In just six months, Stephanie Williamson was evicted from one home that she was renting, and she is about to be evicted from a second.
Both of the Reno homes Williamson rented were foreclosed on.
“As a single mom with two boys, I don’t exactly have all this extra income to be shelling out deposits,” Williamson said.
The number of renters being evicted from homes because of foreclosures has ballooned in the past couple of years, said Kent Qian of the National Housing Law Project, a nonprofit that provides legal assistance and advocacy advice for renters and homeowners. And many tenants don’t fully understand their rights, which have recently expanded because of both state and federal legislation.
Williamson’s first rental was a lease-to-own, and the 39-year-old thought she’d found the perfect spot for her family. She and her two sons were settled on the quiet cul-de-sac and friendly with neighbors. A garden was starting to flourish.
But when she finally learned her landlord had been skipping mortgage payments for nearly a year, Williamson’s life was uprooted.
Despite investing in multiple home repairs, Williamson was forced to pack everything up and move across town in March. Her children changed schools, leaving their friends behind.
She found a new home through a property management company and thought she would be safe. But she wasn’t.
Just three weeks after she moved in, before everyone finished unpacking, she found a notice of default taped to her door.
“The biggest problem renters are facing now is that they can be paying their rent on time each month, but still have no guarantee their home is being safeguarded at all,” said Rhea Gertken, directing attorney for Nevada Legal Services in Reno.
Though she hasn’t been formally evicted yet, Williamson said she’s “playing the waiting game” in a house that hardly looks like a home, because, “I don’t want to bother putting up pictures if I’ll just be taking them down in a few weeks.”
“I’m just waiting for someone to come knock on the door and tell me to move out,” she said.
Williamson is far from alone in suddenly being evicted because of a foreclosure.
In a housing market saturated with foreclosures — Washoe County saw 6,790 homes foreclosed on in the first half of this year alone — Northern Nevada director of Consumer Credit Affiliates Jill Perry said understanding tenant rights is crucial for renters in an unstable market.
A growing issue in the United States
Nationally, about 40 percent of foreclosed properties are rentals, Qian said.
And in Washoe County and Nevada, an increasing number of people are renting their homes to make their mortgage payments, Perry said. But being a landlord takes preparation, and doesn’t come without a cost.
“You have to be realistic,” Perry said. “It takes a lot of money to be a landlord.”
So how do renters protect themselves? By knowing their rights and asserting them, both before entering into a rental agreement and upon receipt of a foreclosure notice or notice of default on the home, Gertken said.
When a tenant’s home is foreclosed, the process from the first delinquent payment through the final transfer of title is long — up to seven months, because most lenders let a homeowner go three months delinquent before sending out a notice of default, and another four until the time of sale.
But in some cases, the tenant isn’t aware until a foreclosure notice is posted on the door of the property.
Government supports renter’s rights legislation
Nevada Assembly Bill 140, made effective last October, outlines new obligations in the landlord-tenant relationship.
It places liability on the landlords, who are obligated to disclose to a tenant if their property goes into foreclosure. Additionally, banks now are obligated to notify tenants of a property default. If a default is recorded, a foreclosure trustee must notify any potential tenant that the property might be subject to foreclosure, Gertken said.
But, Gertken said, “I don’t know how effective this will be,” as it is a difficult law to enforce. Despite their obligation, Gertken thinks many landlords still won’t divulge necessary financial information to their tenants.
Geoffrey Giles, a Reno attorney who handles foreclosure mediation, said many landlords he has worked with worry their tenants will no longer pay rent if they know the landlord is in financial trouble.
In 2009, a report by the National Law Center on Homelessness and Poverty and the National Low Income Housing Coalition entitled “Without Just Cause” detailed the general lack of tenant rights across the U.S.
The report summarized that: “As the foreclosure crisis continues and intensifies, more and more renters are being evicted — often without notice. Moreover … in the vast majority of states, there is little in the law to protect tenants’ legitimate interests.”
