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Sunday, April 13, 2021

A well-recognized scenario from the subprime lending meltdown: The property owner rents out the acquired residence, looking at this income to wholly or partially cover the mortgage payments. But when that doesn’t work out and the bank forecloses, the renters left behind can linger for years before the eviction notice arrives.

Foreclosures can have an impact on tenants in lots of ways, but there are two sets of problems that most will face. The first and most daunting is eviction. The second is a loss of services, which can mean anything from having to fix your own clogged pipes to losing heat in the winter.

Luis Matute moved into a two-bedroom railroad apartment at the top of a walk-up in Bushwick, Brooklyn, 13 years ago. Five years later, Nelva Muy joined him when they were married. Now, the couple, who are from Ecuador, and their 6-year-old son, Jinson, live in the same apartment, which has become plagued with cracks and leaks.

Two years ago, the person who collected the rent every month stopped showing up. Mr. Matute and Ms. Muy have not paid rent since, though they have been saving their rent money of $575 a month.

I’m no legal expert, but the situations described in the article — where landlords disappear and the tenants wind up living rent-free for years — make me wonder if a case for squatters rights doesn’t apply.

It can be pretty hard to establish those rights, as they have to be based upon “adverse possession” criteria, and technically a tenant agreement precludes that. But when the residents wind up being responsible for the upkeep on the property — making significant structural repairs — that indicates a shift in responsibility for an abandoned property. Indeed, it’s preferable for neighborhoods and cities to have these houses occupied by actual residents, versus having them cleared out and then vulnerable to transients and crackheads breaking in (which has happened in other foreclosure-hit areas of the U.S.).

True, the foreclosing bank gets ownership when the landlord bails, so such properties technically don’t slide into a legal limbo. But banks are notorious for neglecting their foreclosed houses — they generally don’t want the headache, they just want a monetary return on their bad investments. I’d imagine they would sign off on a squatter solution if they were given a minimal payment to simply walk away; that’s something that governmental assistance could facilitate.

The missing ingredient here is tenure. Most adverse possession laws, including that for New York, set a lengthy time period for squatters rights to kick in — something like 12 years. It’s highly unlikely that real estate of even minimal value would sit that long without the titleholder expressing the token efforts it would require (or more) to keep a stake in defensible ownership rights.

by Costa Tsiokos, Sun 04/13/2008 09:59:43 PM
Category: Business, New Yorkin', Society
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2 Feedbacks »
  1. If it comes to the point of giving adverse posession to whoever makes up a nominal claim, why not go all the way and strip the bank of the property then pass it on to the former mortgage owner? The alternative is that citizens in the US (and the UK) will end up renting their homes to Sheiks and Chinese communists.

    Comment by Mark Taylor — 07/27/2008 @ 07:14:26 PM

  2. Whoops, I mean from Sheiks and Chinese communists….

    Comment by Mark Taylor — 07/27/2008 @ 07:15:45 PM

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