Foreclosure Crisis Creates Unique Hardships for Renters

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By Monica Hatcher

RISMEDIA, Dec. 30, 2008-(MCT)-After working a full day and tending to her three children, the last thing Latasha Jones felt like doing was making the rounds in her apartment complex to collect contributions for the building’s water bill. But she had no choice-the landlord, in foreclosure, had abandoned the building and stopped paying it.

More than once over the past year, tenants of the 11-unit complex in Miami’s Liberty City neighborhood had come home to find the water shut off. Eventually, they stopped paying rent and took the matter into their own hands, forming a kind of rudimentary condo association to manage the property.

The foreclosure crisis is creating unique hardships for renters in some apartment buildings. Unlike tenants of condos and houses, apartment dwellers rely on landlords to collect garbage, keep up the premises and make repairs. The cost is included in the monthly rent.

So when a landlord enters foreclosure, those services often stop, leaving residents without vital utilities and sometimes in unsafe conditions. They may be forced to move. Low-income renters sometimes have nowhere to go.

“All I see is homelessness for the holidays,” said Celeste Brown, who has lived in run-down apartments in Miami the last seven years. The owner fell into foreclosure a year ago and a receiver from Great Florida Bank has told residents they need to move by Dec. 31 so the incoming owner can make repairs.

“We’ve been paying rent all these years,” lamented Catherine Jackson, 44, who, for 18 years, has lived in the two-building complex with her husband.

In South Florida, the rental market is full of small, independently owned buildings like the ones in which Jackson and Brown live. After years of stability in this rental niche, during the real estate boom speculators with little experience began snapping up apartments. Now falling property values and miscalculations are forcing many out of business in the downturn.

Some investors wanted to flip but missed the peak and couldn’t sell, said Alan Ojeda, a developer of large-scale rental complexes and towers in Miami.

Others built their business plans around converting rentals into condominiums. When the market crashed and buyers disappeared, many had no choice but to rent the unsold units, Ojeda said. Now, the conversion craze that pushed many renters from their homes during the boom is forcing them out again as more and more buildings go belly-up.

Failed condo conversions make up “the vast majority” of apartments going into foreclosure, said Still Hunter, a vice president of investment in the Fort Lauderdale, Fla., office of Marcus & Millichap, a real estate services firm.

“The problem is widespread,” Hunter said, adding in some cases rental income is not enough to cover loan payments or even property maintenance.

Residents in those buildings find ways to cope. In Jones’ building in Liberty City, before the water started going out, tenants complained bitterly to their landlord to fix the broken water heater. Maxine Bell, another tenant there, found a makeshift solution by buying a Zephyrhills water cooler with a hot-water tap.

“We’ve been out of hot water for a year,” said Bell, 41. When the weather gets chilly, it’s impossible to shower, she said. Another resident, Shanika Rollins, said she has to boil water to bathe.

“It’s like a hurricane, but the lights are on,” Rollins said.

Jones, a teacher’s aide at Hialeah-Miami Lakes High School, networked with friends to find a waste company to pick up the garbage. Tired of the headaches, she moved out last week. It’s unclear who will take over as the building’s de facto property manager, since the lender has not yet foreclosed.

Housing advocates say lenders that financed the purchase of such buildings should take responsibility for the properties when landlords skip out. Providing some relief, Fannie Mae announced this month that it would sign new leases with tenants living in foreclosed properties it owns.

But many banks instead do all they can to avoid taking over, including stalling the foreclosure process so they don’t become owners, said Purvi Shah, an attorney with Florida Legal Services who helped Jones and other tenants sue their landlord before he disappeared.

Between the time the owner stops paying and the lender actually forecloses-a process that can take up to a year-buildings deteriorate rapidly, Shah said.

“If lenders are going to make investments into neighborhoods and into these properties through mortgages, they have an obligation to protect their asset,” Shah said.

In the two buildings where Brown and the Jacksons lived, the former landlord is a foreign investor who is now deceased. After the roof rotted, rain was pouring into their homes, they said. Only after organizing with the help of the Miami Workers Center, protesting and drumming up plenty of press coverage did Great Florida Bank make the needed repairs.

Now they want the bank, in its negotiations with a buyer, to require the new owner to offer them first dibs on their old units after he finishes renovations. They also want help relocating, since short-term rentals are expensive and require deposits.

Richard Langhorne, who represents Great Florida Bank as receiver for the properties, said relocation assistance was not likely since the bank had already given residents the equivalent of $4,500 in free rent since March.

In a recent renters’ meeting, Celeste Brown and others scoffed, saying nobody should have to pay rent in the roach-ridden, waterlogged building.

Mario de las Cuevas, the new buyer, said that after he brings the dilapidated building up to code, he would allow the current tenants to move back in, provided they have a job, a clean record and money to pay the rent. The tenants want the deal in writing.

Joseph Phelan, a member of the Miami Workers Center, said the problem of displaced renters is growing, though little help is coming from the government. Renters, he said, are overlooked by federal foreclosure prevention programs solely designed to help homeowners.

“They’re facing many of the same issues as homeowners, but there is not attention on it,” Phelan said. “They are swept up in the mortgage crisis as well, but they are kind of the unseen victims of it.”

© 2008, The Miami Herald.
Distributed by McClatchy-Tribune Information Services.

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