REOs Leased by Bank Considered Shadow Inventory?

NEW -> Contingent Buyer Assistance Program
[quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>
Is a foreclosure a sale?



Anyways, the law that protects tenants against foreclosure is new and not a basic real estate law.



The funny thing is, I guess it can be abused:



<a href="http://homeequitytheft.blogspot.com/2009/08/foreclosure-rescue-operators-using-new.html">http://homeequitytheft.blogspot.com/2009/08/foreclosure-rescue-operators-using-new.html</a>



1. Stop paying mortgage.

2. Sell home to a trust.

3. Trust rents home to original owner for a 5-year lease

4. Bank tries to foreclose, tenant invokes "Don't kick me to the curb" defense
 
[quote author="bltserv" date=1253163269][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


Thats not true Skippy..



<a href="http://www.govtrack.us/congress/bill.xpd?bill=s111-896&tab=summary">http://www.govtrack.us/congress/bill.xpd?bill=s111-896&tab=summary</a>



If the party purchasing is for Private use. Your out in 90 days.

Income property. Duration of Lease.



Title VII - Protecting Tenants at Foreclosure Act

Protecting Tenants at Foreclosure Act of 2009 -

Section 702 -

Declares that, in the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this Act, the immediate successor in interest in the property pursuant to the foreclosure shall assume such interest subject to: (1) provision by such successor of a notice to vacate to a bona fide (non-mortgagor) tenant at least 90 days before the effective date of such notice; and (2) specified rights of such tenant to occupy the property until the end of the remaining lease term.

Section 703

Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice.</blockquote>


No, it is you who is wrong.



"Amends the United States Housing Act of 1937 to declare that, in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the initial term of a lease, the tenant's vacating of the property prior to sale shall not constitute other good cause for terminating the tenancy or occupancy rights of the victim of domestic or similar violence or stalking. Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice. Declares also that, in the case of foreclosure on any federally-related mortgage loan or on any residential real property in which a recipient of public housing assistance resides, the immediate successor in interest assumes such interest subject to: (1) the lease between the prior owner and the tenant, and (2) the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit."





What that says is if the tenant moved out due to domestic violance, the tenancy is not ended, but a 90 day notice is required and then it may be ended.
 
[quote author="CapitalismWorks" date=1253163800][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


You just got served by BLT. That has gotta hurt, especially after trying to go big league with your definitive statement on real estate law. Shall we add that to the list of things that are beyond your area of expertise?</blockquote>


I hope you like crow. Yummy, yummy crow. Thank you, Sir, can I have another?
 
[quote author="NewportSkipper" date=1253163970][quote author="CapitalismWorks" date=1253163800][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


You just got served by BLT. That has gotta hurt, especially after trying to go big league with your definitive statement on real estate law. Shall we add that to the list of things that are beyond your area of expertise?</blockquote>


I hope you like crow. Yummy, yummy crow.</blockquote>


As soon as you chomp down on that tasty pie waiting for you on accounting and valuation (from earlier in this thread, in case your memory has lapsed).
 
[quote author="CapitalismWorks" date=1253164175][quote author="NewportSkipper" date=1253163970][quote author="CapitalismWorks" date=1253163800][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


You just got served by BLT. That has gotta hurt, especially after trying to go big league with your definitive statement on real estate law. Shall we add that to the list of things that are beyond your area of expertise?</blockquote>


I hope you like crow. Yummy, yummy crow.</blockquote>


As soon as you chomp down on that tasty pie waiting for you on accounting and valuation (from earlier in this thread, in case your memory has lapsed).</blockquote>


I never said there was no cost, so your victory is false.
 
[quote author="NewportSkipper" date=1253164267][quote author="CapitalismWorks" date=1253164175][quote author="NewportSkipper" date=1253163970][quote author="CapitalismWorks" date=1253163800][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


You just got served by BLT. That has gotta hurt, especially after trying to go big league with your definitive statement on real estate law. Shall we add that to the list of things that are beyond your area of expertise?</blockquote>


I hope you like crow. Yummy, yummy crow.</blockquote>


As soon as you chomp down on that tasty pie waiting for you on accounting and valuation (from earlier in this thread, in case your memory has lapsed).</blockquote>


I never said there was no cost, so your victory is false.</blockquote>


I guess I thought the thanks to Geo for his musings on how leasing would only costs banks is housing prices declined was support of that position. Am I wrong? If so, what was the thumbs up for?



