July 7, 2016
This blog post discusses the role of the Summons for Unlawful Detainer in Virginia foreclosures. “Unlawful Detainer” is a legal term for the grounds for eviction from real estate. The foreclosure trustee and new buyer go to a real estate closing a few days after the foreclosure sale. Upon settlement, the title company records the Trustee’s Deed of Foreclosure in the local land records. In most land transfers, the giver and recipient of the ownership of the real estate participate voluntarily. In a foreclosure, the borrower may contest the validity of the foreclosure transaction and the Trustee’s Deed. The Trustee’s Deed is necessary to the new buyer to pursue eviction proceedings against the occupants of the property. The Trustee’s Deed is the buyer’s legal basis for filing the Summons for Unlawful Detainer form. A copy of what this form looks like is available on the website for the Virginia court system.
Post-foreclosure evictions are not the only reason anyone files a Summons for Unlawful Detainer. Unlawful Detainer suits get into court in different situations. The most common is where a tenant fails to pay rent or defaults on the lease. However, it can be used for a variety of situations where an occupant entered onto the property with lawful authorization (such as a deed or lease) but has continued to occupy the premises after his right to do so ended. Every landlord knows that each month that the tenant holds over without paying is rental income that will likely never be collected. The General Assembly enacted legislation to streamline property owner’s rights to evict tenants and other persons unlawfully detaining possession of the real estate. This prevents an unfair result that might occur if a tenant could use lengthy court proceedings to live in the premises rent free when he may not have money to pay a judgment at the end. The buyer of the foreclosure property has made a financial commitment to own the property. Foreclosure investors want to evict the borrower, make any necessary repairs as soon as possible so that the property can be rented out or re-sold. So the summons for unlawful detainer form is a powerful, attractive tool for the new buyer in a foreclosure.
The investor or their attorney typically files the Summons for Unlawful Detainer in the local Virginia General District Court (“GDC”) after receiving the Trustee’s Deed. The GDC is the local court in Virginia most people are familiar with. This is where Virginians go for traffic ticket cases and suits for money under $25,000.00. The GDC has a “Small Claims Division” where parties litigate without lawyers. The Sheriff’s Office serves the Summons for Unlawful Detainer on the borrower and any other occupants. Upon receipt of the Summons for Unlawful Detainer, the borrower faces a “fight or flight” decision. Experienced lenders, trustees and purchasers know that the Trustee’s Deed of Foreclosure can be used as a weapon to try to crush the borrower’s opposition to the foreclosure. The Bank, trustee, and new buyer are can pursue these legal matters without the threat of having being evicted out of their base of operations. The borrower would not be in a foreclosure matter if there wasn’t a difficulty making payments. Once the Deed is in land records and the Summons is filed with the GDC, the borrower also has to mount a legal defense to keep possession of the home. A borrower is well advised to seek qualified legal counsel in his jurisdiction to help deal with these matters.
The Summons for Unlawful Detainer Summons must contain the name, address and point of contact for the new owner seeking to evict him. This will tell the borrower whether the property is now owned by the bank that requested the foreclosure or an unrelated investor. The Summons sets out when and where the borrower or his attorney must appear to contest the eviction proceeding. Every form states, “If you fail to appear and a default judgment is entered against you, a writ of possession may be issued immediately for possession of the premises.” A writ of possession is a document signed by the judge that authorizes the Sheriff’s Office to go out to the house and remove the people and belongings found there and turn it over to the new buyer and their locksmith.
What can a borrower do who has been wrongfully foreclosed upon and received a Summons for Unlawful Detainer? The earlier the borrower engages with legal counsel, the more there is that the attorney can do to help. On June 16, 2016, the Supreme Court of Virginia initiated legal reforms which dramatically shift the balance of power in these post-foreclosure evictions. If properly defended, the borrower may have an opportunity to get the dispute over the validity of the foreclosure decided before ordering eviction. This is good news. Prior legal precedent required many borrowers to defend against a Summons for Unlawful Detainer at the same time he pursued his own wrongful foreclosure claims against the bank and trustee. I discussed this new case in greater detail in my blog post, “The Day the Universe Changed” and in a radio show interview available in the “On the Commons” podcast library. While borrowers will continue to receive these “Summons for Unlawful Detainer” forms, they now have better options.
