Atlanta Property Manager Discusses Impact of New Foreclosure Law
You may have heard about the new law which came into effect in late May. It states that if an owner of a property goes into foreclosure, the tenant’s lease is to be honored by the new owner and provides for a 90 day extension to the lease term. Therefore, if there is no lease, the bank can terminate with 90 days versus an immediate eviction. While in theory this sounds like a reasonable plan of action- it certainly has issues that are not yet clarified.
As a property manager, it makes our lives a little easier. Once we confirm that the owner has foreclosed, we simply turn the lease documents over to the foreclosing attorney along with the security deposit and notify the tenants where to send the rents and that we have transferred their deposit over to the new owner’s representative.
For the tenant, this is much better than having an owner who forecloses and the security deposit is lost forever. Once the new owner takes over, they may elect to negotiate a move out- cash for keys so that they can put it on the market for sale, etc.
What the law really doesn’t address is the following – banks make really poor landlords. For example when there is a repair on the property, who is the tenant going to call – the attorney or will there be a designated person at the bank? I guarantee that there is not a 24 hour maintenance hotline. No one will be dealing with their issues over the weekend which in effect, places the banks in a position of possible Landlord/Tenant violation. Banks are not in a position to be a long term landlord, but that is where we are placing them.
On a positive, the banks will be able to capture some of the revenue rather than have a vacant property. They will be able to get their marketing plan in place while the asset is (hopefully) being maintained. They will have less cost of mowing and vacancy insurance.
It is our belief that they will eventually become tired of managing the properties and hire management companies. For now they are relying on the asset managers to handle some of these tasks for them, but they too will grow weary of these services or accidently get themselves into trouble by violating landlord tenant laws and find themselves in a lawsuit. I certainly will be interested to see what happens over the next few months.
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