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Foreclosures Blindsiding Renters

Sean O’Leary

May 26, 2008

When a 70-year-old Bridgeport man returned to the third-floor apartment that had been his home for nearly two decades, the rental unit was locked and boarded up

is landlord had been foreclosed on. The blindsided renter was collateral damage.

Attorney Richard Tenenbaum of Connecticut Legal Services declined to name his dispossessed client but said similar incidents are being played out nearly every day in Connecticut.

“There are dozens, probably hundreds, of people being victimized because they don’t know what’s going on,” Tenenbaum said. “The number of evictions caused by foreclosures has probably doubled, at least, in the past few months.”

While the political debate about the foreclosure crisis has spotlighted the struggles of single-family homeowners who can’t keep up with their mortgage payments, it has rarely touched on the plight of the renter.

But a new study reveals that a third of Connecticut’s foreclosures — accounting for more than half of the total units foreclosed on — are for multiamily housing. In many of those cases, low-income families are being booted because their landlord fell behind on mortgage payments.

For the 14 months ending in March, 2,295 properties in Connecticut were foreclosed on or in the foreclosure process, and 760 of those properties, or 33 percent, were multi-family housing, according to the National Low Income Housing Coalition. Of the 3,495 housing units foreclosed on, 1,960, or 56 percent, were multifamily units.

“It’s an ignored part of the foreclosure crisis,” said Danilo Pelletiere, research director for the NLIHC in Washington, D.C.

After receiving a wave of phone calls from displaced families last summer, the NLIHC looked at foreclosure patterns throughout New England. In Massachusetts, 34 percent of foreclosures were on multi-unit properties. In Rhode Island, the rate was 41 percent. In more rural New Hampshire, multi-unit housing accounted for only 12 percent of foreclosures.

“The majority of these foreclosures for multi-unit housing are for two-, three- and four-unit homes.” Pelletiere said.

Renters in larger apartment buildings face a much lower risk of eviction after a foreclosure, said Michael Santoro, community development specialist for the state Department of Economic and Community Development in Hartford.

“We’re not talking about 60-unit complexes,” Santoro said. “If a complex like that is foreclosed on, the buyer loves the fact there are people living there and there is cash flow.”

When a foreclosure action begins in Connecticut against a landlord with tenants, those tenants are often referred to in the foreclosure documents as John or Jane Doe, said Tenenbaum of Connecticut Legal Services.

Named tenants, including the Does, generally lose their property rights along with their landlords, according to Raphael Podolsky, with the Legal Assistance Resource Center in Hartford. In short, renters often have no notice and limited legal protections.

Even if tenants are not referred to in foreclosure documents, they risk eviction because their leases are no longer valid.

“The people buying foreclosed properties want to flip the house and they feel it is more valuable when it’s empty,” Podolsky said, adding that vacancies can become a hazard in urban areas.

“They want to flip them, but they have to wait for a better market,” he said. “That means you have these properties that are vacated and boarded up. We’ve heard plenty of stories about these houses being vandalized and the neighborhoods start deteriorating.”

State and federal mortgage relief programs, including the $141 million bailout that passed through Connecticut’s General Assembly, are aimed at single-family residences.

But there are legal mechanisms that can protect renters, including a six-month stay of execution on evictions if the tenant is not the cause of the notice, Tenenbaum said. But few tenants are aware that they have a legal right to contest being thrown out, he added.

The state Department of Banking, which has been at the forefront of mortgage relief efforts since last fall, refers troubled renters to nonprofits that can help.

In particular, the Association of Community Organizations for Reform Now and the Neighborhood Assistance Corporation of America have been helping low-income families and actively calling for reform within the mortgage industry.

Reprinted with permission of the Hartford Business Journal. To view other stories on this topic, search the Hartford Business Journal Archives at http://www.hartfordbusiness.com/archives.php.
| Last update: September 25, 2012 |
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