I couldn't resist piling on BLTs comment, even if it was erroneous. Though the jury is still out on your comment.
 
[quote author="NewportSkipper" date=1253163869][quote author="bltserv" date=1253163269][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


Thats not true Skippy..



<a href="http://www.govtrack.us/congress/bill.xpd?bill=s111-896&tab=summary">http://www.govtrack.us/congress/bill.xpd?bill=s111-896&tab=summary</a>



If the party purchasing is for Private use. Your out in 90 days.

Income property. Duration of Lease.



Title VII - Protecting Tenants at Foreclosure Act

Protecting Tenants at Foreclosure Act of 2009 -

Section 702 -

Declares that, in the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this Act, the immediate successor in interest in the property pursuant to the foreclosure shall assume such interest subject to: (1) provision by such successor of a notice to vacate to a bona fide (non-mortgagor) tenant at least 90 days before the effective date of such notice; and (2) specified rights of such tenant to occupy the property until the end of the remaining lease term.

Section 703

Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice.</blockquote>










No, it is you who is wrong.



"Amends the United States Housing Act of 1937 to declare that, in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the initial term of a lease, the tenant's vacating of the property prior to sale shall not constitute other good cause for terminating the tenancy or occupancy rights of the victim of domestic or similar violence or stalking. Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice. Declares also that, in the case of foreclosure on any federally-related mortgage loan or on any residential real property in which a recipient of public housing assistance resides, the immediate successor in interest assumes such interest subject to: (1) the lease between the prior owner and the tenant, and (2) the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit."





What that says is if the tenant moved out due to domestic violance, the tenancy is not ended, but a 90 day notice is required and then it may be ended.</blockquote>


That has to do with Section 8 Property. Not much of that around here.
 
[quote author="CapitalismWorks" date=1253164845][quote author="NewportSkipper" date=1253164267][quote author="CapitalismWorks" date=1253164175][quote author="NewportSkipper" date=1253163970][quote author="CapitalismWorks" date=1253163800][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


You just got served by BLT. That has gotta hurt, especially after trying to go big league with your definitive statement on real estate law. Shall we add that to the list of things that are beyond your area of expertise?</blockquote>


I hope you like crow. Yummy, yummy crow.</blockquote>


As soon as you chomp down on that tasty pie waiting for you on accounting and valuation (from earlier in this thread, in case your memory has lapsed).</blockquote>


I never said there was no cost, so your victory is false.</blockquote>


I guess I thought the thanks to Geo for his musings on how leasing would only costs banks is housing prices declined was support of that position. Am I wrong? If so, what was the thumbs up for?



I couldn't resist piling on BLTs comment, even if it was erroneous. Though the jury is still out on your comment.</blockquote>


It was something else that got the thumbs up. I thought he was understating the cost.
 
[quote author="bltserv" date=1253164887][quote author="NewportSkipper" date=1253163869][quote author="bltserv" date=1253163269][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


Thats not true Skippy..



<a href="http://www.govtrack.us/congress/bill.xpd?bill=s111-896&tab=summary">http://www.govtrack.us/congress/bill.xpd?bill=s111-896&tab=summary</a>



If the party purchasing is for Private use. Your out in 90 days.

Income property. Duration of Lease.



Title VII - Protecting Tenants at Foreclosure Act

Protecting Tenants at Foreclosure Act of 2009 -

Section 702 -

Declares that, in the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this Act, the immediate successor in interest in the property pursuant to the foreclosure shall assume such interest subject to: (1) provision by such successor of a notice to vacate to a bona fide (non-mortgagor) tenant at least 90 days before the effective date of such notice; and (2) specified rights of such tenant to occupy the property until the end of the remaining lease term.

Section 703

Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice.</blockquote>










No, it is you who is wrong.



"Amends the United States Housing Act of 1937 to declare that, in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the initial term of a lease, the tenant's vacating of the property prior to sale shall not constitute other good cause for terminating the tenancy or occupancy rights of the victim of domestic or similar violence or stalking. Allows the owner to terminate such a tenancy, however, effective on the date of the unit's transfer to the owner if the owner: (1) will occupy the unit as a primary residence; and (2) has given the tenant a notice to vacate at least 90 days before the effective date of such notice. Declares also that, in the case of foreclosure on any federally-related mortgage loan or on any residential real property in which a recipient of public housing assistance resides, the immediate successor in interest assumes such interest subject to: (1) the lease between the prior owner and the tenant, and (2) the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit."





