California Attorney General Announces Investigation into Banks’ Treatment of Tenants after Foreclosure

Since launching our Tenant Foreclosure Hotline we have counseled over 4,000 tenants in foreclosure situations. Most of the callers to our hotline report being harassed and mislead by post-foreclosure landlords and their agents.

I’m happy to report that, at the urging of housing advocates, California’s Attorney General, Jerri Brown has launched an investigation to ensure compliance with tenant-protection laws by banks and private investors acquiring tenant-occupied, foreclosed properties. The investigation, announced this week, comes after Tenants Together and 20 allied housing rights and public interest groups from across California brought rampant violations of tenant protection laws to the attention of the Attorney General. The coalition urged Attorney General Brown to take action in response to a pattern of illegal conduct and tenant harassment by banks, real estate agents, and lawyers in their treatment of tenants after foreclosure.

“Tenants who live in properties in foreclosure are the forgotten victims of the collapse of the housing market,” Attorney General Brown said. “We’ll fight every step of the way to ensure they aren’t rousted from their homes in violation of the law.”

The Attorney General’s press release provides further detail on the demands to the industry:

As a part of his investigation, Brown today sent letters to 24 banks, loan servicers, private investors, and law firms demanding information about whether they are complying with federal, state, and local laws regarding foreclosed properties and their treatment of tenants… In his letter, Attorney General Brown requires banks, loan servicers, private investors and law firms to provide information by July 19 about their policies and procedures when dealing with foreclosed properties and current tenants. It specifically asks the recipients to outline how they ‘promote or preserve tenancies after foreclosure.’

We will continue to monitor the Attorney General’s investigation and report on its progress.

Make San Francisco’s Rent Board More Pro-Tenant

By Ted Gullicksen

On Thursday, the Rules Committee of the Board of Supervisors will be hearing a proposed ballot measure for November which would increase tenant representation on San Francisco’s Rent Board and give Supervisors authority over appointments. The hearing will be Thursday, July 1, at 11:00 AM in Room 263 of San Francisco City Hall.

Right now the Rent Board is made up of five members: two landlords, two tenants, and one homeowner. All of them are appointed by Mayor Newsom (who is opposed to rent control) and they serve at his pleasure. The proposal, sponsored by Sup. David Campos would make the Board three tenants, two landlords, and two homeowners; half of them would be appointed by the Board of Supervisors, half by the Mayor, and one would be selected jointly by the Board and Mayor.

The Rent Board has the power to write regulations, decide cases, and determine rent control policy. Right now, tenants have to work to prevent the Board from rolling back rent control. The Campos proposal will give us the chance to use the Rent Board to strengthen rent control and expand our rights.

Please come and show your support for this proposed ballot measure!

Ted Gullicksen is the Director of the San Francisco Tenants Union.

Senator Lou Correa Kills Nation's First Predatory Equity Bill

Senator Lou Correa, a Democratic state senator from Orange County, has killed the nation’s first bill to stop predatory investments that displace renters from their homes. The bill, AB 2337, authored by Assemblymember Tom Ammiano (D-San Francisco), sought to ban the state’s public employee pension funds from investing in “predatory equity” schemes. The issue gained significant attention after real estate investments by CalPERS and CalSTRS in East Palo Alto and New York City resulted in the displacement of thousands of rent-controlled tenants and the loss of hundreds of millions of dollars.

State Senator Lou Correa’s committee stopped the bill yesterday at the request of the California Association of Realtors and landlord groups. Correa has received significant campaign donations from landlord and realtor interests.

“Only someone in the pocket of landlords and realtors could possibly oppose this bill,” said Dean Preston, Executive Director of Tenants Together, California’s statewide organization for renters’ rights. “There’s no other explanation for Senator Correa’s decision to kill this legislation.”

Tenants Together and the East Palo Alto Fair Rent Coalition co-sponsored the bill to prevent workers’ retirement funds from being invested in schemes to evict working people. The bill had the broad support of at least twenty nonprofit housing organizations, labor groups and government entities. The only opponents were several landlord groups and the California Association of Realtors.

The California Bankers’ Association, which originally opposed the bill, removed its opposition based on substantial author’s amendments that narrowed the scope of the bill. CalPERS and CalSTRS, the very entities whose investments would have been restricted under the bill, also took a neutral stance on the bill after amendments were incorporated into the language of the bill.

The full Assembly had approved the bill by a vote of 43-30 before it landed before Senator Correa’s Public Employment and Retirement Committee yesterday. Senator Correa did not pose a single question at the hearing to the author or witnesses about merits of the bill, instead derailing the bill without explanation.

