Recourse for renter in pre-foreclosure property?

[dny]

I currently rent a unit downtown. A few months back I started getting mail addressed to the owner that pointed to the fact he was missing payments; he was getting postcards and letters offering to buy the place as he was behind on his payments. I looked for the place on realtytrac.com and the address did not come up. At the time I thought maybe the owner had missed a payment or two, and because I did not see any other distressful information I let it slide.

Another month or two later I received a letter stating that over $7k in HOA fees were due as they had never been paid since the place was purchased late 2005 (the HOA fees are brutal at $500+). This time I decided to call the property manager who said he would look into. My position then was that I would not be making any more payments until I verified he was current on all the bills associated with the unit. The property manager said he met with the owner and supposedly verified that he was back on track with all of his payments (In case you think the owner and property manager are one in the same, I’m fairly confident they are not the same as the home had some Mexican artwork in a totally unfurnished place, and the property manager is a white guy that lives in East County.)

One thing complicating the situation, also making it more precarious, is the fact that the owner is Mexican and living in Mexico, and that he owes about $200k more on the place than it is worth. For the initial loan he put about 30% down, but refinanced twice for $100k each time so his total debt on the house was closer to 110% of the purchase price back in 2005. I also know he has a teaser rate loan. Sadly, the rent I pay is not even enough to cover his first mortgage, so he has some serious negative cash flow from the place assuming he decides to ever pay it.

So here is where I am now: The first NOD (I estimate about 5 months behind on the first loan) was sent earlier this month, and I am paid through mid May factoring in my security deposit. The earliest I would get the boot from a bank would probably be August, and my lease officially ends July 31, so I’m not too worried from the perspective. My question is, should I continue paying on a month to month basis after burning through my last month’s rent and security deposit that I pre-paid? Or should I reserve payment until I am provided with official paperwork showing that all the outstanding debt has been cleared? I really dont want to line this guy’s pockets any further than I already have.

[no_such_reality]

Talk to a lawyer specializing in tenant law.

Depending on the terms of your lease, you may have some luck based on the refi’s occurring after your lease.

If you have no lease, stop paying future rent, find a new place and leave after May.

[Anonymous]

Dny,

I am in a similar situation renting a condo up in the LA area, but my landlord is not yet in as much trouble as it sounds like yours is. The HOA on my unit is also $500+.

I remember in a previous discussion powayseller recommending this organization for those of you in SD:

http://www.tenantslegalcenter.com/

You may also want to check out http://www.freeadvice.com, which is a site where you can get free legal advice. Be advised though that many of the contributors to this site appear to have the perspective of owners, so you may not get all the information that you need there.

I would be careful withholding rent or counting your deposit in place of payment. Unfortunately if your owner declares bankruptcy I think you have to get in line with the other creditors to recover your security deposit. I believe you can sue in small claims court for it, however. Next time if I rent from an individual owner I may try and get the security deposit held in an escrow account, hopefully protecting it from situations like this.

[ocrenter]

we were in a very similar situation. we ended up going to tenant’s legal center. great source of info there, well worth the $150.

in a nutshell, if you have reason to believe that the owner committed fraud (that includes 1st payment mortgage default, stated owner occupancy on loan docs) then stop paying rent! of course, get the lawyer to look thru your evidence to make sure you are on solid footing on this.

btw, your landlord’s initials isn’t RS, is it?

[ocrenter]

oh, don’t leave after may, stay right up to the auction date. well, just go to tenants legal center and hear them out. well worth the money.

[dny]

I will check into the legal center that is being mentioned. As far as fraud being commited, I don’t think that fraud was intended from the start, but if receiveing rent and not paying the mortgage constitutes fraud, then yes, that is happening.

My guess is that like many amateur flippers this guy bought with the hope that the place would appreciate in price. Once he realized that was a lost dream he decided to cut bait and let the place sink into foreclosure.

And no, the landlord’s initials are not R.S.

[patb]

keep the rent in an escrow account.

the mexican is never coming back

You will need it to pay for an urgent move when the
sheriff serves you a vacate notice.

[little lady]

The advice of keeping rent in an escrow account might be a good idea, since the landlord has to sue you and you can pay if you have the money (and the judges decides you have to).

No one should be that worried about getting evicted, the court will NEVER allow you to be KICKED right out on the street. They always give a little time even if you didn’t have the money.

My mom has had tenants, and is elderly, and I have helped her evict some loser….he knew what he could get away with having done it before. She depends on that money to live. At least now tenants can’t use bancruptcy to hold the place for months, without rent, due to the new bancruptcy laws.

I believe you can go on nolo.com. I believe you can find some free tenant law information there. It might give you a little piece of mind.

[Author]

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