Tenant Rights During Foreclosure

1. Tenant Rights During Foreclosure Workshop for Tenants Marc Potvin & Myrta Cupeles February 17, 2009 Neighborhood Legal Services 170 Common St., Lawrence MA (978) 686-6900

2. What is the foreclosure problem? • Foreclosures are exploding • Tenants are living in bad housing because owners not taking care of properties • New owners want properties empty • New owners using “cash-for-keys” inducements and eviction threats to pressure tenants to move out • Forced moves are stressful to families • Vacant properties are bad for neighborhoods

3. What is a “foreclosure”? • Legal process for a lender to take ownership after a borrower stops paying a loan (mortgage) • Four Steps • Step 1 - Give notice to owner • Step 2 - File Complaint in Land or Superior Court • Step 3 - Hold a foreclosure auction • Step 4 - File a foreclosure deed at the Registry of Deeds

4. Basic Legal Rights: Your Tenancy Survives a Foreclosure • Foreclosure does not automatically end any tenancy • Tenants do not have to move just because the landlord lost the property in foreclosure • Tenancies at wills (no lease / month-to-month) continue on same terms as before • Leased tenancies convert to tenancies at will • It is illegal for the new owner to treat tenants as trespassers, do a lock-out, or shut-off utilities

5. Basic Facts for Tenants: • The bank, person or company that purchases at the foreclosure auction becomes the new owner and landlord with full responsibility for repairs • If the new owner or its agent tells a tenant that they must move, the tenant does not haveto • Only a judge can evict a tenant; self-help evictions and lock-outs are illegal • It is usually best to stay unless a tenant already wants to leave and has a good place to go to

6. Don’t Be Tricked by Cash-For-Keys • Cash-for-keys offers ($500 – 30 days) are a cheap scam to pressure tenants into moving fast • Cash-for-keys offers are almost never a good deal • The cash won’t cover moving or security deposit • Tenants must sign away their legal rights: return of security deposit, damages for utility shut-offs, bad conditions, etc. • Tenants usually do much better in court, both in money and time

7. What If You Sign & Change Your Mind? • If you sign a cash-for-keys agreement and you change your mind because the situation changes, or you cannot or do not want to move, you don’t have to move • You likely will not get paid and you probably gave up legal claims • But the new owner must still go to court to evict you, and you can still raise defenses and ask for more time

8. Facts for Subsidized Tenants (Section 8, MRVP, etc.): • Tenancy continues after foreclosure • During first 12 months of a tenancy the new owner can evict only “for cause”: tenant must violate the lease • After 12 months a new owner can terminate only for “good cause,” which may include “business or economic” reasons • Owner must prove that vacant unit is a good business or economic reason

9. Should You Pay Your Rent During a Foreclosure? • Tenants are responsible for paying rent • Always get receipts • Until a foreclosure sale, tenants should continue paying rent to the old landlord • If you cannot locate the old landlord, hold the rent & put it in a separate bank account, if possible • Tenants should stop paying rent to the old landlord when there is a foreclosure sale • A new owner has the right to collect rent

10. Should You Pay Your Rent During a Foreclosure? • Beware of the old landlord attempting to collect the rent. If in doubt, hold rent and put it in a separate bank account, if possible • Keep receipts to prove payment • If new owner did not give notice and later claims rent due, tenant can defend & force new owner to sue old owner for rent actually paid to the old owner

11. What if the new owner refuses rent? • New owner may refuse rent or won’t request it • Questionable technique to avoid admitting tenancy • Good technique to cause you to fall behind in rent • If rent is refused, send a certified letter to new owner offering to pay rent & asking to whom you should pay • Keep copy! • Save rent money, and put it in a separate bank account, if possible

12. Tenants in Condos • Condo fees are the responsibility of the owner, not the tenant • If the owner fails to pay the condo fee, the condo association is legally permitted to demand and collect rent from the tenant until the balance owed is paid off • Keep condo demand letters • Get and keep receipts for all payments to association

