Real estate brokers and agents are often hired by banks to market and sell properties after a foreclosure. When dealing with foreclosure properties, you may be confronted with a former owner who has not vacated the premises and/or removed their belongings from the foreclosed property. This article will discuss how you can minimize your liability exposure in these circumstances.
Every real estate professional should be familiar with the notice requirements governing foreclosed properties. Before a bank may exercise its power of sale to take possession of the property, the bank must have complied with the statutory notice requirements in the state where the property is located. Since a Realtor® acts as the bank’s agent, realtors may minimize their liability by confirming that the bank has complied with these notice requirements prior to performing any services. While the specific notice requirements vary from state to state, the bank must typically advise the borrower that he/she is in default, the debt has been accelerated, and give notice of the foreclosure sale.
For example, in the state of Rhode Island, the bank may begin the foreclosure process after the outstanding debt of the loan has been accelerated, and the borrower has been notified of the default. The bank shall provide the borrower with an opportunity and reasonable period of time to cure the default. In Rhode Island, a Realtor® may consider verifying that the bank has notified the borrower by written notice of its foreclosure proceedings, including the time and place of the foreclosure sale. The Realtor® may also confirm that the bank has published written notification before the foreclosure sale takes place. Once these notification requirements are satisfied, a bank may then proceed with the foreclosure sale in order to acquire title to the property, unless the default is cured by the borrower.
After the foreclosure takes place and the bank becomes the legal title owner of the property, a Realtor® may be retained to market and sell the foreclosed property. Although the former borrower or owner of the property no longer has any ownership rights, the former borrower/owner may not have vacated the property by this time. In this situation, the agent may want to verify that the bank has sent the former borrower or owner a “Notice to Quit” or “Notice of Termination of Tenancy,” which shall indicate the date by which the former borrower/owner must vacate the property. When the former borrower or owner does not vacate by the date indicated on the notice, this individual becomes a tenant-at-will or tenant-by-sufferance and the bank becomes the landlord. In Rhode Island, the tenant-at-will or tenant-by-sufferance is entitled to common law remedies, such as conversion and trespass, if the bank and/or realtor violate any possessory rights.
However, where the former borrower/owner refuses or fails to vacate the property after receiving notice to vacate the property or terminate the tenancy, the bank may proceed to evict the former borrower or tenant. Under these circumstances, the Realtor® should verify that the bank has given proper notification. As an example, in the state of Rhode Island, a tenant-at-will or tenant-by-sufferance shall vacate the premises by the date indicated in the notice from the landlord. The notice must indicate that it is being sent from the new landlord, i.e., the bank, and shall provide a reasonable period of time to vacate the property. The time frame for reasonable notice to vacate has been held to be anything from 21 days to 3 days in Rhode Island. The number of days which are considered “reasonable notice” will depend on the laws of each state and the particular circumstances of each case. Should the former owner or tenant fail to vacate, the bank may then file an action to evict (which can be filed anytime after the date specified in the notice to vacate) or terminate the tenancy.
For protection from liability, a real estate agent should take every effort to confirm that these notification requirements have been complied with by the bank. Once these formal notice requirements have been confirmed, you may proceed more cautiously with listing, marketing and selling the property. However, there may be circumstances where the former borrower or owner does not appear to still be residing at the property, but may not have removed some or all of his/her personal items or belongings at the property.
Realtors® are often confronted with the former borrower/owner’s personal belongings left at the property when dealing with vacation homes or secondary residences. Before taking any action to market or sell the property, you may want to confirm that the former borrower or owner has actually received the notices and perhaps even take the initiative to locate and speak with the individual directly. In most states, the former borrower or owner is deemed to have abandoned their property rights where there is evidence that he/she intended to abandon the personal belongings and has manifested the intent to abandon with some act or failure to act. For example, the property and its contents may be deemed to be abandoned where the property is vacant, there are serious code violations, there is no evidence of maintenance, the property is no longer structurally sound and/or where vandalism is unrepaired. Once the bank determines that the items left at the property have been abandoned, the bank may then arrange to have the property cleaned out and the abandoned items disposed of or placed in storage for a reasonable period of time. To protect from liability, a Realtor® should require the bank to independently determine if the items have been abandoned and directly arrange for the clean out of the property and disposal of any items.
Guest blog written by Luana DiSara Scavone
Partner at Litchfield Cavo LLP ~ Luana DiSarra Scavone is a former real estate broker and sales agent. She is currently a civil defense litigation attorney practicing in Massachusetts and Rhode Island State and Federal Courts. Her practice includes premise liability, products liability and professional liability, including real estate professionals. Attorney Scavone is a Partner of Litchfield Cavo, LLP, a national law firm with 12 offices across the country. Learn more about Luana DiSarra Scavone at:http://www.litchfieldcavo.com/1_bio_disarra.html
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