Law Blog

Sanctuary. Adobe. Spacious. Luxurious. Vacant??  Times have changed when it comes to the words landlords used to describe the once highly competitive apartment and other rental spaces market.  Apartments with 5, 10, 15+ applicants the second it is advertised has dwindled down do a couple, if that, and landlords are finding themselves desperate to fill vacancies.

If you are a renter, like myself, and able to afford city life then this is the prime-time to enter into a lease in an apartment at a lower rental cost.  I have seen some of my friends move out of their beautiful high-rent apartments in attempts to save money by moving home, getting roommates or moving to a cheaper location.

Perhaps “Renters Paradise” was a little much for my blog title, but the number of vacant apartments out there is almost at unprecedented levels.  Unfortunately, so too are the factors that tether this fact back to reality: unemployment and economic uncertainty.

According to a recent study, U.S. apartment vacancies are nearing a record low.  Currently at 7.5% and projected to increase, the rising figure reflects the difficult economic times.

Not surprising, the struggling real estate and rental industries are accompanied by an increase in legal problems and litigation.  A study conducted by LegalMatch, looking nationwide at the past 12 months saw a rise in legal inquiries across the board in the Real Estate category.  Landlord tenant issues are on the rise as landlords are feeling the pinch and tenants are demanding more concessions and lower rents. I agree with a recent Yahoo News article that attributed much of the rental issues to the employment problems that have befallen the 18-24 year old category.

Obviously, the effects increased vacancies are having will not be isolated.  An interesting prediction regarding falling home prices relationship to the rental market was articulated in a recent Wall Street Journal article.  The author felt that falling home prices could hit landlords in two ways: “they could force landlords to lower rents to keep up, and could spur some renters to purchase homes. Still, the number of renters who move out to purchase homes isn’t expected to surpass levels seen during the housing boom earlier this decade.”

Whether a renter or buyer these are really interesting times to explore your financial options and research the best financial approach to housing for you!  Don’t be afraid to negotiate your rent, demand concessions at your current location, or look into buying.

Homeowners aren’t the only people affected by the foreclosure crisis.  Increasingly, renters who have dutifully paid their rent are being evicted from their apartments because their landlords face foreclosure.  In fact, over the last several months, as many as 70,000 renters have confronted foreclosure-related eviction.

Recently, government-run mortgage finance company Fannie Mae promised to assist tenants by signing new leases with those living in Fannie-owned properties that have been foreclosed.  Under the proposed plan, renters will be granted the option to lease month-to-month on foreclosed properties until the property is resold.  Fannie’s actions mark the first nationwide attempt to save renters caught in the mortgage crises.

While it’s a little disconcerting to see Fannie effectively become our national landlord, the mortgage behemoth’s actions may encourage private lenders to enact such programs; further, lawmakers may be persuaded into enacting more comprehensive relief measures. 

Still, there are potential problems with Fannie’s plan.  First, because the government lacks incentive to maintain rents at market rate, taxpayers may ultimately subsidize below-market rentals.  Second, government may waste taxpayer dollars because it lacks the necessary experience and/or infrastructure to manage these rental properties efficiently.  Third, Fannie’s action prevents these foreclosed properties from being sold on the open market, perhaps exacerbating the housing downturn and economic recession. 

While some states such as Minnesota have passed stricter laws to protect tenants from foreclosure, other states are dragging their heels.  For now, here’s some advice for prospective and current tenants.  Existing tenants should be wary if they suddenly become inundated by advertisements from local bankruptcy lawyers – this indicates the owner may be facing foreclosure.  Prospective tenants should perform a credit check on a property owner.  Also, look out for default or sheriff sale notices posted on the property (and don’t take the owner’s word, if he says things are “under control”). 

Further, check public records online or in your local county records office to see if the owner is failing to make payments or the property is in foreclosure; and while you’re at it, check to see if the owner owes property taxes or association dues – both clues that he may owe mortgage payments as well.  You can research your local foreclosure laws online too.  If you don’t have the time (or patience) to perform such due diligence, at least make sure to watch for a landlord who asks for an unusually high deposit or a number of advance rent payments.