Friday, May 21, 2010

Rodriguez-Dod on Protecting Tenants from Foreclosure Evictions

Eloisa C. Rodriguez-Dod (Nova Southeastern) has posted Stop Shutting the Door on Renters: Protecting Tenants from Foreclosure Evictions on SSRN.  Here's the abstract:

This article discusses existing and proposed federal and state law affecting tenants’ rights in foreclosure. As “Foreclosure” signs rapidly join “For Sale” signs across the country, the national foreclosure crisis has not only displaced homeowners, but a plethora of renters as well. The approach taken by states concerning tenants affected by foreclosure varies greatly. Furthermore, a recently enacted federal law, created specifically to help tenants in foreclosure, does not relieve the uncertainty in resolving this issue. In addition to being the first to critique the new federal law, this article offers recommendations for legislation that may better protect tenants from foreclosure-related evictions.

Ben Barros

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Landlord-Tenant, Mortgage Crisis, Real Estate Finance, Real Estate Transactions, Recent Scholarship | Permalink

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Rodriguez-Dod's paper is weak in several respects. She lauds the recent Federal "Protecting Tenants at Foreclosure Act of 2009" but omits to analyze whether mortgagors burdened by its operation would have valid inverse-condemnation claims (for "temporary takings" during extended tenancies of persons who would otherwise be quite properly evicted, and for permanent takings to the extent said tenants waste the property). She does not distinguish the situations of tenants of "income" properties (e.g., apartment buildings) for which mortgagors understood that they would have to deal with tenants, and tenants of single-family residences which mortgagees promised not to rent out (and in return for that promise of personal occupancy, got a cheaper mortgage). She promotes a variety of schemes to privilege tenants over mortgagors and other prior claimants without discussing whether upending longstanding property law (first in time, first in right) is good policy or even Constitutional (applied retrospectively). The more extreme schemes she proposes (such as subordinating a mortgagor's right of possession to an arbitrarily-long leasehold tenancy acquired from a long-since foreclosed mortgagee) raise serious 5th Amendment issues. Rodriguez-Dod passes very lightly over the possibility of collusion between outgoing mortgagees and tenants to defraud mortgagors (e.g., by agreeing to sweetheart lease terms). While readers can easily agree with her that it might be good to force market participants to provide better notices to tenants regarding changes in the ownership of the properties they occupy and/or the terms of their occupancies (and such notice requirements might not be so burdensome as to justify a demand for government compensation), Rodriguez-Dod's failure to address the costs to mortgagors and mortgagees (not to mention prospective mortgagees-- who will find new mortgages much more expensive if mortgagors are to be forced to insure future tenants against mortgagees' bad faith) of her more substantive suggestions justifies the reader in treating them very skeptically.

Posted by: Veracitor | May 25, 2010 10:46:59 AM

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