- Towards a New Eviction Jurisprudence, Gerald S. Dickinson, Georgetown Journal on Poverty Law Policy, Vol. 23, No. 1, 2015.
- Managing Retirement Risks with Reverse Mortgage Loans and Long-Term Care Insurance, Adam Wenqiang Shao, Hua Chen & Michael Sherris, 7th Australasian Actuarial Education and Research Symposium.
- Real Estate Holdings of Public Firms and Collateral Discount, Irem Demirci, Umit G. Gurun & Erkan Yönder.
- Decomposition of Debt and the Road to REIT Returns, Linda Allen & Mariya Letdin.
- Mortgaged to the Hilt: Risks from the Distribution of Household Mortgage Debt, Craig R. Alexander & Paul Jacobson, C.D. Howe Institute Commentary 441.
- Clustered Housing Cycles, Ruben Hernandez-Murillo, Michael Owyang & Margarita Rubio, FRB of Cleveland Working Paper No. 1524.
- The Consumer Financial Protection Bureau: A Five Year Retrospective, Robert E. Krainer.
- Unemployment as an Adverse Trigger Event for Mortgage Default, Chao Yue Tian, Roberto Quercia & Sarah F. Riley, Journal of Real Estate Finance and Economics, Vol. 52, No. 1, 2016.
- Intermediation in Markets with Buyer and Seller Selection: Theory and an Application to Real Estate Brokerage, Bert Willekens, Roel Helgers, Maarten Goos & Erik Buyst.
Tag Archives: eviction
Bank Break-ins
Chris Odinet has posted Banks, Break-Ins, and Bad Actors in Mortgage Foreclosure to SSRN. The abstract reads,
During the housing crisis banks were confronted with a previously unknown number mortgage foreclosures, and even as the height of the crisis has passed lenders are still dealing with a tremendous backlog. Overtime lenders have increasingly engaged third party contractors to assist them in managing these assets. These property management companies — with supposed expertise in the management and preservation of real estate — have taken charge of a large swathe of distressed properties in order to ensure that, during the post-default and pre-foreclosure phases, the property is being adequately preserved and maintained. But in mid-2013 a flurry of articles began cropping up in newspapers and media outlets across the country recounting stories of people who had fallen behind on their mortgage payments returning home one day to find that all of their belongings had been taken and their homes heavily damaged. These homeowners soon discovered that it was not a random thief that was the culprit, but rather property management contractors hired by the homeowners’ mortgage servicer.
The issues arising from these practices have become so pervasive that lawsuits have been filed in over 30 states, and legal aid organizations in California, Florida, Michigan, Nevada, and New York report that complaints against lender-engaged property managements firms number among their top grievances. This Article analyzes lender-engaged property management firms and these break-in foreclosure activities. In doing so, the paper makes a three-part call to action, which includes the implementation of bank contractor oversight regulations, the creation of a private cause of action for aggrieved homeowners, and the curtailment of property preservation clauses in mortgage contracts.
This is a timely article about a cutting edge issue. All too often I have heard pro-bank lawyers claim that banks almost never foreclose improperly. The news reports and lawsuits discussed in this article counter that claim. And yet, I hope that some empirically-minded person could quantify the frequency of such misbehavior to better inform policymakers going forward.
Abusive Non-Rent Fees for Rent Stabilized Tenants
The Urban Justice Center’s Community Development Project has issued a report, The Burden of Fees: How Affordable Housing is Made Unaffordable. The introduction reads,
Tenants in New York City’s poorest neighborhoods are under attack. Despite the existence of laws such as rent stabilization to protect tenants from high rents, landlords are creating new ways to push rent stabilized tenants out of their homes. One such tactic is the use of non-rent fees, a confusing and often times unwarranted set of charges that are added to a monthly rent statement . . .. These include fees on appliances (air conditioner, washing machine, dryer, and dishwasher), legal fees, damage fees, Major Capital Improvement (MCI) rent increases and other miscellaneous fees. Often these fees appear on a tenant’s rent bill without any explanation. If a tenant fails to pay, even if they are unaware of why the fee was imposed, they are sent letters that make them feel that they are being harassed and are threatened with eviction by the landlord. Most tenants have a right to object to many of these fees, and landlords are legally prohibited from taking tenants to Housing Court solely for non-payment of additional fees. But many tenants don’t know their rights about the fees and often pay them when they shouldn’t. For low-income and working class tenants who struggle each month to pay rent, these fees add up and make their housing costs unaffordable. While some of the fees are legal, many of them are not, and the consistency and pattern of the way the fees are being charged and collected suggests that some landlords are intentionally increasing tenants’ rent burdens to push out long- term, rent stabilized tenants.
