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New Law Leaves Landowners in Lurch

January 17, 2011 by   - () Leave a Comment

A federal law intended to protect tenants who live on foreclosed properties has created some tension in California’s Santa Cruz County.

In January 2010, tenants at the River Grove RV Park in Felton were stunned when a new owner from a foreclosure sale considered closing the park and gave tenants a week to leave. The owner later changed his mind, the Santz Cruz Sentinel reported.

The tenants had become aware of a May 2009 law called the Protecting Tenants in Foreclosure Act. It essentially gives tenants on foreclosed properties at least 90 days to remain on the property once it enters foreclosure.

But the rule has also worked against landlords.

On a stretch of Empire Grade Road just north of UC Santa Cruz, Kenneth and Susan Coale live in a four-bedroom home with a horse stable in front. They bought the property in 2000 to be close to her job as an ocean science research specialist at the university; he is director of the Moss Landing Marine Laboratories.

The Coales had been eyeing the four-acre property next door at 2329 Empire Grade, which includes a field, an older house and a tower. They hoped to clean up the property and transform it into a horse pasture.

In April, sheriff’s deputies seized several marijuana plants in a raid on the property. The old tenants left, and some trash and other debris remained.

The owner could not pay his debt on the land, and it went to a trustee sale on the steps of the county building in November. The Coales made their move, buying the property with their life savings, including a $30,000 payment for delinquent taxes connected to the property.

But there was a problem.

Some time before the sale, two men and a woman began living on the property. The Sheriff’s Office said one of the men, Gino Vaughan, has lived at the River Grove RV park. Vaughan’s lawyer confirmed that Vaughan was familiar with the law.

Vaughan and other tenants signed a rental agreement with the previous owner to pay $1,000 per month, and had driven a fifth-wheel trailer on to the property along with a pickup and other vehicles.

The Coales contend their new neighbors arrived on the property to take advantage of the foreclosure law. Now the couple wants to warn others in foreclosure sales of the potential pitfalls.

“This law was obviously enacted to protect families in foreclosure,” Kenneth Coale said. But when a group moves in days before a sale, “that is not what this act was meant to protect.”

Terry Hancock, an attorney for Vaughan and fellow tenant Chris Daullenbach, said they were living on the property before the sale. The tenants paid the Coales’ attorney $866 in cash for November’s rent and $1,000 in cash for December, which Hancock argues makes the Coales landlords.

“No matter when or how they got there, the tenants have paid rent for November and December,” the attorney said. “If the Coales believe that they aren’t landlords, then why are they collecting rent?”

Sheriff’s Sgt. Mark Yanez said he expressed sympathy for the Coales, but said his agency’s options are limited. Deputies can force an eviction, but they require a court order.

“The circumstances under which these people got on the property seem extremely dubious to me,” Yanez said.

Kenneth Coale said, “I think they’re exploiting a loophole in this federal statute. It may be legal, but it doesn’t make it moral or fair.”

As it stands, the Coales are awaiting a 90-day eviction notice to end Feb. 11, and Kenneth Coale said there may be a settlement in the works.

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