In what is believed to be the first such lawsuit in the country, on Monday, September 9th, the Illinois Attorney General filed suit against Safeguard Properties, a service and management company hired by Bank of America to service a home in foreclosure. Illinois contends that Safeguard wrongfully dispossessed Barry Tatum, the owner of a home in Chicago, and committed trespass. Illinois alleges the Safeguard: (i) broke into Mr. Tatum’s home, along with many other homes, despite clear evidence that those homes were occupied by owners; (ii) bullied occupants into leaving the homes even though those occupants were not legally obligated to leave; and, (iii) damaged the homes that Safeguard was hired to protect. Illinois’ Attorney General filed suit after having received over 400 separate complaints about Safeguard. The allegations of Illinois’ complaint are eerily similar to the experiences of condominiums and HOAs in New Jersey, Pennsylvania and New York, that have had the creativity, fortitude and intelligence to place abandoned units and homes into receivership, or otherwise have them rented, to the benefit of those communities. These condominiums and HOAs, and/or their receivers, often suffer from the consequences of serving companies like Safeguard, that have changed the locks on homes that are currently occupied by association and/or receivership tenants, and that damage the homes after entering. My clients and I see our tenants and/or occupants intimidated into believing that their occupancy is somehow illegitimate. All of this admittedly flows from federal, state and local mandates by which lenders protect the properties from squatters and damage while in foreclosure, which only results in competing interests hoisted upon lenders. Nonetheless, it is clear to me, and experts agree, that the manner in which these servicing companies are paid leads directly to the abuses complained of. For instance, some are compensated on a contingency basis (i.e., retain a % of the revenue generated following a sale of an abandoned home’s contents). Others are paid a flat fee (i.e., one flat sum per property), which many believe incentivizes servicers to report that a property in foreclosure has been abandoned, when it has not been.
Again, condominiums and HOAs smart, savvy and creative enough to have addressed abandoned homes and units via receiverships, rentals and other tactics must be ever vigilant in protecting those efforts from servicers, documenting their actions and consulting with counsel thereafter.