PROTECTIONS SOUGHT FOR FORECLOSED-UPON RENTERS
The worst is yet to come for apartment buildings with too much debt. What will that mean for tens of thousands of tenants.
Standing on the steps of City Hall last month, City Councilman Dan Garodnick spoke up for renters threatened by bank foreclosures. "I want to make sure tenants understand their rights. The impact in New York City of foreclosures is not just to homeowners. It also hurts renters."
Garodnick might seem like an unlikely champion in the fight against foreclosures' impact on tenants. His district covers some of Manhattan's priciest real estate, including the grand apartments along Central Park South and much of Museum Mile. By contrast, the vast majority of home loan foreclosures in New York City are concentrated in a few low-income neighborhoods on Staten Island and in Southeast Queens, such as Jamaica and South Ozone Park.
But Garodnick's district also includes the more than 11,200 rental units at Stuyvesant Town and Peter Cooper Village, which sold in 2006 for nearly a half-million dollars per apartment. That's one reason he backs three related bills (Introductions 889, 956 and 959), which would require that renters be notified of a pending foreclosure, require banks and others to register foreclosing properties with the city, and require owners to maintain upkeep of properties while in default.
Those downtown Manhattan units have plenty of company: Local experts count more than 70,000 "overleveraged" rentals where the commercial real estate loans may be larger than the value of the property based on rental income.
As these properties' debt becomes more onerous and foreclosure becomes a possibility, a variety of officials and advocates hope to protect tenants while a tangled web of owners, lenders, and investors struggle over who has the right to whatever value is left at the properties.
PROTECTIONS SOUGHT FOR FORECLOSED-UPON RENTERS [City Limits]
The worst is yet to come for apartment buildings with too much debt. What will that mean for tens of thousands of tenants.
Standing on the steps of City Hall last month, City Councilman Dan Garodnick spoke up for renters threatened by bank foreclosures. "I want to make sure tenants understand their rights. The impact in New York City of foreclosures is not just to homeowners. It also hurts renters."
Garodnick might seem like an unlikely champion in the fight against foreclosures' impact on tenants. His district covers some of Manhattan's priciest real estate, including the grand apartments along Central Park South and much of Museum Mile. By contrast, the vast majority of home loan foreclosures in New York City are concentrated in a few low-income neighborhoods on Staten Island and in Southeast Queens, such as Jamaica and South Ozone Park.
But Garodnick's district also includes the more than 11,200 rental units at Stuyvesant Town and Peter Cooper Village, which sold in 2006 for nearly a half-million dollars per apartment. That's one reason he backs three related bills (Introductions 889, 956 and 959), which would require that renters be notified of a pending foreclosure, require banks and others to register foreclosing properties with the city, and require owners to maintain upkeep of properties while in default.
Those downtown Manhattan units have plenty of company: Local experts count more than 70,000 "overleveraged" rentals where the commercial real estate loans may be larger than the value of the property based on rental income.
As these properties' debt becomes more onerous and foreclosure becomes a possibility, a variety of officials and advocates hope to protect tenants while a tangled web of owners, lenders, and investors struggle over who has the right to whatever value is left at the properties.
PROTECTIONS SOUGHT FOR FORECLOSED-UPON RENTERS [City Limits]
City officials should investigate the severely reduced "skeleton crew" watching over these over-leveraged properties. You can't run a giant cruise ship with 100 employees, what makes management think they can do the same here? This is a recipe for disaster.
I have to say that, when I looked at this issue a little while back (ok, ok, so I stuck the memo in my desk drawer instead of circulating it) I was surprised to realize that in most cases, the tenant has little or no recourse. Of course, under basic property law, the result follows from the premises because the renter's title to the property is no better than the landlord's is, so if the landlord loses his title, it follows that the renter(s) must lose their claims as well.
However, the remedy that might be available under commonlaw property law (here I'm just thinking off the top of my head, not researching) would be for the renter to "redeem" the landlord's mortgage from the foreclosing creditor(s) - which is ludicrous because it basically entails buying the property; if renters had the cash to buy, do you think they'd still be renters?
Given the equities of the situation, for properties that are commercial in nature - that is, large apartment buildings that are run as a business (or, alternatively, held for a profit) - the interests of the current tenants should be granted status superior to that of the landlord's title (and thus to the foreclosing creditor's interest) so that the current renters' interests as such cannot be willy-nilly destroyed in a foreclosure action against the landlord.
This would make sense because, at the end of the day, whomever buys the building out of foreclosure (or bankruptcy, but that, unfortunately, is most likely a federal, not a City, issue) is going to turn around and rent the building out to residential tenants again, so it doesn't substantially destroy the value that buyer is getting if he/she/it is required to take title subject to the existing residential leases - in other words, the buyer should step into the shoes of the defaulting landlord vis-a-vis the current tenants and their leases. That, at least, would provide everyone with the security of knowing that they will at least have until the normal end of their lease term to find someplace else to live if that becomes necessary.
Huh?
Dan Garodnick and others in city gov't are concerned that buildings in foreclosure may fall into disrepair and services decline while the legal issues (who among the various owners, lenders, and investors has "the right to whatever value is left at the properties in the event of foreclosure" ) are being hammered out.
Tenants protected by New York’s rent regulation laws are not at risk of eviction and will continue to get renewal leases, regardless of whether their building is sold or foreclosed.
And as the article says: