Archive for the 'Real Estate' Category

Zombie Properties Create Issues for Neighborhoods across the Country

Recently we’ve all become somewhat obsessed with what’s known as “zombie culture.” Popular movies and shows like World War Z and The Walking Dead spin out tales of survivors of the zombie apocalypse. Some people take these possibilities seriously, and have stocked food and weapons for the apocalypse. There are even entire websites devoted to zombie apocalypse preparedness.

FC land bankHowever, in the real estate world, a different type of zombie outbreak has already begun to gain a foothold in real life. There has been observed an increasingly common pattern of unresolved foreclosure situations leading to what are known as “zombie properties.”

Zombie properties result when a foreclosure proceeding begins, but is never completed because the owner moves out of the home before the foreclosure process can be fully completed. This leaves the property in a twilight-like state- no one occupies the home, but the property remains in the homeowner’s name. Or, there is an extended dispute over ownership of the home, as many banks may be reluctant to claim such properties. Some zombie properties may have no owner and may remain in this state for months or years.

For some communities, zombie properties can create major problems. Properties that are left unoccupied for long periods of time can create pest control issues, plant overgrowth, increased wildlife, and other problems. They can also lead to more serious issues such as crime (the home may turn into a haven for drug trafficking and gang activities). These types of issues can “infect” the overall neighborhood and lower property values. Statistical reports indicate that the most affected metropolitan areas in 2014 were the New York/New Jersey/Long Island areas, and areas in Florida such as Miami, Ft. Lauderdale, and Tampa areas. Other states have been hit hard too.

In my opinion, completely preventing zombie foreclosures might be a difficult task, as they are somewhat of the “fallout” resulting from the mortgage crisis from the past decade. Also, some zombie property situations are difficult to avoid (such as when the previous homeowner suddenly moves to a different state or out of the country). However, being able to identify and address the existing zombie homes can help prevent them from “infecting” the entire neighborhood through disuse and lack of upkeep.

Some possible methods for curbing the effects of zombie foreclosure situations may include:

  • A push for more legislation requiring increased coordination between banks, mortgage companies, and state/local housing authorities.
  • Creation of phone hotlines where neighbors can call to report suspected zombie properties.
  • Streamlined court processes for auctioning off homes that have been deemed as zombie properties (usually homes that have been in that state for at least 3 years).
  • Enforce quicker response times in terms of condemning and demolishing problematic zombie properties.

I think these steps can help to reduce one of the main problems with zombie homes, which is that they are left unattended for long stretches of time. This is a problem that appears to be growing, and will be with us for a while. As such, it’s important for communities and local authorities to begin recognizing the dangers associated with such properties, and begin taking steps towards winning the war against zombie properties. If you notice any homes or properties that might be suspect, contact your local housing authorities, or a real estate attorney for assistance with the situation.

Successful Landslide Lawsuits

Landslides are a large risk in elevated parts of the United States, such as the Appalachians, Northwestern United States, and Southern California. Landslides claim a billion dollars in property damage and cause 25 deaths each year.

Most landslides are triggered by natural events, such as earthquakes or heavy rainfall. However, humans can also contribute to landslides. Although successful landslide lawsuits are uncommon, here are three recent cases that succeeded:

La Conchita landslide lawsuit1) La Conchita – 2008

La Conchita, California has a history of landslides. The landslide of 2005 was the most devastating. That landslide destroyed thirteen homes and killed ten people. The families of the deceased sued La Conchita City and La Conchita Ranch Co., a ranch on top of a hill overlooking the residences.

The jury determined that the city was not liable, but La Conchita Ranch was fifty percent liable because they failed to install a proper drainage system which would have diverted some of the rain water. $5 million was divided between thirty-six plaintiffs.

2) Rolling Hills – 2010

In 2005, 300 feet of rocks and debris collapsed onto Poppy Trail residence area. The retaining wall holding back the rocks was eroded after a winter of heavy rainfall. Roadways were blocked, cutting off passage to nearby houses. Residents were forced to use all-terrain vehicles to access their multimillion dollar homes.

The slide also resulted in a guesthouse hanging over the edge of a small cliff. If the cliff had collapsed, the guesthouse would have fallen on top of the other houses. The owner of the guesthouse refused to repair his property, but subsequently disappeared from the state.

In the end, a settlement was reached. Two new driveways were constructed and the hanging cliffside guesthouse was demolished. Residents received $40,000 in damages each.

3) Mill Valley – 2007

In 2006, 70 Bolsa Avenue was destroyed by a mudslide. Walter Guthrie was removing debris around his house when it happened. He was crushed to death when an avalanche of mud came down after hours of rain.

