The "Very Dark Side" Comes Home to Roost - What to Do About Unwanted Tenants in Foreclosed Property
In my last post, I highlighted a post by Mark Edwards at the Concurring Opinions blog focused on the plight of perhaps "blameless" tenants being evicted from property being foreclosed upon. Although I think Mark has overstated the problem somewhat, I also believe he raises an excellent point of general application reminding us that there is a "human" consequence entailed in foreclosure that shouldn't just be ignored.
Keith Mullen of the Tough Times for Lenders blog who brought my attention to Mark's post has followed up with a post entitled "Foreclosure and the Residential Tenant: Some Helpful Hints". In this post, Keith explains that commercial lenders should be more concerned about this topic because"the time will come when evicting a small business owner, or evicting families who occupy abandoned property (or a model home), or evicting laid-off workers occupying an abandoned warehouse ofr factory will gain the attention of the local media." His suggestions, aimed at getting the property back "while managing media coverage":
- Realize that a broader spectrum of people and entities may need to be notified, i.e get the lender's community/governmental relations group involved so that they can "rach out to local community organizations and governmental agencies".
- As soon as you have the legal right to do so COMMUNICATE directly with the occupant(s) about the process and options available to them (e.g. local community and governmental resources)
- Consider entering into short-term leases both as a bridge to finding a replacement tenant and to allow occupants to find other housing
- Examine title records to determine any restrictions burdening the property.
Commercial lenders DO need to be concerned about the likely increasing complications involved in regaining possession of real property, but Keith's list seems to me to miss the point, both from the lender perspective of wanting the shortest least complicated route to clean possession and resale of the property and from the perspective of addressing the true underlying problem. The challenge presented by the presence of perhaps unwanted occupants in foreclosed property is not as simple as just shoving the problem off to another division of the lender, but neither does it have to be a circus.
Foreclosure, at least in Ohio, is not an especially swift process (click here and here for previous posts describing the procedures in Ohio). The best way to deal with the problem of squatters and/or other potentially unwanted occupants is to obtain the appointment of a receiver to manage the operation of the property and to sort out the occupancy issues during the pendency of the case. Properly handled, any "media' issues should be able to be dealt with incrementally. In addition, Keith's idea of utilizing short term leases to ameliorate any harshness entailed as a result of the forclosure process also seems like a useful approach.