Unless the borrower does not intend to contest the eviction and foreclosure, borrowers receiving a Summons for Unlawful Retainer from the buyer of the foreclosure property should immediately seek qualified legal counsel in order to explore available options. The Virginia General Assembly is anticipated to enact new legislation in its next session to clarify the jurisdiction of the GDC and the appropriate court procedures when a borrower contests the validity of a foreclosure related to the eviction proceeding. With assistance, borrowers may be able to take advantage of these legal reforms.
June 21, 2016
My parents are retired schoolteachers. Growing up, we watched our share of public television. I remember watching a British documentary by James Burke called, “The Day the Universe Changed.” This program focused on the history of science in western civilization. Scientific developments affect public perceptions of man’s place in the world. Each episode dramatically built up to a momentous change in scientific perception. For example, when scientists determined that the earth circles the sun (and not the opposite), it felt as though the “universe changed.” The title of the final episode was, “Worlds Without End: Changing Knowledge, Changing Reality.” Provocative stuff for 1985. I went on to study the history of science for four years in liberal arts college.
Property: Ownership & Possession:
In the law there is a difference between the reality of how people think and act in real life, on the one hand, and the reality of courthouse activities on the other. For example, people frequently lie when under the stress of questioning. Courts developed a comprehensive set of evidence rules to determine what documents and testimony are acceptable. The rules of evidence are not a formalization of the way people ordinarily evaluate truth-claims. As another example, outside of Court, non-lawyers understand the difference between the right of ownership and the right to possess or occupy any property. The right of ownership is superior to, and often includes the right to possess. These rights are distinct but unseverably connected. Attorneys and nonlawyers understand the difference between being an owner, a tenant, or an invited guest. By contrast, since before the Civil War, Courts in Virginia enforced the conceptual separation between the right to claim ownership and the right to evict an occupant and gain exclusive possession. The courts did this by not allowing an occupant to raise a competing claim of ownership as a defense in an eviction suit. In many cases, attorneys would have to “lawsplain” why a borrower could not effectively assert the invalidity of the foreclosure in the eviction case brought by the new buyer. Practically speaking, the borrower had to defend the eviction case while also filing another, separate lawsuit of her own to raise her claims to rightful title to protect her property rights. The rules required a financially struggling borrower to litigate overlapping issues in two separate cases at the same time against overlapping parties. If you are reading about this and think that it makes no sense, you are right, it doesn’t. But this was the way that the Virginia eviction world worked for a very long time.
Instant Legal Reform:
And then June 16, 2016 was the day the entrenched worldview of foreclosure contests and evictions in Virginia changed forever, or at least until the General Assembly holds its next session. The Supreme Court of Virginia published a new opinion overturning 150-200 years of precedent in this area. This opinion is important to anyone who lives or works in any real estate with a mortgage on it. Virginia appellate law blogger Steve Emmert observed that this decision represents a “nuclear explosion” and that “. . . dirt lawyers are going to erupt when they read . . .” This case is a game-changer that unsettles much of real estate litigation in Virginia.
My Professional Interest:
Since the foreclosure crisis exploded in 2008, I have litigated foreclosure cases in Virginia on behalf of borrowers, lenders and purchasers. Before June 16, 2016, few expected the rules of the road to change dramatically. The Supreme Court of Virginia has hundreds of years of precedent underlying the existing state of affairs. The banking industry maintains an effective lobbying presence with the General Assembly. Victims of foreclosure abuses play the game of survival; few become activists. Yet, common-sense would dictate that having two separate lawsuits (the eviction case and ownership dispute) proceeding through the court system at the same time wastes resources for everyone. This impacts borrowers the most because they are in the least favorable position to pursue multiple lawsuits at the same time.
Parrish Foreclosure Case:
Teresa and Brian Parrish took out a $206,100 deed of trust (mortgage) on a parcel of real estate in Hanover County, Virginia. This deed of trust’s provisions incorporated certain federal regulations into its terms. These regulations prohibited foreclosure if the borrower submitted a complete loss mitigation application (a.k.a., loan modification application packet) more than 37 days before the trustee’s sale. Federal National Mortgage Association (“Fannie Mae”) had an interest in the home loan. The Parrishes timely submitted their application packet. Regardless, in May 2014, ALG Trustee, LLC sold the Parris property to Fannie Mae at the foreclosure sale. Fannie Mae then filed an unlawful detainer (eviction) lawsuit against the Parrishes in the General District Court (“GDC”). The GDC is the level of the court system that most Virginians are familiar with. People go to the GDC for traffic tickets, collection cases $25,000.00 or less, evictions and “small claims” cases. In the GDC, the Parrishes did not formally seek to invalidate the foreclosure sale. Instead, they argued that they were entitled to continue to possess the property because ALG conducted the foreclosure sale while the loan modification application was pending. The GDC judge took a look at the Trustee’s Deed that ALG made to Fannie Mae and ordered the sheriff to evict the Parrish family. The Parrishes appealed the case to the Circuit Court. The Circuit Court granted a motion affirming the lower decision in Fannie Mae’s favor. The Parrishes sought review of the case by the Supreme Court. The Supreme Court of Virginia’s June 16th opinion is a mini-treatise for the new landscape of foreclosure legal challenges.
Questions of Ownership and Occupancy Are Inextricably Intertwined:
The Justices directly addressed the question of the GDC’s jurisdiction. Unlike the Circuit Court, the GDC does not have the statutory legal authority to decide competing claims to title to real estate. That said, in each post-foreclosure unlawful detainer case the GDC must base its decision on whether the presentation of the Trustee’s Deed of Foreclosure is sufficient evidence of title to grant the eviction. Under longstanding legal precedent, the Parrishes’ contention about their loan modification application would not be heard in the unlawful detainer case because the borrowers can’t invalidate the foreclosure deed in the GDC. But on June 16, 2016 that all changed. The majority found that the validity of the foreclosure purchaser’s claimed right to possess the premises cannot be severed from the validity of that buyer’s claimed title because that title is the only thing from which any right to occupy flows. “The question of which of the two parties is entitled to possession is inextricably intertwined with the validity of the foreclosure purchaser’s title.”
From this insight, one must call to question the practical requirement for the borrower to bring his own separate lawsuit against the buyer, trustee and lender to reverse the foreclosure, confirm the right to possess and other relief. Why not have a procedure where all of the related claims can be combined?
What Are Lawyers to Do Now?
Okay, now the “universe has changed.” How do borrowers raise this issue in defense of post-foreclosure evictions? Is there anything that the foreclosure buyer can do about this? The Supreme Court recognizes many reasons why a borrower might have a legitimate claim that the foreclosure sale was legally defective, including but not limited to:
- Fraud (by the lender and/or foreclosure trustee)
- Collusion (between the trustee and the purchaser)
- Gross Inadequacy of Sale Price (so low as to shock the conscience of the judge)
- Breach of the Deed of Trust (for example the regulations about the loan modification application)
The Supreme Court’s new opinion states that the homeowner could allege facts to put the validity of the foreclosure deed in doubt. By the court’s new standard, if the borrower sufficiently alleged such a claim, the GDC becomes “divested” of jurisdiction. When the judge determines that he has no jurisdiction because there is a bona-fide title dispute, he must dismiss the entire case. From there, the new buyer would have to re-file the case in the Circuit Court where the parties would then litigate everything.
