The Plight of Renters of Foreclosed Condos

by Donald Hanz on Foreclosure Crisis

Renters are the latest unsuspecting victims of the foreclosure crisis that have been sweeping across the country for several years now. Most often, renters of foreclosed condos would just find themselves being evicted in a moment’s notice despite paying their rents diligently.

Most owners of foreclosed condos never warned renters about the foreclosure and continue to collect rents until such time that eviction is inevitable.

And adding to the woes of renters of foreclosed condos is the refusal of owners to return their security deposit. Tenants Together, a renter’s rights group, said that last year, over 225,000 renters in California lived in foreclosed properties.

Housing lawyer Christina Skaf Hathaway said that President Barak Obama’s Helping Families Save Their Homes Act gives tenants more rights. Under the law, lenders are required to give renters at least 90 days to remain in the property or until the lease expires. It also requires that an eviction notice should be written.

On a separate note, some apartment owners in New York are finding ways to survive the current economic downturn. Buildings that have started out as condominiums were converted into rentals. Many condominium developers, who cannot sell, have come into agreement with their lenders, to rent the units to get cash flow.

However, the trend is a potential turn off to most buyers who often shy away from buildings that are rented. According to industry experts, apartments that have been rented could not be placed on the market as new units. This would force developers to reduce the prices of apartments that have been rented.

Adding to the problem is the lack of motivation on the part of renters to take care of the apartments. According to experts, renting out apartments has less impact on values than having a vacant building with no tenants.

Developers who want to rent their unsold apartments must do so under the original condominium plan filed with the attorney general’s office in New York. This document is reviewed by potential buyers before closing an apartment sale.

Developers have the option to amend the condominium plan to adjust for rentals, provided that no units have been sold. It is the standard practice of developers to include rental provisions in the plan.

Developers said that they need to have the right to rent their units in all their condominium projects in order not to turn them into foreclosed condos.