What happens when a bank takes over a rental property after foreclosure? In many cases, they are failing to live up to their legal duties. Tenants and regulators report banks that become landlords are not following local and state housing codes, and tenants often don’t know whom to contact to report problems.
In Oakland, Calif., one tenant reported water leaks so bad that part of the ceiling fell in. Vandals broke windows. And with broken plumbing and exposed electrical wires, the bathroom is too dangerous to use, so he nailed the door shut. The previous owner was renovating the unit when he was foreclosed upon by the bank.
Even more shocking: the bank neglected to pay the water bill for the multi-unit building, so the utility company shut off everyone’s water. The tenant, a single dad with four kids, tried to pay his part, but was refused. With no water in his home, the tenant was compelled to steal one from a vacant home and reinstall it in his.
Another tenant in a bank-owned rental home in Maryland is living with an infestation of bedbugs. After the management company wouldn’t take care of the bedbugs and other problems, she and other tenants tried to find the landlord. They finally did, and were granted a meeting with the finance company who owned the building. Eventually, tenants were successful in getting some of their issues resolved. But the bedbugs remained untreated. Tenants were forced to sue.
Some banks do hire property managers to handle foreclosed properties. But with so many foreclosures being bought and sold, it’s difficult to track who is responsible for what. The problem is so widespread that the U.S. Treasure Department recently warned banks that thy must fulfill their legal duties as landlords.
This is just another example of how the face of housing is changing as a result of the housing bubble and subsequent collapse. States don’t know exactly how to enforce housing codes with banks. Some are drafting guidelines to deal with the problem. In the meantime, honest and professional landlords continue to provide safe housing for their tenants, while many tenants are powerless and living in squalor.