Why HB2733 is Needed!

HB 2733 rights social wrongs.

FORECLOSURE

THE FORECLOSURE CRISIS is victimizing tenants. But, in many cases, the homeowners are not so innocent.

When a property is foreclosed, the tenants traditionally are given short shrift. With no forewarning, they are told by the lenders to vacate in a number of days. Many times these are families living in houses they intended to purchase, having paid option fees, down payments and/or closing costs. Home rentals, where the vast majority of foreclosure evictions occur, often involve large deposits and prepaid final month of rent. Having sunk all their funds into the rentals, they have nowhere to go and no way to pay for it.

One company, GoRenter.com, makes a frequent practice of offering leases with purchase options, with large sums paid on down payments and closing costs.

If a tenant is evicted, which often happens with unscrupulous landlords and management companies, they are out the amounts paid in the beginning. Given the bias of the justice courts, they find it all but impossible to recover their security deposits too.

Invariably, the tenants have lost almost everything: Homes, security deposits, pet deposits, down payments, closing costs, applications fees, cleaning fees, preparation fees, option fees. Suing the landlord or management company is an exercise in frustration and futility; landlord bankruptcy happens more than one would imagine, blocking collection by the tenants.

Frequently, the situation is a diabolical scheme perpetrated by con-artist landlords. When the housing market was frothy, they would purchase the properties for nothing down, often receiving cash in hand, or securing a secondary mortgage that provided cash. Then, they would rent the properties, with tenants as prospective purchasers, so as to rake in more cash. Over the duration they would not pay the mortgages, with intent to foreclose. Some landlords repeat this pattern with many properties.

When a property is foreclosed, therefore, not only are the tenants harmed, but just about everybody else is, too. Obviously, the lending institution takes a hit, which is harming the financial system. Neighborhoods are negatively impacted, with vacant properties running down property values and creating unsafe community conditions. This creates a vicious cycle of foreclosures, as surrounding housing declines and the overall economy goes down the tubes.

HB 2733 stops this in its tracks. It provides a breathing space for victimized tenants, so they have time to organize and plan. It keeps houses occupied. Tenants can find themselves in the position of becoming first time home buyers for a fair price, depending on market conditions. Neighborhoods are stabilized by converting rental properties to owner-occupied, with the same residents continuing throughout. It provides for lenders to receive the mortgage principal balance due, working to reduce uncertainty about the outcome of the property auction sale insofar as there is a ready buyer already familiar with the house.

Morever, it holds landlords accountable for fulfilling their contractual and social obligations. It removes the incentive of the type of schemes outlined above. Landlords must pay their mortgages or return the rent. Landlords must promptly apprise their tenants of developments, or be penalized by loss of deposits and fees, with damages for wrongful withholding, no longer dischargeable in bankruptcy. When a property is foreclosed – as is the tenant’s opportunity to purchase – all deposit, fee, and purchase funds paid by the tenant are returned to the tenant. Lenders and the courts must also give notice to the occupant tenants, who are no longer kept in the dark.

In some cases, groups of resident tenants may band together to purchase a multi-unit apartment community. What had previously been investment opportunities for hands-off, out of state owners, are transformed into small, locally owned and inhabited, group condominium communities combined with rentals managed by on-site owners. Think of it as a housing cooperative. This is the definition of community development and stability.

It may be that this set of opportunities could spawn new lending scenarios by banks, foundations, municipalities and social service organizations whose intent is to better the community.

Another common type of abuse by landlords is REFUSAL TO ACCEPT RENTS OR PROVIDE RECEIPTS. On an almost daily basis our organization receives calls from tenants whose landlords refuse the rent, and then use non-payment as grounds for evictions. This is not an exaggeration. Some landlords just say it is not their policy to give receipts. Some say that the tenant’s check can be the receipt, but that does not mean the landlord will negotiate and deposit the check. Landlord “TW” has been known to take a tenant’s rent check and sit on it for weeks, and then at the end of the month file for eviction due to nonpayment, claiming the amount paid was inadequate. And, amazingly, many justices of the peace buy into this crap.

Sometimes landlords accept a payment, but apply it to some other concocted claim, and then assert the rent was not paid anyway. Eviction time.

When a tenant pays by money order, and does not obtain a receipt, he is evicted anyway because the courts will not construe a money order stub as evidence of rent payment. It takes six or more weeks to confirm a money order transaction, but an eviction can happen in one or two weeks. So, by the time the tenant obtains proof the landlord cashed the money order, the tenant is living on the street or wherever lodging can be found. Frequently tenants leave payments in drop-slots or boxes. Later, the landlord claims that the payment was not received for various reasons, such as theft by a manager or employee who has gone AWOL. So the landlord demands a second payment, and when the tenant is unable to afford a second rent payment in a given month. . . it’s eviction time.