Despite these developments, Ammiano’s groundbreaking bill was not in vain. The bill forced a discussion about predatory equity investment practices and drew considerable media attention to the problem. Additionally, in response to the bill, CalPERS and CalSTRS adopted new internal policies banning future predatory real estate investments, a move praised by tenant advocates as a major step toward stopping public pension funds from financing evictions.

Court Slams NYC Rent Board for Exceeding Its Authority

Each year, the New York City Rent Guidelines Board (RGB) passes a rent increase for tenants in rent-stabilized apartments.

In June 2008, with the economy on the decline, the RGB passed 4.5 and 8.5 percent increases for one and two-year renewals, respectively. But some tenants were forced to take on even higher rent hikes. The RGB passed a guideline with a “supplemental increase” provision, also known as a “poor tax.” Tenants who have lived in their home for six years or more and pay $1,000 or less in monthly rent were ordered to pay a dollar increase rather than the usual percentage increase. The 2008 increases were $45 and $85 for one and two-year renewals for tenants who fell into that category. In 2009, the board passed high increases of 3 and 6 percent, with a poor tax of $30 and $60.

The nine board members are appointed by the mayor, and the chair serves without term limits, at the pleasure of the Mayor. While there are legislative efforts to remedy this imbalance of power, tenants and advocates have taken other measures to put a stop to what they believe are illegal acts by the RGB. With the help of the Legal Aid Society and South Brooklyn Legal Services, New York-based tenants’ rights organization Tenants & Neighbors, along with two tenants directly affected by the supplemental increase, sued the Rent Guidelines Board for exceeding its authority by creating different classes of housing accommodations.

Ellen Davidson, attorney with the Legal Aid Society, explains, “About three weeks after the final vote, the Appellate Division, 2nd Department came down with its decision in New York State Tenants and Neighbors Coalition v. Nassau County Rent Guidelines Board. In that case, the 2nd Department invalidated a separate rent increase for low-income tenants, holding that the Board had improperly created a new class of accommodation. Creating classes of accommodations was left to the legislature only. We then used this claim to file our case.”

In January, the Supreme Court of New York County issued a decision in favor of the tenants. The Rent Guidelines Board posted an alert on its website stating that the supplemental increases from 2008 and 2009 were not in effect and immediately took steps to appeal the decision. While some tenants continued to pay the high increases and watch the appeal process, other tenants simply could not afford the increases and were forced to leave their homes.

Six months after the initial wave of good news, tenants received another. One week ago, just two days before the RGB’s annual vote, the Appellate Division of the New York Supreme Court upheld the lower court’s decision and invalidated the supplemental rent increases passed by the RGB. Tenants are entitled to money back from their landlords. According to Ed Josephson of South Brooklyn Legal Services, tenants can request a refund or credit from their landlord. If the landlord does not respond, the tenant can either subtract the overpayment from the rent or sue in small claims court.

Next, the Rent Guidelines Board will ask the state’s highest court, the Court of Appeals, to review the case. In the meantime, the board continues to do business as usual. Rather than approve a rent freeze during this damaging economic crisis, the board passed rent increases of 2.25% for a one-year renewal and 4.5% for a two-year renewal. These are the lowest increases that board has passed in eight years.

Private Investors Blatantly Violate Tenant-Protection Laws after Foreclosure

While callers to our Tenant Foreclosure Hotline routinely report being harassed and mislead by agents of banks acquiring foreclosed properties into vacating their homes prematurely, some of the most atrocious violations also come at the hands of private investors.

In a recent interview with KGET Channel 17, NBC-Bakersfield, Frank St. Clair, the managing broker for the Bakersfield-based Bella Vista Real Estate, LLC stated that he was moving forward with the post-foreclosure eviction of a tenant with a long-term lease. Mr. St. Clair denied that his tenants are protected by the federal Protecting Tenants at Foreclosure Act (PTFA), stating that the federal law “pertains to the banks that are the foreclosing entity. I am not the foreclosing entity, I’m a third party and therefore I don’t have to honor a lease.”

Mr. St. Clair’s position is 100% wrong. The PTFA applies to both banks and private investors, stating that “in case of foreclosure…any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to” the existing lease. Bella Vista Real Estate, LLC is clearly subject to the PTFA, having acquired at least 30 foreclosed properties at trustee sale over the last nine months.

Unfortunately, Mr. St. Clair’s callous, above-the-law attitude is commonplace among private investors acquiring foreclosed properties. Tenants Together will continue to monitor these private investors and take the necessary steps to assure their compliance with tenant-protection laws.

Kagan Proves It's Time To Amend The Federal Fair Housing Act

By Jessica Gafkowitz

This past weekend's breaking news about Elena Kagan has added urgency to Alternatives to Marriage's call for for Congress to amend the federal Fair Housing Act to ban marital status discrimination in housing across the nation.