His widow, Lisa Guthrie, sued the city for property and personal damage because the city knew about the dangerous conditions of the hill overlooking the Guthrie house, but failed to act. The jury awarded $4.8 million as a result.

Since the jury also found contributory negligence on Walter’s part, the judge lowered the final award to $4 million. However, it is still difficult to find fault with a man who was trying to save the house he and his family had lived in for thirty-five years.

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California Senator Seeks to Reopen a Beach Blocked by a Billionaire

Senator Jerry Hill Proposes a Bill to Reopen California’s Beach Blocked by Billionaire Vinod Khosla

Surfers love the beach, but would they be willing to swim through a shark infested ocean to reach their favorite surf spot? Vinod Khosla presented this very question in 2008 when he purchased and closed the only gate access to Martin’s Beach in California for $37.5 million.

PROTEST AT MARTINS BEACHThe beach-access gate is part of 89 acres of beach property Khosla purchased. The surrounding area, Half Moon Bay, is appropriately named because it is shaped like a crescent moon, thereby restricting pathways. Costal access to Martin’s Beach itself is cut off by towering bluffs.

Khosla, co-founder of Sun Microsystems, purchased the property from a family which had owned the land for most of the 20th century. The family had allowed the public access to the beach in exchange for small fees. The fees were merely for the right to walk across the property. The beach itself is considered public land. The problem Kholsa has created is that the public can no longer enter public land.

In October 2013, Judge Buchwald ruled in favor of Kholsa. Although Judge Buchwald acknowledged that the California Constitution preserved a public right to beach access, the judge decided that all public rights to the property were extinguished because of the local history. The Treaty of Guadalupe Hidalgo, the treaty which ended the Mexican-American War in 1848, required that the United States recognize Mexican land grants as long as the original owner filed a claim. The original owner of the property in question, Jose Alviso, had filed the claim and the United States Supreme Court had affirmed the grant in 1859.

Although Half Moon Bay residents lost the case, their attorneys have filed for appeal. However, California lawmakers aren’t waiting for the courts to act. On February 10th, State Senator Jerry Hill introduced a bill which would require the State Lands Commission to buy an easement from Khosla. If the Commission fails to make a deal with the billionaire within a year, the Commission would also be required to exercise eminent domain and seize the necessary land from Khosla.

Eminent Domain: Using a Nuclear Weapon to Kill a Cockroach

I’m going to say right away that Kholsa is being extremely selfish. California has repeatedly acknowledge the important public policy to “maximize public access to and along the coast…consistent with sound resources conservation principles and constitutionally protected rights of private property owners.”

Although California has recognized Khosla’s property rights by attempting to discuss terms with him, Khosla himself cannot continue to defy public policy. Khosla could save a great deal of effort and money by giving the public access to land which rightfully belongs to everyone. If the previous owners could negotiate a deal with the locals, a businessman who hires former Prime Minister Tony Blair as an advisor and who dines with President Obama at fundraisers should be able to work out a settlement over beach access.

With that said, eminent domain is a draconian application of state power. The only other uses of state power more extreme than eminent domain are the death penalty and military drafts. Government deprivation of people of life, liberty or property is unjust, and eminent domain is deprivation of property. Historically though, eminent domain was at least tolerable because it was justified by the necessity of a “public use,” such as highway or hospital construction.

Today, “public use” has somehow expanded to include private development of land. Local governments today use eminent domain to give private corporations like Wal-Mart land which rightfully belongs to others, or use eminent domain to take land which rightfully belongs to private corporations like Wal-Mart (Wal-Mart is both villain and victim). The Constitution requires that private owners who have had their property taken by the government receive “just compensation” but it is debatable whether the compensation is ever “just.”

It is arguable that preserving state policy regarding access to public land is a public purpose and that Khosla himself has left California with almost no other options. Both are true, but we could reach the same results through an easement by necessity rather than an exercise of eminent domain. The results would be the same (although it’s questionable whether Khosla would receive just compensation in the former), but the precedent would be narrower. An easement by necessity would establish that a stubborn billionaire was violating public policy by cutting off land access while eminent domain would simply open the door for more government intrusion into property rights.

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Wrongful Foreclosure Lawsuits

Wrongful Foreclosure Lawsuits: How the Glaski Decision May Provide New Protections for Homeowners

Homeowners faced with foreclosure often wonder if they can sue their lender. If you are in this position, there is good news: The recent case Glaski v. Bank of America et al. in California may open a new avenue for homeowners to challenge foreclosures on their property.foreclosure lawsuit

The Glaski Case

In the Glaski case, the homeowner took out a mortgage from a bank. The bank then transferred the mortgage to a trust held by a third-party. However, according to the terms of the trust, the mortgage was transferred into the trust too late, after the trust had closed. Thus, there was a defect in the transfer.

