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Foreclosure Chaos Touches Renters, Too

by Lynh Bui - Sept. 21, 2008 12:00 AM   The Arizona Republic

Don't bother ringing the doorbell at the darkened house near 29th Avenue and Winchester Road in Apache Junction. The electricity has been cut off and nobody's home.

Same thing just a street over at a house with a forgotten above-ground swimming pool in the backyard and the string of Christmas lights left sagging on the roof.

In fact, by the end of November at least 12 homes on these and three other neighboring streets in the Jacob's Ranch community will sit vacant - getting ready for auction if they haven't already been sold.

But there's more to this emptying neighborhood than the often-heard tale of homeowners who took on more mortgage than they could manage. The families living in these houses were renters who found themselves with less than two months to find other places to live.

Their landlords have been collecting rent but balking on the mortgages, and now these tenants have been dragged into sharing the consequences.

Their experiences echo across the Valley as the number of foreclosures continues to climb in a market where many houses were purchased by investors with the intention of converting them to rental properties.

And renters who face eviction via foreclosure are finding that the law isn't on their side.

A sudden move

Mandy Dieffenbach and her fiance, Clinton Griffin, moved into Jacob's Ranch in 2007. They were so happy in the newly built home that they signed on to renew the yearlong lease in May. Then, less than two months later, they found a foreclosure notice in the mail.

After a talk with the property manager, they learned their deposit was gone and it was time to go.

"We have to get up and move and start all over again," Dieffenbach said from her living room, with a mountain of packed boxes piled nearby.

Dieffenbach and Griffin are scraping together money to pay for a moving truck, a deposit, utility hookups and first and last month's rent on another rental. After those expenses and Griffin's recent layoff, there's little left to hire an attorney to get their deposit back.

"The initial shock and disappointment is gone now," said Elke Dieffenbach, Mandy's mother, who recently moved in to help pay rent. "You're numb. You just gotta pack and move."

Of the roughly 8,000 foreclosure auctions scheduled for Maricopa County next month, almost 1,000 of the homes are listed as rental properties, according to the assessor.

And that number is a fraction of rental foreclosures. Many landlords and investors don't register their properties as rentals in order to avoid paying higher taxes and other costs.

In Pinal County, the number of foreclosures so far in 2008 is 400 percent higher than total foreclosures in 2004.

Fighting for rights

Ken Volk, founder of the Arizona Tenants Advocates & Association, said his organization has been getting about 20 to 30 calls or e-mails a week from renters who find themselves in situations similar to that of Dieffenbach and Griffin.

"Tenants have no rights in this arena," Volk said. "The laws are outdated."

Under the current Arizona Residential Landlord and Tenant Act, homeowners going into foreclosure aren't bound by law to tell renters about the situation. And because the process of turning a property over to a bank or title company can take months, some unscrupulous landlords wait until the last minute to inform their tenants.

This allows landlords to squeeze out as much rent money as they can, but it leaves renters with the shock of finding another home on short notice.

"You're talking fraud and greed," Volk said. "Sometimes these owners are scam artists, pocketing all the rent money and deposits."

Two weeks after Kristan Smith and her fiance moved into her rental at Jacob's Ranch, a notice was taped to the door: the sewer service would be shut off in 24 hours if the bill didn't get paid.

The sewer payments were the direct responsibility of her landlord. The bill got squared away after a talk with the property manager and she didn't think anything of it until months later, when similar payment notices cropped up again.

Smith had moved in around February. In August, she was told that the house would be on the auction block in less than a month.

The $1,350 deposit disappeared. And Smith and her fiance cobbled together $3,000 to move and put money down on another rental, borrowing money from family to help.

Smith thought about hiring a lawyer to seek legal recourse, but "the cost to get blood from a turnip would be more than it is truly worth."

Trying to stay afloat

Taking a landlord to court can be "too onerous and expensive" for renters, said Pete TeKampe, who is on the board of directors for the Arizona Multihousing Association, the trade association for the state's apartment and rental housing industry.

The recent housing boom in Maricopa and Pinal counties created an "overheated, overhyped, overspeculated" market, with many buyers being out-of-state investors, said TeKampe, who is also the vice president of investments with the real-estate firm of Marcus & Millichap.

