the bank on a modification and the home will be brought out of foreclosure and oh yes…keep paying that rent!

After receiving the notice of foreclosure I saw no reason why I should pay them the rent. Still, after a conversation from the landlords and some research on my part I found that as long as they still own the home I still am obligated to pay the rent.

I just happened to find a great website for tenants in foreclosure http://foreclosurehelp.oregon.gov/DCBS/foreclosurehelp/information_for_renters.shtml because I was in a meeting where the Department of Consumer and Business Services was presenting on their resources for consumers. My worry is for those who don’t work in the industry as I do and do not have the resources or time to dedicate to the research the issue. How are they suppose to find the resources they need to help them through this process?

So what are your thoughts? Is it right that as a tenant you are still obligated to pay rent to a landlord who is not paying the mortgage?

My plan is to break this series into several posts as I work through this process. What I’ve come to find out is that this is really is a very confusing and emotional process for someone to have to go through. My hope is that my sharing what I’ve learned will help others faced with a similar situation.

In future posts I will discuss the signs leading up to this, the security deposit and others topics as they arise with my situation.