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Thursday, October 09, 2008

"Official" Vigilantism

I came across this story on CNN.com today. In a nutshell, there is a sheriff in Chicago who thinks there are too many foreclosures and will stop evicting "innocent" renters from properties. I can surely empathize with him. It would not be fun to evict people for no fault of their own. But enforcing the law sometimes means doing things that are not pleasant.

I agree that the tenants are not to blame for the foreclosure - in most cases. It's the landlord, after all, who has not paid the mortgage. However, that doesn't mean the tenants are entitled to live there for free. The law is the law and the sheriff should enforce it and kick the tenants out.

From what I can tell, the sheriff's main beef is that tenants are being evicted even if they have paid the rent on time. His justification for refusing to enforce eviction notices is the fact that the banks are not identifying the people living in the property when they issue him the eviction notices, as they should be. OK, maybe the banks should be doing that (although I think it might be rather difficult for them to do so, especially if the bank is located in another state). But by refusing to evict tenants at all, he is also allowing those tenants who do NOT pay their rent to remain in the property for free. He says he is coming across "innocent tenant after innocent tenant" that are being kicked out. Hmm. The last time I checked, it was a judge's or jury's responsibility to determine someone's guilt or innocence, not a sheriff's. And he obviously is taking the tenant at their word. As any landlord can tell you, tenants are known to tell lies now and again when it comes to rent payment matters.

But suppose the banks give the sheriff what he wants and they do start correctly identifying who is living in the building when they give him the eviction notice. This will not change what he has to do. He will still be required to evict the "innocent" tenants. Loan contracts clearly state that if the mortgage is not paid, the bank gets the property, no matter who is living in it. The tenants will still have to be evicted. Sorry, Sheriff. You have to enforce the law, no matter how unpleasant you find it.

As for wanting legislation to protect the tenants, what exactly does he want to see? The property owner go to jail? Well, that's not going to solve anything. The bank still won't get their money if they can't take back the property. First, there is no guarantee that the tenant's rent will even cover the amount of the mortgage in the first place. (If the owner was smart, it would, but in the midst of the real estate bubble, many, many people rented investment properties for less than the mortgage amount, hoping that appreciation would make them money in the long run.) Second, the bank does not want to be in the landlord business, so having the tenants remain in the property and just pay the bank instead is not an option. I'd be interested in knowing exactly what type of legal remedy this sheriff would like to see. I guarantee you it will not be fair to someone.

6 comments:

Jason said...

Yes it is wrong what that sheriff is doing. I think what they should do is that is a house is going into foreclosure, allow the bank to take the house, but have a prevision where the tenant can start to pay the mortgage payments direct to the bank, and if they pay on time for a year they can assume the rest of the mortgage, and own the house. That would help the banks and the tenants.


Jason Dragon
http://blog.capitalactive.com/

Shaun said...

But that puts the bank in the landlording business, which they do not want and are not equipped to handle. Can you imagine trying to call a bank at 11 PM at night to tell them your water heater is no longer working? Not to mention that many tenants are renters because they cannot qualify for a home loan. You're asking the bank to basically ignore their loan qualification criteria.

There's no easy solution to this problem. It's funny, but the CNN story has links to blogs articles about this story. Almost 100% of the blog posts and commenters feel the sheriff is wonderful. I think I saw one comment from someone who realized the banks are not equipped to be landlords.

I think the bottom line is crap happens. If you are a tenant paying on-time and you landlord doesn't pay and forces you to be evicted, you just might have to suck it up and deal with it.

I suppose you could also modify the rental agreement so that it gives the tenant some rights in case the owner doesn't pay the mortgage (or property taxes for that matter) and they are evicted. The problem is what good is that? Some sort of monetary penalty would be pretty much worthless. If the owner isn't paying the mortgage, there is like no money to be had. You could go to court and garnish his wages or something, but I'm not sure that would survive a bankrupcy filing by the owner. Anyway, gving the tenant some sort of recourse in the lease agreement is at least better than nothing, even if it will take some time to collect damagers. Perhaps that's the answer...

Clifford said...

I agree. The Sheriff can't pick what laws to enforce. He must enforce them all. Surely he must have realized that not everything in law enforcement is rainbows and unicorns. He has to do unpleasant things.

The laws aren't perfect. But fortunately we have a system that allows them to be changed. Until they are changed, he has to enforce them.

Anonymous said...

My understanding from the news articles is that the tenants aren't being given any warning of a pending eviction. When the sheriff shows up, it's a big surprise to them.

Tenants need to get some sort of warning before an eviction. It's only fair to allow them time to find another place to live, etc.

Shaun said...

Anon - you have a point there. Maybe that is the change in the law the sheriff wants to see. I know in my area, many cities require that rental properties be registered with the city as such (to ensure they can collect sales tax on the rent). I'm not sure if the public has access to those records, so I'm not sure if the banks would be able to check though.

Anonymous said...

There was more on this story today here:

http://biz.yahoo.com/ap/081016/meltdown_evicted_tenants.html

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