13. Right to Utilities After Foreclosure • Utilities covered: water, sewer, electric, gas, heat • If tenant had a lease: a new owner steps into the shoes of the old owner • If tenant at will: new owner must pay for all utilities, except those that the tenant agreed to pay under a written agreement with the old landlord • Problem: foreclosing entities often ignore utilities for which they are responsible. This lead to shut offs

14. Dealing with Utility Shut-Offs • Contact new owner immediately & demand action to prevent shut-off or restore service • Contact utility company & request service be restored or not be terminated due to the foreclosure. Tell utility that landlord lost property in foreclosure • Many utilities will not shut-off when informed of foreclosure status • Don’t have utilities put in your name; only the owners • If problem remains, call Dept. of Telecommunications & Energy (DTE) Consumer Hotline - 800-392-6606 • DET staff can and do order utilities to restore service • If these fail, go to Housing Court for a Temporary Restraining Order (TRO) to order new owner to pay the utility bills and provide service

15. What if you are living in bad conditions? • Owners are responsible for making repairs to an apartment and common areas, including snow removal • All housing must meet the standards of the State Sanitary Code • Tenants should always notify an owner of problems • Retaliation against the law – penalty is 3 times monthly rent • In eviction case, presumption of retaliation within 6 months of complaint or request for code inspection • Notice also can go to RE agent, prop. manager or lawyer • If pre-foreclosure, notify current landlord; if post-foreclosure, notify new owner • Notify in writing. Keep a copy • This is proof that the tenant notified the owner and owner knows about problems

16. If Bad Conditions Continue • If bad conditions continue ask for an inspection by Inspectional Services Department at City Hall • (978) 620-3130 in Lawrence • Tenants can request a full inspection of apartment and all common areas (hallways, laundry rooms, basement, outside) • ISD will give tenant a report of code violations and will order owner to make repairs • ISD should re-inspect and may take the owner to court • Tenants should clean up before inspection to avoid citation • Take pictures and write date on back

17. How do I get repairs made? • First complain to the owner in writing • If no response, call ISD for an inspection • If serious or emergency conditions, get ISD report and go to Housing Court for a Temporary Restraining Order (TRO) • TRO will order owner to make immediate repairs • TRO can be brought against prop. manager or R.E. agent if owner not known

18. Evictions After a Foreclosure • If new owner cannot persuade tenant to leave, the only option is to begin the formal eviction process • To evict an owner must follow specific legal procedures: • Give tenant a valid “notice to quit” • File a complaint in court • Prove case and overcome tenant defenses

19. Evictions in a Nutshell • Notice to Quit • Court Summons & Complaint • Tenant Answer • Tenant Options • Discovery • Transfer to Housing Court • Court Hearing • Mediation • Judgment or Dismissal • Obtaining a 6-12 month Stay

20. Eviction Step #1 - Notice to Quit • Before a landlord can evict, the tenant must be given a written notice of tenancy termination (called a “notice to quit”) • Often uses phrases such as “tenant must deliver up” or “vacate” the apartment • Notice will state a date for the tenant to move • You do not have to move by the date! • A notice to quit does not determine who is entitled to have legal possession of an apartment • Only a judge can decide

21. Help is Available to Tenants • Don’t panic if you get a Notice to Quit or Summons and Complaint • If you receive a Summons and Complaint come to a NLS Foreclosure Eviction Clinic • Get advice • Get help with completing your Answer and Discovery forms • Remember – you are likely to do better at court

22. Eviction Step #2 – Court Complaint Landlord can go to court only after the notice period is over • Legal filing called a “Summons and Complaint” • Complaint must state the reason for the eviction • Complaint can be brought by owner or agent • Must be served by a constable or sheriff • Will state “Answer Date” and “Original Trial Date” • Answer Date will be about 7-14 days after service • Original Trial Date in Lawrence is the Thursday after the Answer Date