This has to stop, and HB 2733 stops it.

A landlord must give a tenant a contemporaneous receipt for any payment. It must describe who is paying what, when, in what amount, for what purpose, and how much is due. If the landlord does not do this, it is a violation and can subject the landlord to statutory damages due the tenant.

If a landlord can be shown to have refused the rent, he cannot proceed with an eviction case against the tenant. Moreover, he waives his claim for rent for the period. This is the essence of accountability, with teeth.

During an eviction hearing, if a tenant can provide a copy of a money order or certified funds made payable by the tenant to the landlord at the time rent was due, then it is to be presumed evidence that the tenant made effort to pay. A landlord could rebut the presumption, but to do so would have to come up with evidence countering the tenant’s position.

CREDIT RATINGS

Another fast and loose by landlords is to demand monies from the tenants, and then, without obtaining a court judgment, SULLY THE TENANT’S CREDIT WITH UNJUSTIFIED AND UNSUBSTANTIATED NEGATIVE RECORDS ON THE CREDIT REPORTS. This is heinous. I have seen hundreds of cases where landlords have extorted monies from tenants by wrecking their credit with bogus claims. Whenever the tenant wants to purchase a vehicle, a home, rent, obtain credit, obtain a cell phone – anything – it is blocked by the landlord’s lies.

In fact, landlords often sell their alleged claims to collection agencies. Then these jackals harangue the tenants, sometimes for years. At the end of it all, they do the same damn thing: place the non-litigated, unsubstantiated negative record on the tenant’s credit report.

It does no good that the claim is noted to be disputed. The damage is done, anyway. This is nothing less than financial libel. The only way to confront it is through expensive litigation in federal court.

But with HB 2733 this type of abusive conduct will be illegal. A landlord must first go to court for a judgment, or forget it. This applies to any successor party, too, such as a collection agency. Plus, there is a penalty for violation, insofar as the landlord loses the right to pursue his claim in any forum if he defiles the tenant’s credit absent a judgment first secured. Plus, the conduct is defined as defamation of credit, which gives the tenant a leg up on legal action that may be contemplated against the landlord.

Pretty hefty stuff, this is. And it’s about time.

EVICTION

Lastly, there is the issue of EVICTION. In Maricopa County alone, there are about 7,000 cases per month, almost all of which end in the tenants losing. Multiply each case by the number of people affected, and you end up with perhaps 250,000 people evicted each year in Maricopa County alone. That’s a whole city’s worth of population, and a portion of this city’s population gets suckered again at the tail end of the process.

Now, I am not going to defend any deadbeat tenant legitimately evicted for nonpayment or wrongful conduct. Tenants are human, and humanity is flawed, to say the least.

But there is another scam that goes unnoticed.

In an eviction, there are several factors. One is removal of the tenants, by way of what is called a writ of restitution effected by a constable, usually. Another is a monetary judgment. The third, is that the tenant and his family has to go somewhere. New lodgings must be acquired, and property moved there. It is a time of great stress, physically, emotionally and financially. That’s just a fact.

A.R.S. § 33-1368(B) states that, after a tenant is convicted of eviction for nonpayment, reinstatement of the rental agreement is solely in the discretion of the landlord. That’s fine with me; there is no reason that the landlord should have to take such a tenant back.

What happens all too often, however, is that landlords entice evicted tenants to pay off the full judgment with a promise that they can remain in the property. So, the tenants pay a month of rent in addition to the judgment. In other words, they make good on their debt, giving up precious monetary resources in reliance upon the assumption that they will have a place to stay. But, instead, later – sometimes weeks, sometimes over a month – the landlord executes the writ of restitution, and the tenants are homeless, locked out and separated from their property. From the point of view of a landlord, a nice scheme to get the judgment paid; but for the tenants, who believed the lease had been reinstated, it is a shock, nothing less than kick-the-dog-while-its-down.

A lie, a deception that is not contemplated in the existing statute, and needs to be fixed. HB 2733 fixes it by creating an elegant either/or situation. The landlord can have his judgment, and collect on it by legal means. But, if he invites the tenant back after eviction, then the fact that any rent is to be paid has the same effect as if he had accepted a partial payment under A.R.S. § 33-1371(B), waiving the right to terminate and, concurrently, vacating the judgment.

Of course, this solution would not prevent a landlord from negotiating payment of the judgment as a prerequisite to reinstatement. It would only make it above board, removing the deceit factor that harms those who have the least. It's about fairness and justice.

Contact your State Legislator HERE to prevent:

• Foreclosure Abuse
• Rent Refusals
• No Rent Receipts
• Credit Report Defamation
• Eviction after Rent Acceptance

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