I expect that the General Assembly will enact new legislation in its next session that will clarify the jurisdiction of the GDC and the procedures for post-foreclosure unlawful detainers. At least until then, purchasers and lenders will not have the same ability to use the unlawful detainer suit as a weapon in their struggles with borrowers in foreclosure contests. Homeowners’ abilities to fight foreclosures will be streamlined. Justice McClanahan wrote a dissent where she explained the meaning of this in remarking that the majority of justices,
practically eliminated the availability of the summary [i.e. expedited] proceeding of unlawful detainer to purchasers of property at foreclosure sales. The majority’s new procedure for obtaining possession operates to deprive record owners of possession until disputes over “title” are adjudicated after the record owner has sought the “appropriate” remedy in circuit court.
The Supreme Court of Virginia reversed the decision of the Circuit Court and dismissed the unlawful detainer proceeding brought against the Parrishes.
I welcome the Court’s recognition that the rights of title and possession are “inextricably intertwined”. In post-foreclosure disputes between the borrower, purchaser, lender and trustee, bona fide ownership claims should certainly be decided in court before the sheriff kicks anyone out of their house. Eviction procedures should not be used as a weapon to railroad homeowners out of their houses. It makes no sense for there to be more than one legal case about the same thing. Hopefully the General Assembly will adopt new legislation accepting these revelatory developments while clarifying and streamlining court jurisdiction and procedures so that the parties need not litigate any more than is necessary to properly decide who has the right to own and possess the foreclosure property. The universe has changed, and we are closer to a future where the court procedures do not unfairly burden one side over the other and it is easier for each case to be decided on its merits and not who runs out of money first.
UPDATE: I was interviewed by Shu Bartholomew on her radio show/podcast, “On the Commons” about this Parrish v. Fannie Mae case. The podcast is now available.
December 10, 2015
Was the California landlord to the terrorist couple entitled to open up the rental property to the news media? Internet videos show a frenzied swarm of camera crews exploring every cabinet and closet. So what if the San Bernardino landlord holds controversial open house? Commentators raised questions about preservation of evidence in the criminal investigation. There is also an ethics-in-journalism element. Given the heinousness of the crimes and public interest in foiling future attacks, it’s easy to overlook the landlord-tenant legal issues raised when tenants use a rental for criminal purposes and some die before termination of the lease. This story is of interest to any landlord with elderly tenants or who rents in a community with a crime problem.
According to law enforcement, Syed Farook and Tashfeen Malik used the garage of the Redlands, California townhouse they rented as a homemade explosive device factory. They used their residence as a base for their December 2nd attack on the Inland Regional Center that tragically left over 14 people dead and many more wounded. The victims and their families deserve our continued concerns and prayers, especially as public attention shifts elsewhere. As a new father, I cannot fathom Farook and Malik’s decision to drop off their six-month-old daughter with a relative and then commit such a deplorable attack. While Malik’s pledge of allegiance to the Islamic State of Iraq and Syria makes motive discernment easier, this blog post is about landlord-tenant law and not the politics-and-religion issues discussed thoroughly elsewhere. The deceased attackers were not the only residents of the property. Farook’s mother and the couple’s six month old baby also lived there. Law enforcement searched the premises and removed certain items of interest. According to news reports, they turned it back over to landlords Doyle & Judy Miller. On Friday, December 4, 2015, Doyle Miller held an informal press conference on the lawn of the townhouse. After the interview he opened up the house and permitted the news media and their cameras to search the house except for the garage.
Given the law enforcement’s interest in further investigations, the landlord’s interest in preventing additional notoriety to the property, the grandmother’s possessory interest in the place and the child’s unique vulnerability as a resident, heir, and orphan, it is shocking that the media obtained free access with their film crews. The reporters likely put their fingerprints all over the townhouse, moved items around, and possibly removed or destroyed parts of the townhouse or the occupants’ belongings. In fact, MSNBC later publicly apologized for broadcasting some photos and identification cards of some occupants. One can imagine the intense pressure the identification of the killers’ home must have placed on the Millers. They needed to cooperate with law enforcement. After the police search, the news media must have inquired about the inside of the house. The deceased’s shocking crimes do not conjure sympathy. One would not expect the grandmother and grandchild to ever live there again. It may have appeared easier to simply let the media swarm inside the house than to face their constant inquiries.