23. Step #3 – Tenant files “Answer” • The Answer is the document you file to tell your side of the case • It will include your Defenses • May include Counterclaims against the owner • Easy-to use Answer forms are available from: • Neighborhood Legal Services or • On-line at www.masslegalhelp.org • The Answer must be delivered to the court and the landlord (or landlord’s attorney) by the Answer Date shown on the Complaint

24. Major Foreclosure Eviction Defenses • Technical Defenses • No notice to quit or defective notice to quit • Does not end tenancy on a rent day • Does not give a full rental period • Unclear or misleading language • Owner files complaint before notice to quit expired • Complaint not signed by an attorney (if corporate landlord) • Owner can’t prove ownership (no foreclosure deed) • Complaint is defective or not served • All tenants not named • Reason is different from notice to quit

25. Major Foreclosure Eviction Defenses • Bad conditions • Interference with utilities or use of the home (Breach of Quiet Enjoyment) • Security Deposit & Last Month Rent Violations • Retaliation - for complaint of bad conditions • Discrimination (i.e. Section 8, familial status)

26. Why Use Tenant Discovery • Great tool to get information to prepare your case • If tenant requests Discovery by the Answer date, the trial date is automatically postponed for 2 weeks • 3 types of Discovery • Interrogatories (Questions) – up to 30 allowed • Requests for Documents • Requests for Admissions – owner must admit or deny facts • Easy-to-use discovery forms are available from NLS or at www.masslegalhelp.org

27. Transfer from District Court to Housing Court • If eviction is filed in the District Court you can transfer the case to the Northeast Housing Court • Strongly recommended • More knowledgeable judges and housing specialists • Usually postpones trial date • How? File a “Transfer Form” with District and Housing Court before the Trial Date • Form available at NLS or at www.masslegalhelp.org

28. Foreclosure does not terminate security deposits Mass. law requires old landlord to transfer deposit to new owner at time of sale (rarely done in foreclosures) Tenants can recover deposits from: Old landlord (can be a problem because insolvent or gone), or New owner, unless new owner is the foreclosing entity and a bank charted by Mass. or the U.S. Best to bring as counterclaim against new owner because it can serve as an eviction defense On anniversary date a landlord is required to pay the interest to the tenant or inform the tenant to deduct the amount from the next rent payment If you already moved, send a 30-day demand letter and follow with Small Claims lawsuit Under G.L. ch. 93A, tenants can win triple damages in a small claims action Understanding Security Deposits

29. Tenant Counterclaims • Claims brought against owner for money damages • Use to pressure bank into giving a lease or more money and more time for a move out • Bad Conditions (rent rebate) • Breach of Quiet Enjoyment (no heat, no utilities, lock-out, unlawful entry, bad conditions) (3 X Rent)

30. Tenant Counterclaims • Unfair or Deceptive Practices (Consumer Protection Violations – scare tactics) • Infliction of Emotional Distress • Headaches, stomachaches, insomnia) • Retaliation (3 X Rent) • Security Deposit Violation

31. Eviction Step #5 – Court Hearing • Thursdays is eviction day at Housing Court • NLS staffs a “Lawyer-for-the-Day” table • Services range from advice, assist in mediation, to full representation at trial • Case referred to a Housing Specialist for mediation • Banks agreeing to tenancies or better move out deals when faced with worse care scenarios • Tenant has good defenses – likely to keep possession • Tenant will win $$$$$ damages • If no agreement reached, case goes before judge

32. Even if you lose your case . . . You still get time • Tenants are entitled to seek 6 months time to find a new place to live • Called a “stay” of the execution • If tenant is elderly or disabled, stay can extend to 12 months

33. Final Words • Almost never take a “cash-for-keys” offer • Write to the owner about bad conditions • Ask for a ISD inspection • Use court process to obtain more money, more time or keep their apartment • Attend a NLS Eviction Clinic • NLS can assist you to file your Answer and prepare for court • Tenants will almost always do better at court

34. Questions and Answers