This problem is proliferating in the Bronx, where New Settlement’s Community Action for Safe Apartments (CASA) works to improve living conditions and maintain affordable housing. This is particularly apparent in buildings owned by Chestnut Holdings, a company that is fast becoming one of the biggest landlords of rent stabilized buildings in the Bronx.
* * *
All survey respondents live in rent stabilized buildings owned by Chestnut Holdings. In total, the coalition collected 172 surveys from 23 buildings, representing 13% of the number of apartments in those buildings. The research sample accounts for 4% of all the apartments that Chestnut Holdings owns, and 28% of the buildings. Researchers also collected rent bills and other supplemental materials (including letters to and from landlords, housing court decisions, and more) from 196 Chestnut Holdings tenants. Coalition members chose to focus on these buildings because they are rent stabilized and located in the neighborhoods where each organization is actively working. Data in this report comes from surveys, recent rent bills collected from Chestnut Holdings’ tenants and interviews with tenants.
Overall, we found that the problem of non-rent fees is serious and widespread in the Bronx. 81% of the tenants we surveyed had been charged some sort of fee. From the rent bills we reviewed for this report, the average tenant had $671.13 in non-rent fees on their most recent rent bill. (1-2)
This document is obviously an advocacy document and not a piece of objective scholarship. Moreover, its methodology may not be rigorous enough to allow us to extrapolate much from its findings. That being said, the survey responses themselves reveal a serious problem: alleged average non-rent fees of nearly $700 for each survey respondent seems very, very high, even if we limit the findings to the respondents themselves.
In the 1970s, predatory landlords hired bruisers with bats and pit bulls to frighten tenants into leaving their homes. In the 2000s, a new generation of predatory landlords used abusive court filings to achieve the same purpose. There is a very real risk that high non-rent fees represent a new tactic for predatory landlords to drive out rent-regulated tenants with under-market rents. To the extent that non-rent fees represent a new tactic to harass tenants, government regulators should actively seek to end it and punish those who employ it.
Monday’s Adjudication Roundup
- Former Freddie Mac executives, who were accused of lying about Freddie’s exposure to subprime mortgages before the financial crisis, settled with the SEC.
- Citibank shareholders slam the Bank’s motion to dismiss a case over mortgage-backed securities worth more than $17 billion as NY federal courts have rejected similar arguments to dismiss similar cases.
- The Second Circuit dismisses a class action against Royal Bank of Scotland PLC finding that the bank did not lie about its exposure to residential mortgage-backed securities.
- DC federal judge certified a class action of evicted homeowners, with a lead representative who lost his home over a $134 unpaid tax bill. The court will decide whether district law creates a property interest in equity, if its tax-sale statutes effect a taking of the property and if class members were properly compensated.
Airbnb and Profiteering
A NYC Housing Court judge issued a Decision/Order in 42nd and 10th Associates LLC v. Ikezi (No. 85736/2014 Feb. 17, 2015) that resulted in the eviction of a rent stabilized tenant who had rented his apartment through Airbnb at a rate much in excess of the rent approved by the NYC’s Rent Guidelines Board.
The Decision makes for a pretty good read in large part because of the incredible testimony of the tenant:
When questioned on Petitioner’s case whether Respondent charged anyone money to stay in the subject premises, Respondent first testified that he could not recall if he ever charged anyone money to stay in the subject premises for a tenancy, and then testified that he does not know if he ever charged anyone money to stay in the subject premises. Given that Respondent was being sued for eviction, that Respondent testified as such on January 21, 2015, and that Respondent’s tenancy commenced on October 10, 2014, three months and eleven days before his tenancy, Respondent’s inability to remember or know if he had charged anyone to sleep in the subject premises defies common sense. Such incredible testimony was of a piece with other testimony Respondent offered, such as his response to a question about how many nights he has slept in the subject premises with the answer that he does not keep a log of where he sleeps, Respondent’s inability to determine whether a photograph of a comforter on a bed in the ad was a comforter that he owned, Respondent’s lack of knowledge as to other addresses that might be his wife’s address, and Respondent’s testimony that he does not have an email address at the company that he is the president of. If Respondent was actually profiteering by renting out the subject premises as a hotel room, wanted to avoid testifying as such, and was trying to be clever about technically avoiding committing perjury, it is hard to imagine how Respondent would testify differently. (9-10)
The defendant’s testimony demonstrates what happens when the profit motive hits smack up against rent regulation’s policy goal of protecting tenants from large rent increases. Without defining it precisely, the Court refers to this as profiteering which it finds to be inconsistent with the goals of rent regulation and incurable to boot. Thus, the Court issued a warrant of eviction.