As such, Glaski argued that the third-party could not foreclose on the property because the third-party did not own the homeowner’s mortgage. The court agreed with Glaski and prevented the third-party from foreclosing.

What Power Does the Glaski Decision Grant Homeowners?

Glaski opens up a new avenue for homeowners to challenge foreclosures on their property by scrutinizing the manner in which their mortgage was transferred from their bank to third parties.

More specifically, the Glaski decision grants the homeowner standing to declare the transfer of the mortgage void if there was a defect in the transfer. If the homeowner is successful, this may prevent the third-party from being able to foreclose on them.

Implications for Banks

Meanwhile, banks now need to take greater care to avoid defects when transferring mortgages.

Conflicting Rulings

Not all California courts agree with the Glaski ruling. Other courts have held that a homeowner does not have standing to challenge defects in the transfer of their mortgage.

This is because when a homeowner takes out a mortgage from a bank, they generally sign a contract that permits the bank to freely transfer their mortgage. Therefore, the mortgage belongs to the bank to transfer as they see fit, and under some legal theories, the homeowner has signed off any right to scrutinize the process by which the mortgage is transferred.

Thus, any defect in the transfer to a third-party is solely an issue between the bank and the third-party, and outside the scope of the homeowner’s interests.

Although this area of law is unsettled, the Glaski decision may be used as precedent to challenge foreclosures. If you are being foreclosed upon, you should contact an experienced real estate attorney who can help determine whether there was a defect in the transfer of your mortgage, or other manners to challenge your foreclosure.

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The Mortgage Crisis Is Over, But the Fraud Is Not

The Sub-prime mortgage crisis of 2007 crippled the world economy and left thousands of Americans without a home. Although the crisis occurred partly because many buyers accepted bad loans they could not afford, the banks which offered the contracts also contributed significantly to the crisis. When it became obvious that buyers were struggling to pay off their mortgages, the country’s major banks forged deeds and committed mass fraud on a scale unprecedented in American history. Although the economy is slowly recovering, the dubious foreclosure practices have not ceased.

In South Florida, a company known as Prescott Roche has been buying up houses, and now owns property worth $3.5 million. The problem though is that the previous owners of the houses never signed paperwork surrendering ownership even though their signatures are on the “deeds.” A close examination of many of these documents reveals other errors. The attorney for Prescott Roche is David Boyd-Bey, even though Boyd-Bey is not licensed to practice law in Florida.

Foreclosed HomeThe company also attaches notices of non-abandonment to their deeds even though the homes are not vacant and Prescott Roche has not had ownership previously. These fake deeds are reminiscent of the major bank’s attempts to foreclose during the mortgage crisis when the banks realized that they did not have the documents necessary to perform a foreclosure. Contracts with fake signatures, with non-existent attorneys and other corporate officers listed, and generally fraudulent documents were omnipresent during the sub-prime mortgage crisis. Even after a few years though, the illegal and immoral tactics have not gone away.

So what should homeowners struggling to meet their mortgages do if faced with foreclosure? First, always verify whether the banks which originally held the mortgage still retain the mortgage. Companies like Prescott Roche specifically target homeowners who are defaulting, so those homeowners are often led to believe that the banks have sold the mortgages to other parties even though the mortgages have not left the bank’s metaphorical hands.

Second, even if a mortgage holder threatens foreclosure, retain possession of the home until the Sheriff shows up at the door with a writ of eviction. If a homeowner knows the eviction is coming, they should pack up, but the homeowner should avoid moving out until the legal action is enforced. A recent problem which has arisen after the initial mortgage crisis abated is homeowners who are threatened with foreclosure then move out prematurely. The mortgage holder, in the meantime, has a very difficult time finding a new buyer and gives up on trying to foreclose. The original homeowners, who abandoned the property under the impression they had been foreclosed, find themselves owing unpaid property taxes because they still legally own the house.

The bizarre thing about the foreclosure situation in South Florida though, is that even when the homeowners have moved out, despite retaining legal ownership, the houses aren’t empty. Prescott Roche claims possession of the houses and rents them out to tenants.

In essence, the homeowners have given up on possessing the property even though they still legally own the property and are liable for all property taxes, bills, and other fees. Meanwhile, there are people living in that house under the impression they have rented the houses from a company which claims ownership, but does not actually have it. The banks who still hold the mortgages believe that the original homeowners are still in possession of the house even though they can’t pay off the mortgage.

If this sounds like a confusing mess, well, it’s not a new problem. The only difference is that other companies have adopted the fraudulent practices of the nation’s banks to make easy, if illegal, money.

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