Even though California has strong fair housing laws, everyone reading this blog could know someone who has been discriminated against. Over one half of American households are headed by unmarried people, including nearly 6.15 million households headed by cohabiting couples (of whom 88.6% are different-sex couples). Marital status discrimination in housing is both widespread and legal - and completely unfair however, only about half of U.S. states and many localities prohibit it. In states that are silent on the issue, a landlord can legally refuse to rent to an unmarried couple, a town can decree that unmarried families, roommates or extended families cannot live certain neighborhoods.

While a new bill has been introduced (H.R. 4820 The Fair and Inclusive Housing Rights Act) that would prohibit discrimination on the basis of sexual orientation and gender identity, this is not enough - marital status must also be added. AtMP also calls on states that have existing laws against marital status discrimination to enforce them, and calls for the repeal of all anti-cohabitation laws.

As Tenants Together points out in their blog post on this issue, back in 1995-1996, Elena Kagan recommended federal intervention over a California Supreme Court ruling that a landlord's religious freedom was not burdened by a state law prohibiting housing discrimination on the basis of marital status.

Alternatives to Marriage is a non-profit organization that advocates for the fairness and equality for ALL unmarried people and against marital status discrimination, AtMP opposes her nomination unless she withdraws her former statement and demonstrates an understanding about the injustices of marital status discrimination.

Join our call to expand the federal Fair Housing Act and speak out against Supreme Court nominee Elena Kagan’s outrageous statement that a landlord’s religious beliefs justify denying housing to an unmarried couple!

Jessica Gafkowitz is a communications assistant at Alternatives to Marriage. She can be reached at jgafkowitz@unmarried.org

Judges Rewrite Ellis Act

By Dean Preston

This week, appellate judges re-wrote California's Ellis Act to find that a landlord cannot waive its rights under the Ellis Act. The Case is Embassy LLC v. City of Santa Monica.

The Legislature is supposed to make the law which the courts then apply. When it comes to California's Ellis Act, however, we have two legislative bodies: The elected legislature that enacted the law and the judiciary that rewrites the Act to benefit landlords.

Here's what happened in the Santa Monica case. The City and landlord Embassy LLC entered into a settlement agreement ten years ago in which the landlord expressly waived its right to withdraw the rental units under California's Ellis Act. Subsequently, in August 2008, the same landlord sought to withdraw the units and evict the tenants under the Ellis Act. The City rejected the filing based on the landlord's waiver of the right to invoke the Ellis Act in the earlier settlement agreement.

The landlord sued to compel the city to allow it to withdraw the units from the rental market, notwithstanding the fact that the landlord had given up the right to invoke Ellis. The landlord asserted that the waiver it had signed was unenforceable as a matter of law. The trial court correctly threw out the landlord's lawsuit. The landlord appealed.

Earlier this week, the Court of Appeal sided with the landlord. The court reached the remarkable conclusion that "the Ellis Act provides that a contractual waiver is unenforceable."

Of course, the Ellis Act says no such thing. The Act says nothing about contractual waivers. Nor would there be any reason for the Act to address waivers by a landlord. The point of the Act was to give a landlord who complies with the Act a way out of the rental market, not empower landlords who falsely promise to stay in the rental market the ability to violate their written agreements.

When the legislature wants to provide that rights are nonwaivable, it knows how to do it. There are California statutes that specify that tenants cannot waive certain rights such as the right to jury trial, the right to proper notice of eviction and the right to habitable living conditions. This reflects the determination of the legislature that tenants usually have little bargaining power and should not be held to contractual provisions that require them to waive statutory rights.

There is no similar "nonwaiver" provision in California law for landlords, and certainly not one in the Ellis Act. At least there wasn't until the Court of Appeal created one this week without legislative approval.

The City of Santa Monica will now decide whether to petition the California Supreme Court for review of this obviously incorrect decision.

Elena Kagan – Friend of Renters?

By Dean Preston

In 1987, Elena Kagan, as clerk to Supreme Court Justice Thurgood Marshall, stood up for rent control, characterizing a challenge to its constitutionality as “absurd” and “outrageous.” In the mid-1990s, Kagan, as counsel to President Bill Clinton, authored a memo supporting a landlords’ right to discriminate based on marital status.

So which is it? Is Kagan sympathetic to the rights or renters or not? The Senate Judiciary Committee needs to find out.

Kagan was absolutely correct in her memo of 1987. Property rights zealots have come up with some wild theories over the years as to why rent control laws are unconstitutional. Kagan and many fair-minded judges over the years have rejected these ideologically driven arguments, though they keep resurfacing in the hopes that judges will eventually adopt them.