What that says is if the tenant moved out due to domestic violance, the tenancy is not ended, but a 90 day notice is required and then it may be ended.</blockquote>


That has to do with Section 8 Property. Not much of that around here.</blockquote>


No it doesn't, it has to do with "federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this Act". The jury isn't out. I am right and you are wrong and it is you who got served....with garnish.



Note the importance of the word "also":



Declares also that, in the case of foreclosure on any federally-related mortgage loan or on any residential real property in which a recipient of public housing assistance resides, the immediate successor in interest assumes such interest subject to: (1) the lease between the prior owner and the tenant, and (2) the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit."
 
[quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


I'm not sure which book you read, but you might want to double check it for the details or read a different book. <em>Excluding any implications of S. 896 cited by BLT or any recent changes in the law made by the Legislature, if any,</em> in California a lease <em>generally</em> will not survive a foreclosure sale unless that lease was entered into and recorded prior to the recording of the foreclosing deed of trust. There are some exceptions to this, such as a subordination agreement, but those require the approval of the beneficiary of the deed of trust at issue. In my limited experience, lease recordation and subordination of the DOT to the lease is far more common in CRE than residential.





<em>As always, this post is made for informational purposes only, should not be relied on for any purpose, is worth exactly what you paid for it, and is not intended to create an attorney-client relationship (putative or actual). For advice or counsel related to your specific situation, please consult your own lawyer.</em>
 
if these 2 are only bills, that means basic real estate law is foreclosure extinguishes the lease.



see here for more:

<object width="325" height="250"><embed src="http://www.youtube.com/v/youtube" type="application/x-shockwave-flash" width="325" height="250"></embed></object>
 
[quote author="EvaLSeraphim" date=1253166199][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


I'm not sure which book you read, but you might want to double check it for the details or read a different book. <em>Excluding any implications of S. 896 cited by BLT or any recent changes in the law made by the Legislature, if any,</em> in California a lease <em>generally</em> will not survive a foreclosure sale unless that lease was entered into and recorded prior to the recording of the foreclosing deed of trust. There are some exceptions to this, such as a subordination agreement, but those require the approval of the beneficiary of the deed of trust at issue. In my limited experience, lease recordation and subordination of the DOT to the lease is far more common in CRE than residential.





<em>As always, this post is made for informational purposes only, should not be relied on for any purpose, is worth exactly what you paid for it, and is not intended to create an attorney-client relationship (putative or actual). For advice or counsel related to your specific situation, please consult your own lawyer.</em></blockquote>


In my version of the English language:



"... in California a lease generally will not survive a foreclosure sale unless that lease was entered into and recorded prior to the recording of the foreclosing deed of trust."



This says the lease has to be signed before the foreclosure is completed. I would think that's patently obvious.
 
[quote author="EvaLSeraphim" date=1253166199][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


I'm not sure which book you read, but you might want to double check it for the details or read a different book. <em>Excluding any implications of S. 896 cited by BLT or any recent changes in the law made by the Legislature, if any,</em> in California a lease <em>generally</em> will not survive a foreclosure sale unless that lease was entered into and recorded prior to the recording of the foreclosing deed of trust. There are some exceptions to this, such as a subordination agreement, but those require the approval of the beneficiary of the deed of trust at issue. In my limited experience, lease recordation and subordination of the DOT to the lease is far more common in CRE than residential.





<em>As always, this post is made for informational purposes only, should not be relied on for any purpose, is worth exactly what you paid for it, and is not intended to create an attorney-client relationship (putative or actual). For advice or counsel related to your specific situation, please consult your own lawyer.</em></blockquote>
You are correct, if Skippy bothered to check the recorder's office he would find out that 99% of residential leases are not recorded and as such do not have priority to the trustee deed. First come, first serve!
 
[quote author="LoudRoar" date=1253166355]if these 2 are only bills, that means basic real estate law is foreclosure extinguishes the lease.



see here for more:

<object width="325" height="250"><embed src="http://www.youtube.com/v/youtube" type="application/x-shockwave-flash" width="325" height="250"></embed></object></blockquote>


No it doesn't.
 
[quote author="USCTrojanCPA" date=1253166670][quote author="EvaLSeraphim" date=1253166199][quote author="NewportSkipper" date=1253162051]It's basic real estate law that a lease survives a sale.</blockquote>


I'm not sure which book you read, but you might want to double check it for the details or read a different book. <em>Excluding any implications of S. 896 cited by BLT or any recent changes in the law made by the Legislature, if any,</em> in California a lease <em>generally</em> will not survive a foreclosure sale unless that lease was entered into and recorded prior to the recording of the foreclosing deed of trust. There are some exceptions to this, such as a subordination agreement, but those require the approval of the beneficiary of the deed of trust at issue. In my limited experience, lease recordation and subordination of the DOT to the lease is far more common in CRE than residential.





