Private equity firms have been praised by those in the real estate and finance worlds for the way in which these companies snapped up some 200,000 homes, mostly foreclosed, and transformed them into a rental empire.
It’s true the process has served to raise home values, and has come to be known as a “rental-backed security.”
But our Miami foreclosure lawyers know there are many problematic issues with this model, not the least of which is that these firms have a tendency to put profits over people – almost without exception. There is no concern for the families involved or investment in the communities. In some cases, these firms have even displayed flagrant disregard for the law. In one such case, the result was tragedy.
Tens of thousands of families are living in these private equity-owned residences. One of those lived in small-town Arizona. While many families in these residences have themselves endured foreclosure, this one was happy to finally live in a house for the first time, after residing in a string of apartments for years. Residents included two parents, the mother’s parents, and their three children.
The rental home into which they moved had been sold to the private equity firm by the owner who sought to avoid foreclosure. The original owner owed $100,000 more on the property than it was worth. The firm in turn made the home available for rent.
A walk-through inspection turned up a few concerns: There was a cockroach infestation, the exterior paint job was shoddy and there was an oil spill in the driveway. However, it was nothing about which the family was overly-concerned.
What the family did express concern for was the fact that the pool had no fence. Prior to signing the lease, the family requested that the property management company, hired by the private equity firm, install adequate safety fencing. An agent took the request to a supervisor, and was told it was denied. The parents said they offered to pay to have it done. The company told them that would be fine, but only so long as it didn’t impact the surrounding landscape and wasn’t fixed to permanent structures on the property. This meant that doing so was essentially impossible.
The family didn’t believe they had any rights as renters, despite the fact that Arizona law, similar to Florida’s, requires pools be surrounded by protective fencing. The family agreed to a safety plan, which included keeping both doors locked at all times, with numerous adults required to supervise the children if they were playing outdoors. The family inquired about swimming lessons, but hadn’t heard back.
The mother said she called the company and once again asked about installing a fence. The company turned her down, though it now says it has no record of those requests. In responding to a reporter’s inquiry, one representative was quoted as saying the incident was over a year ago and, “If you know the number of properties we have…”
This particular company has a $400 million credit line to purchase homes. There are much-larger private equity firms, too. For example, Blackstone, the top buyer of single-family homes in the country, shelled out some $8 billion over the course of two years to buy 43,000 homes in 12 different cities.
Often at the time of purchase, the condition of the home and its code compliance is not known. Historically, the purchase rate was so high that bidders couldn’t keep up in visiting each one individually prior to purchase to assess those needs – like pool fences.
You can guess how this story ends. While the grandmother was watching the child, she climbed out through a pet door. She found her way to the pool. She did not survive.
Personal injury lawyers would later say the property was clearly in violation of the city’s code. Anytime a landlord rents a home with a pool to a family of small children, they say, the duty under state law requires the landlord to take precautions that any “reasonably prudent” person would.
But for this $400 million firm, it was profits over people.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Keeley for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.
When Wall Street Is The Landlord, Profit Trumps Safety, June 23, 2014, www.crooksandliars.com
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Report: 92,000 Floridians Receive $9.1B in Mortgage Relief Deal, June 14, 2014, Miami Foreclosure Lawyer Blog