Foreclosure and the Residential Tenant: Some Helpful Tips
As noted in our recent posting on this subject (The Very Dark Side), the Concurring Opinions Blog addressed a volatile topic: evicting residential tenants after a real property foreclosure of a single-family residence. In this posting, we suggest this topic has more relevance to commercial lenders and servicers than you might initially think; and we suggest some tips.
Clearly, most commercial mortgage lenders do not have this type of product (single-family) in the portfolio. Or if they do, it is a million-dollar home occupied by an executive who is not a tenant, and definitely not a sympathetic figure in the new economy.
So, does a commercial mortgage lender or servicer care about this topic? Why should you care?
The prediction here is that 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 or factory will gain the attention of the local media.
If this starts to sound like your portfolio, then here are a few tips:
- Realize that foreclosure and the process of taking possession will be much different than your typical commercial collateral foreclosure. For starters, you should notify a broader group of people in the foreclosure process. For example, contact your community relations or governmental relations group, and include them in decisions made during the foreclosure process. In turn, they will reach out to local community organizations and governmental agencies.
- As soon as you have the legal right to directly communicate with the occupant, contact them to discuss the process and options available to them, including local community and governmental resources. In other words, be a resource of information for the occupant.
- Consider entering into a short-term lease arrangement (as a bridge to finding a replacement tenant) in order to give the occupant time to find new housing. (As to laid-off workers occupying the collateral - I'm still chewing on that one.)
- If the collateral is an affordable housing project, examine the title records to verify rental and other restrictions that burden the project.
Taking back the collateral is tough enough. And getting it back while managing media coverage only makes it worse.
If you have any other suggestions or questions, please post a comment.