<em>As always, this post is made for informational purposes only, should not be relied on for any purpose, is worth exactly what you paid for it, and is not intended to create an attorney-client relationship (putative or actual). For advice or counsel related to your specific situation, please consult your own lawyer.</em></blockquote>
You are correct, if Skippy bothered to check the recorder's office he would find out that 99% of residential leases are not recorded and as such do not have priority to the trustee deed. First come, first serve!</blockquote>


Proof please.
 
[quote author="graphrix" date=1253162046][quote author="awgee" date=1253161660][quote author="graphrix" date=1253161026]Does anyone know who these banks are that leasing these properties? I'd love it of they were a publicly traded bank too... perfect short opportunity with the capital ratio issues.



BTW, if there was a lease in place when the bank foreclosed on the place, then they have to honor the lease. In a sense, they become forced landlords. A tenant can refuse cash for keys, and the bank will be stuck honoring the lease.</blockquote>


I know nothing about leasing laws, but logically it seems like if the lease is made with the previous owner, the lease/contract ends when ownership ends. If there are any costs involved with the early cessation of the lease, it seems the responsible party would be liable for those costs.</blockquote>


Awgee... oh awgee... you were too busy watching the chart on GOLD break $1000 to notice the law that was passed recently to protect all those poor renters affected by the foreclosures. If there is a legitimate lease in place, whether it is 9 months remaining on a 1 year lease, or 1 year and 9 months remaining on a two year lease, no matter who the new owner is after the trustee sale (bank or investor), has to honor the lease. The only way around it is use the "cash for keys" method, and still the tenant can refuse. Something to think about if you want to buy at the foreclosure auction. I'd cite my source, but I am going to go check out what got foreclosed on today instead.</blockquote>


If you care to cite, fine. If not, fine also. You usually know what you are talking about and it sounds like you know about this. I do not. It just sounded illogical.
 
My intial statement was not about foreclosures, but I see that there is an out for owner-occupant buyers.



I was addressing this:



"but logically it seems like if the lease is made with the previous owner, the lease/contract ends when ownership ends"
 
[quote author="awgee" date=1253166829]If you care to cite, fine. If not, fine also. You usually know what you are talking about and it sounds like you know about this. I do not. It just sounded illogical.</blockquote>


It is illogical, and it is a big PITA these days. I know a guy who bought home at auction. Some squatter forged a lease, even used the former owner's name. The guy who bought the house called the old owner, old owner said I never leased the place. New owner calls the cops, has forged lease dude dragged out in handcuffs for trespassing and probably fraud. Had it been legit, he'd have to wait to sell the place or sell it as investor only with current tenant. Good times.



BTW, the law before applied to normal sales when it came to honoring a lease. The old law for a trustees sale meant you could boot the occupant out as soon as possible. The new law requires you to honor the lease. Only way to boot a legitimate tenant is cash for keys.



Did you see that someone picked up 27 Secret Garden today for $764k? I wonder how the neighbors feel about that?
 
[quote author="graphrix" date=1253167277][quote author="awgee" date=1253166829]If you care to cite, fine. If not, fine also. You usually know what you are talking about and it sounds like you know about this. I do not. It just sounded illogical.</blockquote>


It is illogical, and it is a big PITA these days. I know a guy who bought home at auction. Some squatter forged a lease, even used the former owner's name. The guy who bought the house called the old owner, old owner said I never leased the place. New owner calls the cops, has forged lease dude dragged out in handcuffs for trespassing and probably fraud. Had it been legit, he'd have to wait to sell the place or sell it as investor only with current tenant. Good times.



BTW, the law before applied to normal sales when it came to honoring a lease. The old law for a trustees sale meant you could boot the occupant out as soon as possible. The new law requires you to honor the lease. Only way to boot a legitimate tenant is cash for keys.



Did you see that someone picked up 27 Secret Garden today for $764k? I wonder how the neighbors feel about that?</blockquote>


Didn't see that. I don't watch Irvine. Is 27 Secret Garden a Keough property?









Eva - As a renter, can I have my lease recorded? Just march a copy down to the recorders office, fill out some paperwork, pay a fee, and say please?
 
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