The Millers may have been concerned that refusal to cooperate with the media might lead to further questions about landlordly knowledge of the activities at the house. In an informal press conference held at the property, Doyle Miller stated that his tenants always paid their rent on time. The renters called a few times requesting landlord repairs. During his visits he never saw any guns or bombs. When asked if he ever went into the garage where law enforcement found evidence of pipe bomb manufacturing, he stated that once he went in there but he only saw some people repairing a car.
Good landlords check to make sure that prospective renters can pay their rent and won’t cause other problems. During the rental period, many obligations to maintain the property fall on the landlord. Most lease agreements provide for landlords to inspect the property for damage by the tenant or other causes during the rental period. Homemade bomb manufacturing is not just illegal. It is an ultra-hazardous activity involving explosive devices that can be easily set off. No landlord wants that in their townhouse no matter how timely the rent payments are.
Sometimes tenants engage in narcotics trade or other illegal activities. Tenants can be incarcerated or die. These are events that can lead to the termination of a tenancy. However, such events don’t necessarily cause the other occupants or the estate of the deceased to lose all of their rights in the premises or their belongings. In Virginia, like many places, a landlord cannot evict a residential tenant’s family without going through the courts. Hosting a media circus seems like a troublingly broad extension of a landlord’s right of inspection. Our legal system has many procedures in place to protect people from infringement of their rights to be secure in their own homes. News reports do not suggest that the townhouse or its contents were abandoned by the grandmother, infant, or the estate of the deceased. While the Millers must have been under a lot of pressure, it is not clear why they didn’t use California’s landlord-tenant laws and the provisions of the lease agreement to deal with the personal property and retake possession of the premises. The attorney’s fees would be a small price to pay for the value of the legal protection. Perhaps some of my readers may have some insights.
Landlords should not discriminate against prospective or current tenants based on their religion or national origin out of fear of renting to terrorists. I am not aware of any exception to anti-discrimination laws for instances where landlords associate a national origin or religion with types of illegal conduct. I’m wondering if any state legislatures will amend landlord-tenant, community associations, or mortgage statutes to give landlords, HOA’s, or lenders expanded legal privileges or duties to prevent homes from being used for terrorism. I’m concerned that homeowners’ rights are already under assault from different directions and such legislation would have unintended consequences.
Given the desire of the Farook family for privacy, I’m not sure if any legal claims will be brought against the Millers for hosting the media “open house.” The family may decide that any damages from loss of use of the townhouse or ownership of personal items is not worth the loss of privacy from media attention surrounding such a suit. However, given the high profile of this media event, the public may draw an incorrect inference that the Miller’s actions are advisable or without substantial risk. This is significant because home ownership is on the decline and renting is the trend. Many working people are unable to save a down payment necessary to purchase a home. In the event that tenants use a rental for illegal purposes and/or die before the leasehold is terminated, a landlord should consult with a qualified attorney before taking possession of the property. If occupants of rental properties are displaced by the criminal conduct of other tenants, they should also seek counseling to protect their rights.
January 2, 2014
Can My Landlord Evict My Business Without Going to Court First? – Part II – Complications to Landlord Self-Help
In Virginia, landlords have a right to evict commercial tenants without going to Court first. This does not make it likely or wise. Even in jurisdictions where self-help is legal, it is unusual to see landlords piling up their tenants’ business property on the curb. There are several reasons why:
1. Lease Terms: Any self-help must comply with the terms of the lease agreement. The laws of Virginia and its neighbors vary regarding a landlord’s remedies upon the tenant’s default. Many commercial leases are forms adapted from use in other jurisdictions. These forms may be a challenge to interpret under Virginia law. Even terms drafted with an eye to the law of the jurisdiction may not contemplate the exercise of the self-help remedies desired by the landlord’s agents. The terms of some lease agreements eliminate the right of self-help eviction entirely. Many other leases do not clearly define the landlord’s rights to exercise self-help. When parties negotiate the lease agreement, tenants typically request that any detailed landlord self-help eviction terms be edited out. The landlord often finds himself reserving, in a general way, its common law remedies, including self-help, without defining how they may be exercised. When the issue comes up upon default, both parties experience uncertainty regarding how a court would view the landlord’s threatened action.
