Renter Beware! Northern California Renter’s Rights in the Face of Real Estate Fraud and Investment Fraud

The victims of Real Estate Fraud are not only the investors and purchasers of homes that are built and bought under fraudulent circumstances, but also include people who are renting such homes from the landowners. In the midst of such serious matters as Real Estate and Investment Fraud, innocent renters of lovely homes in Silicon Valley, the East Bay, San Francisco, and the Monterey Bay Area are faced daily with non-responsive landlords, sudden evictions, and loss of their personal property.

Imagine that you are a family who is facing financial hardship. Perhaps you have lost your own home to foreclosure, and now you have terrible credit. So you cannot buy a new home, even if you could afford one. You may not even be able to afford entering into a year-long lease. Suddenly you find a lovely home that is offering you a month-to-month or other short-term lease (under a year, for example), with no credit check or contract required. The alleged owner of the home tells you that they simply want some help to cover their mortgage payments, so it sounds like a win-win situation. You decide to move your family and possessions into the home, pay the rent and any security deposit, and life is suddenly alright again, no?

Not for so many Californians in this exact situation, who find shortly after moving in that the house may be red-tagged by the city for failing to conform to local housing laws, or the house may be the subject of aggressive real estate fraud litigation between the actual owner and some con-artist posing as the owner, or the house may have been illegally rented to you in the first place in violation of some mortgage agreement between the owner and his lending institution (such as California Housing Finance Agency or CalHFA) prohibiting rental of the home to anybody, or the house may be infested with termites or rats, or the owners may have not timely paid the utility or garbage bills. Now, there’s no electricity, garbage is piling up on the curb, the rats are having a field day on the dilapidated front “lawn,” and the front door looks like your local cafe’s community message board, plastered up and down with city red-tag notices, eviction notices, lawsuit notices, and late payment notices from local utility companies and tax commissions.

Soon, renters may find that they are being evicted because the house is the subject of a foreclosure action or other legal battle between various persons claiming ownership rights to it. For example, renters may have been paying rent to one person, reasonably believing that they were paying the landlord every month but finding out that in fact they were paying a person who doesn’t actually own the home and may instead have defrauded the true homeowner out of the house. Alternatively, renters may be informed in writing by a bank that all future rent checks should be forwarded to the bank rather than the original landlord because the bank may have foreclosed on the original homeowner’s mortgage, and thus the bank may be the new rightful owner of the home. Meanwhile, the original landlord may be insisting that you continue paying rent to him.

So what to do? Well, calling a lawyer is a good first step. I review and analyze rental agreements, relevant notices you may have received, and communications between you and the landlord, and then I advise you of your legal rights and obligations as a tenant and inform you of state and local renter’s laws that apply to your particular situation. In some Northern California cities which are rent controlled, like Berkeley, Oakland, San Francisco, and East Palo Alto, there are strict laws which make it difficult for a landlord to evict a tenant. Where a renter’s personal property is damaged or simply taken by the homeowners during a hasty and unlawful eviction caused by an underlying foreclosure or fraud, a renter may be best advised to timely file a lawsuit for wrongful eviction against the person or entity who evicts him (be it the individual landlord or a foreclosing bank who is the evicting party). Alternatively, a suit for conversion of personal property may be appropriate in small claims court (for minor losses) or in Superior Court (for major losses). Give me a call as soon as you have any serious legal concerns, and I will work with your budget to help you through this complex time.

But remember that “an ounce of prevention is worth a pound of cure,” as Benjamin Franklin said. When you are renting a home from anybody, do your homework. Generally, it may be best to avoid renting a home from a landlord who is himself experiencing financial troubles, as the landlord may not be able to keep ahead of his own mortgage payments or to properly maintain the home that you are renting from him. Don’t be too shy to ask questions about your landlord’s financial stability and his legal right to rent the home to you, as a reasonable landlord should appreciate a renter’s concerns in today’s economic climate, and a landlord may feel more confident knowing that he may be renting to somebody who is seeking a stable housing situation. Of course, a bad faith landlord may not be forthcoming with problematic information about the rental home. Fortunately, you can often conduct a free or very inexpensive property record search of the home you are renting in the local County Recorder’s Office, where all relevant property records such as Notices of Default on a Loan, Notices of Foreclosure, Notices of Pending Litigation (“Lis Pendens“), Liens and Mortgage Interests, and City Housing Code Violation Notices (“Red-Tags”) are kept on file and publicly viewable for every home in the County. If you find such a Notice in the public records of the home you are planning to rent, it may be advisable to reconsider your decision to rent the home. There are plenty of homes available on the rental market, and renting a home that is the subject of fraud litigation, pending mortgage foreclosure proceedings, or city violations may be a bad idea. You can also check up on your landlord himself to see if there is any pending or recent past litigation against him. Simply look up your landlord’s name at the County Superior Court in which he resides, as well as the Court in which the rental home is located. You can do this kind of search online on the Superior Court of California webpage for the County in question, or you can call the Court Clerk’s office for that County.

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