This seems like the right result on the law and as a matter of policy. Otherwise, more and more apartments would be informally removed from the regulated housing stock. Moreover, landlords and neighbors would be stuck with the costs of short-term stays while tenant scofflaws would get all the benefit.
Tenants in Foreclosure
Judge Demarest issued a Decision and Order in 650 Brooklyn LLC v. Hunte et al. (No. 504623/2013 Feb. 5, 2015). The defendants moved for dismissal because the foreclosing plaintiff failed to comply with a relatively new NY statute that requires that the “foreclosing party in a mortgage foreclosure action, involving residential real property shall provide notice to: (a) any mortgagor if the action relates to an owner-occupied one-to-four family dwelling; and (b) any tenant of a dwelling unit in accordance with the provisions of this section . . ..” (12, citing NY RPAPL section 1303(1))
The Court dismissed defendants’ motion, relying on the plain language of the statute. The Court also noted that the purpose of the RPAPL notice provision, according to the 2009 Sponsor’s Memorandum, was to “establish protections for tenants residing in foreclosed properties” and noting that
20% of all foreclosure filings across the country were in non-owner occupied properties . . . Often, renters have been unaware that their landlords are in default until utilities are shut off or an eviction notice appears on their door . . . This [notice] provision will allow tenants to be fully aware of the status of the property and allow them to make informed decisions about whether they should remain in such property. (15)
Given the straightforward language of the statute, this seems like the right result as a matter of law. It also seems like the right result as a matter of policy. Certain dense jurisdictions, like NYC, have a lot of of tenants living in 2-4 family buildings. Many of these buildings are in areas that have been hard hit by the foreclosure epidemic. Indeed, according to the State of New York City’s Housing and Neighborhoods in 2013, “most of the foreclosure filings in 2013 and other recent years have been on 2–4 family properties.” (3) Many foreclosures have unnecessary collateral damage and improving notice to affected parties like tenants seems like a small and reasonable step for any jurisdiction to take.
Lawyering up for Housing Affordability
The New York City Independent Budget Office issued an estimate of the cost of providing “free legal representation to individuals with incomes at or below 125 percent of the federal poverty level who are facing eviction and foreclosure proceedings in court . . ..” (1) The IBO nets the cost of this proposal against the potential savings that the City would reap by reducing admissions to homeless shelters. The IBO concludes that this proposal would have a net cost of roughly 100 million to 200 million dollars.
The IBO notes that “there are benefits to reducing evictions that extend beyond the city’s budget, such as the potential for reducing turnovers of rent-regulated apartments, which would slow rent increases for those units, as well as avoiding the long term physical and mental health consequences associated with homelessness.” (1-2)
Seems to me that this is money well spent in 21st century New York City. Market forces are such that landlords can frequently raise rents significantly whenever a tenant leaves. Unscrupulous landlords harass their tenants in a variety of ways in order to encourage them to leave sooner. This might be done through the abuse of legal process, with a landlord trying to evict a tenant multiple times when the tenant has not violated the terms of the lease. Or it might be done through improperly maintaining the property, for instance, cutting off the water repeatedly. In either case, though, tenants are being subject to a lot of illegal behavior in this hot real estate market.
Housing court is a mess for both tenants and landlords, but typically only landlords have lawyers to help them navigate it. This proposal would even the field a bit. Mayor de Blasio’s affordable housing goals would be greatly augmented by this proposal.
Perhaps housing court reform should also be put on the table so that these cases are adjudicated equitably, but that is a topic for another day . . ..