A recent New York Times article questions whether the 1987 memo reflects Kagan’s personal view or that of the Justice she was working for: “it is not clear how much the memorandums reflect her thinking today. At her confirmation hearing to be Solicitor General last year, Ms. Kagan sought to distance herself from them, saying that she no longer agreed with some and that her job as a clerk was to ‘channel’ Justice Marshall’s views.”

The nominee’s family history suggests she should be sympathetic to the plight of renters. Kagan grew up in an apartment in New York City. Her father, Robert Kagan, had a small law firm that “mostly represented tenants.” According to his obituary, his work also included “securing housing for poor families displaced by the construction of Lincoln Center, and opposing Westway, a proposed superhighway through residential areas.” Kagan is probably the only Supreme Court nominee in history whose parent was a tenant rights lawyer.

Nonetheless, Kagan took a disturbing position in the mid-1990s. As White House Counsel to President Clinton, Kagan issued a memo highly critical of a California housing discrimination case. In the case, the Court had held that housing discrimination laws prevented a landlord from refusing to rent to a couple based on marital status. The landlord in the case claimed that her refusal to rent to an unmarried couple was based on her religious opposition to sex outside of marriage. Kagan believed that the anti-discrimination statute in question stifled the landlord’s religious freedom, and she urged the Solicitor General to weigh in on the side of the landlord in the case.

Kagan’s confirmation hearing is scheduled to begin on June 28 in the Senate Judiciary Committee. The New York Times predicts: “in an era in which the government’s power to encroach on property rights has been a hot issue, Ms. Kagan could face sharp Republican questions at her confirmation hearing about her strong reaction to the rent-control ruling.”

Liberals on the committee -- including Senator Chuck Schumer, who has recently taken a leadership role in protecting rent control housing from predatory equity schemes -- should not wait for Republicans to raise these issues as if there were something wrong with supporting rent control and other tenant protections. Instead, they should proactively seek assurances that Kagan supports renters’ rights, particularly in light of her disturbing position on California housing discrimination case.

The Roberts Court has shown little regard for precedent. The activists on the court would not think twice about striking down rent control, housing discrimination laws and other measures that run counter to the political beliefs of the conservatives on the high court. With approximately one third of Americans living as renters, it is important that liberal Judiciary Committee members make sure that Kagan will uphold existing laws that protect renters.

A strong statement of support for basic renter protections would go a long way toward assuring Americans that this Supreme Court nominee has compassion for the plight of ordinary people struggling to make ends meet.

[Article originally published by Beyond Chron]

The Fall of CitiApartments

Real estate company CitiApartments, founded by Frank Lembi, is notorious for being one of the worst residential landlords in San Francisco. Their business model was predicated upon the displacement of tenants from their homes in order to circumvent rent control protections and maximize profits.

The combination of the economic crisis and strong tenant organizing efforts has led CitiApartments to their demise. The owners of 16 properties filed for bankruptcy in February 2010, and 20 properties were acquired by another company (LNM) just a couple of weeks ago. An additional 24 buildings are headed for foreclosure. The tactics once used by CitiApartments and its affiliates to harass tenants out of their apartments, including threatening phone calls, utility shutoffs, unannounced visits, and chronic construction work, have significantly subsided.

But the fight isn’t over. An article in the San Francisco Bay Guardian highlights that tenants have yet to receive their security deposits, spurring a class-action lawsuit against 57 corporate defendants associated with CitiApartments.

Read the full article at sfbg.com.

Tenants Together Delivers Win-Win Proposal to JPMorgan Chase

Yesterday, Tenants Together met with representatives of JPMorgan Chase & Co., one of the largest-post foreclosure landlords, to talk about the nightmare situations tenants living in foreclosed homes are going through. Tenants Together hand delivered its Win-Win proposal to Peter Baker, Chase’s California Chairman and Steven Stein, Chase’s Senior Vice President of Home Lending.

Our Win-Win Proposal urges financial institutions acquiring foreclosed properties to, among other things, enforce a zero-tolerance policy for non-compliance with existing tenant-protection laws and to not evict tenants without just cause.

The Chase representatives acknowledged the urgency of the situation and committed to responding to the proposal quickly. We’ll let you know how they respond. Our thanks to the California Reinvestment Coalition for facilitating this meeting with Chase.

Parkmerced in Default: What Now for Owners’ Plan to Bulldoze Over 1,500 Rent-Controlled Homes?

A new article by our director challenges the development plans at San Francisco's Parkmerced.

The owners of Parkmerced cannot pay their mortgage, yet they want permission from the city to demolish more than 1500 rent controlled homes. While most of the public discussion about the proposed development project has been about environmental, transit and preservation issues, the planned demolition of so many rent-controlled housing units is reason alone to stop this project.

Read the full article at BeyondChron.org.