Amateur investors thought they would get rich quick by snapping up a cluster of properties to flip down the road, but when the housing bubble burst, they were caught off guard.

Now, the rental rates landlords are able to generate in the current reality-based market don't mesh with the inflated values for which houses were originally purchased.

That disconnect is partly what has driven the continued wave of rental foreclosures.

"All boats ride with the tide," TeKampe said, "and when the tide goes down, you see who's swimming naked."

And in this case, some landlords are punishing their tenants along the way.

House Bill 2733 from the previous session of the Arizona Legislature was aimed at reforming the state's landlord/tenant act.

It suggested requiring landlords to warn tenants of foreclosure within 30 days of getting a notice and returning rent money that hadn't been applied to a mortgage.

The bill flopped without muscle from a lobbyist, Volk said, but he and others will try again in the coming session.

If any legislation comes to life, it'll be too late for the 12 families in Jacob's Ranch who were forced to leave. But the hope is to protect them in the future.

Griffin, Dieffenbach and Diffenbach's mother, Elke, hope to be settled into a new home in the Santan area by the end of the month.

"Unless you really have the money to fight these people, there's not much you can do," Elke Dieffenbach said. "Let's face it: not many renters have the savings to go after people like this.

"It's disconcerting, it's discouraging, it's depressing."

Original Article


More on this topic

Tips for renters

Renters who have experienced foreclosure offer these tips and signs to keep tenants alert to possible foreclosures.

• Check out the mail: While it is illegal to open other people's mail, keep an eye out for letters that appear to be billing notices for late payments. This can include homeowners' association fees, utility bills and mortgage bills. If the owner isn't paying those bills, he or she may not be paying the mortgage.

• See what the county assessor says: Look to see if the owner has kept up with paying property taxes. If you've been dealing with a property manager, you can find out information about who owns the home, if the owner has more than one property and if foreclosures are pending on any of the properties. Many renters experiencing foreclosure evictions have found their landlords own more than one property.

• Look for credentials: Pete TeKampe with the Arizona Multihousing Association suggests tenants rent from professional property-management companies that are licensed and members of the AMA. "It's not a guarantee, but it's another layer of protection," he said.


More on this topic

Renters Share Stories of
Eviction over Owners' Foreclosures


The Arizona Republic
by Lynh Bui - Sept. 21, 2008 12:00 AM

Jacob's Ranch in Pinal County isn't the only place where tenants have found themselves getting evicted from their landlords' foreclosures. Three other Valley renters share their stories:


Titus Fisher - Avondale

How he found out: A letter was left on the door in August informing him that the house would be going up for auction in November.

Who's moving: Fisher, his mother, his seven kids ranging in age from 2 to 17 years old.

Will he get his deposit back?: Yes.

He says: "All my kids are already established or in school. My son plays football for La Joya [Community] High School. I don't want to uproot them . . . I wish the owner would have given me three or four months' warning instead of dropping the bomb."


Christina Foote - Litchfield Park

How she found out: When the owner tried to do a short sale on the house, she confronted her real-estate agent, who told her the house was going into foreclosure.

Who's moving: Foote, her husband and two kids live on an acre lot with six dogs, a miniature horse and several reptiles.

Will she get her deposit back?: No, $200.

She says: "I just lost my job a couple weeks ago. We're on a limited income, and one of my kids will have to switch schools.

"I have paid rent on time every month, but you don't even have the decency to give me a little bit of notice? I've already contacted some attorneys."


Ann Coyne - Fountain Hills

How she found out: She signed a lease and moved into a home in June. On July 25, she got a letter saying that she had to vacate by July 31 or face eviction.

Who's moving: Coyne, an 18-year-old son and an 11-year-old daughter.

Will she get her deposit back?: No, $1,800.

She says: "The thing that upset me the most is when I signed the lease, the landlord knew at the time he was going to get foreclosed. He did not give me any indication anything else was going on and took $1,800 in deposit.

"I spent about $400 in attorney's fees and found out the only option I had was to prove the landlord had committed fraud. I have no legal leg to stand on to fight this. I felt truly hopeless."

Coyne is coordinating a committee to raise money for a lobbyist and support new laws to protect renters. Information: E-mail rentersrights08@yahoo.com.

Original Article


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