Corporate meltdown leaves renters in limbo

‘Most of the time, the tenant is out of luck’
“They could go to court and sue (Bethany) for it but if the property is in foreclosure where is the money going to come from?” he said. “Most of the time, the tenant is out of luck.”

That’s especially true in Arizona.

A recent report by the National Law Center on Homelessness and Poverty ranked the state among the worst in the nation for renters living in a property that is foreclosed upon.

For example, in Arizona and at least 30 other states, there is no legal requirement to notify tenants that the property is going through foreclosure, it said. And only New Jersey and the District of Columbia explicitly preserve tenants’ rights in the lease after a foreclosure.

The report, co-sponsored by the National Low Income Housing Coalition, warned that renters affected by foreclosure are at greater risk of homelessness, and called for federal and state governments to beef up protections. Legislation to do that has been introduced in Arizona, but it has not yet been acted upon.

Until now, the biggest problem facing renters has been summary eviction following a foreclosure. But the demise of the Bethany group raises different problems, since the new owner would have a wide range of options with a commercial property.

“The real issue is who is going to take over the property and what are they going to do with it?” said Ken Volk, who runs the Arizona Tenants Advocacy and Association in Tempe and has been advising some of the Bethany renters. “These tenants, if they leave, they could be held to the lease if the new owner wants to run it as a rental. If they don’t want to, the landlord could terminate the lease and say you have to get out, very often within five days.”

Volk has been organizing residents at the Bethany complexes to press for better treatment and has helped others legally break leases — a service for which he charges a fee.

That incenses Hoffman, who argued that such activities could amount to illegal interference.

“If he’s going to advise people to break the lease I’ll have him before the judge,” he said. “He’s certainly not going to interfere in any way with our possession and control of the asset.”

A confrontation with police
Trigild called Chandler police last week to alert them to a meeting at which Volk and about 100 Alante at the Islands residents were discussing possible next steps on property adjacent to the apartment complex. According to witnesses, eight or nine officers pushed their way into the crowd to disperse it, prompting a shouting match among tenants, police, the apartment manager and Volk before the meeting broke up.

“It was intimidating,” Volk said of the confrontation. But he said he will continue working with the tenants and dismissed Trigild’s criticism that he is intervening simply to profit off the tenants’ fears.

“I might make a little,” he said. “But the motivation is to help people. It’s what I do.”

He said the primary service he provides is to help renters understand how to legally break leases.

“By and large tenants … have no clue what to do,” he said. “They figure the morality of their situation will carry them over into the legality, and it doesn’t. There are very precise legal requirements. Unless you address them very carefully, a lawyer on the other side will get in your way.”

Nicholle Krause, the Alante resident, found that out the hard way. She threatened to withhold her March rent when her complaints about the poor condition of the property were ignored. That prompted the complex manager to threaten her with eviction, which would make it harder for her to rent elsewhere.  She backed down, and paid.

She then sent the manager a letter stating that she would move out in 10 days because of the landlord had not fulfilled its obligations to keep the property in livable condition. But an attorney for the company responded that her letter did not meet legal requirements for breaking the lease.

“I want to leave … but I would need an attorney,” said Krause, explaining that even with order returning to Alante, the uncertainty of not knowing what a new owner might do with the property continues to plague her. She said she intends to move out when her lease expires in June, if not sooner. “I don’t know if the cost and the exhaustion (that it would entail) are worth it.”

As the foreclosure crisis continues to expand, many other renters around the country are likely to find themselves in the same situation as Krause.

“We have a bunch of apartment complexes around the country,” said Hoffman of Trigild, Inc. “We haven’t got anywhere near the bottom. … If I look at our pipeline, it would normally be about 12 (to) 15 properties. We’re looking at a couple hundred at this stage.”

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