2. Possibility of Property Damage: The landlord may be averse to taking possession of the property in a way that may damage the tenant’s property or involve physical confrontation with the tenant’s personnel. The landlord may desire an award or settlement for the balance of the lease. Property damage counterclaims complicate collection efforts.
3. Forcible Entry Claims: In certain situations landlords and tenants may be punished criminally under forcible entry, detainer or trespass for aggressive action taken with respect to the premises and business property in dispute.
4. Bankruptcy Stay: If the tenant is in bankruptcy, then an automatic stay likely prohibits self-help. The dispute between the landlord and the debtor-tenant over rights to possess the space is addressed in federal bankruptcy court.
5. Sublease: The landlord-tenant relationship may be complicated by a subletting arrangement. A sub-landlord and the master-landlord may disagree regarding their respective rights to possess the sub-leasehold. Disagreements between the property manager and the sub-landlord may delay action.
6. Institutional Landlords: The organizational structure of the landlord may play a role. When the same individual is the owner and property manager of the building, that person will likely exercise broader discretion than in a more institutional context.
These issues do not necessarily preclude the use of self-help. A risk-adverse landlord may view going to court to gain possession as a desirable alternative.
What should a tenant do if the landlord is threatening to take possession prior to going to court? The simplest options are to (a) avoid falling into default or (b) plan a move-out in advance if a default appears imminent. In certain situations, the circumstances of the business or relationship with the landlord may be too complex or attenuated for that. The tenant may have business operations or valuable property to protect. In any case, careful consideration of the lease terms and cogent communication with the landlord are essential. Where property and income are at stake, potential risks associated with changing locks and removing property are too great for either side to view landlord self-help as the logical first step towards resolving a dispute. In these situations, a tenant is best served by interacting with the landlord through experienced brokers and lawyers.
December 31, 2013
Part I – Landlord Self Help in Virginia
Suppose a company leases commercial property to run its business. Due to economic conditions, the tenant struggles to pay rent. The landlord has declared the tenant in default, or is threatening to do so. One of the remedies asserted by the landlord is “self-help” such as changing the locks and removing the business’ property from the premises. Can the landlord do that? What strategies and considerations are available to the tenant in such a situation?
When a tenant of a commercial property falls into default under the lease, or such default is imminent, knowing what options the landlord has moving forward is essential. The tenant making present use of the leased premises needs to know the landlord’s potential legal remedies so it can craft its own plan for the immediate future and to provide a framework for negotiations. In Virginia, and other jurisdictions where landlord self-help is permitted, threats such as changing the locks or otherwise barring the tenant from re-entry, removal of the property from the premises and placing it elsewhere may be the most urgent concern to a struggling commercial tenant. Understanding the respective rights of the landlord and tenant are crucial to planning continuity of business operations and safeguarding company property.
In Virginia, a landlord in a residential lease has no right of self-help eviction. However, the right of self-help remains an option for non-residential leaseholds. The commercial landlord is limited to using reasonable force in taking possession of the property upon default. The landlord may not “Breach the Peace” in taking possession. In other words, confrontation threatening physical harm is not permitted. Self-help may be attractive to the landlord in order to make an urgent transition to a new tenant without having to go to Court, take the case to trial and have the sheriff come out to the property.
While the remedy of self-help is legal in Virginia in non-residential matters, there are several considerations that make landlords reluctant to pursue it. In Part II, I will discuss several reasons why landlords usually avoid trying self-help eviction.