It also recommended the federal government take immediate action to protect tenants in foreclosures, including provision of fair notice to tenants, preservation of existing tenancies and legal assistance. Largely because of this report, Qian said, Congress passed a law that took effect in May 2009, the Protecting Tenants At Foreclosure Act.
Under the new law, which is in effect until 2014, tenants get a minimum of 90 days notice before they are forced to move out of a home because of foreclosure. Formerly, Nevadans got only three days notice, Gertken said.
This period begins once the transfer of title on the home is complete. The law stands even if there is no lease agreement.
If a lease is in effect, the law also requires the bank, foreclosure trustee or other new owner continue honoring a tenant’s existing lease terms, unless a new owner wishes to immediately take permanent residence in the home.
Asserting their tenant rights
Ultimately, Qian said, if tenants don’t understand and assert their rights, often they forfeit them.
The Staying Home Report, which was released by the NLCHP last month, pointed out several compliance problems with the federal law.
Oftentimes, Qian said, tenants can be misinformed by agents who don’t even know the laws themselves.
Giles said the biggest issue is ambiguous language in notices placed on the home.
“A lot of times tenants get notices that are very cleverly contrived,” he said.
Qian said the most common ambiguity is that separate terms can for a number of parties, from homeowners to renters. These parties are issued varying amounts of time to vacate. Tenants don’t know which applies to them, and they assume their deadline is the first one.
“Most of the renters I’ve worked with get real panicky when a notice is posted on their door,” Giles said. “They move out way before they have to, and that’s too bad.”
Another problem, Qian said, is that banks should be doing due diligence to find out whether someone is renting a property. But they often leave the task to real estate agents, whose incentive is to sell the property quickly.
“They have a conflict of interest in terms of vacating the property to sell,” Qian said. “So oftentimes, issues with the PTFA have to do with how the laws are implemented on the ground, as this may be different from banks’ actual policies.”
Qian said this is why some banks will hire property managers, rather than real estate agents, as the first point of contact with a renter.
Some banks use a “Cash for Keys” program, in which they offer varying sums of money to entice tenants to leave a home quickly so it can be sold.
Reno resident Cassie Miller chose to use this program last year, and said it resulted in the most stressful week of her life. Though she was given $4,900 to move out, she had only a week to do it, and that week fell during college midterms.
“I don’t know if I would do the same thing again,” the 22-year-old said.
But Miller added that had she not researched her rights, the deal would never have happened.
“No one came forward and told me my options,” she said. “I was lucky to know about them, but many people don’t.”
Despite the many challenges, Perry said the situation has already begun improving.
“About a year ago, the problem was huge,” she said. “Tenants were really caught off-guard by what was going on, but that has started to slow down.”
People are learning how to work through the issue, she said.
Still, she urges homeowners: “Do the right thing. Give your tenants the option to move out if you’re delinquent.”
Gertken, the attorney for Nevada Legal Services, advises tenants to do their research so they know exactly what they’re getting into.
“I know more now than I’ll probably ever need to…” Williamson said. “But you never know.”
ASK QUESTIONS
Tenants should ask their prospective landlords the following questions:
>> Why are you renting your home?
>> How long have you been renting your home?
>> Can I see your current loan statement?
RED FLAGS
Tenants should be cautious if:
>> Renters are renting out their home to supplement mortgage payments
>> The house recently has gone up for rent, established rentals are generally less risky
>> A homeowner has missed multiple payments
Sources: Jill Perry, Consumer Credit Affiliates and Rhea Gertken, Nevada Legal Services
HOW TO GET HELP
If the home you’re renting goes into foreclosure:
>> Stop paying rent to your landlord as soon as the transfer of title is finalized because the new owner becomes, in effect, the new landlord
>> Exercise your rights: demand a minimum of 90 days to vacate and continuation of your lease through the new homeowner or a cash for keys incentive
>> Contact a local legal assistance program, such as Nevada Legal Services or Washoe Legal Services, if you need help or clarification
ONLINE RESOURCES
National Low Income Housing Coalition:
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