Ask Me Help Desk - Attorney forced house to foreclosure, helped renter buy it at auction for profit

Attorney forced house to foreclosure, helped renter buy it at auction for profit

Is it ethical for an Attorney to force a house he doesn't own into foreclosure, then help the renter buy it at auction?

I bought a house several years ago (Sept 2001) that I was going to fix up and sell. Since I was already rehabbing another couple of houses, I allowed the seller to stay in the house and rent it. It was with a Lease Agreement for 6 months, month to month after that.

I finally got ready to rehab, asked the renter to vacate (Jan 2008) and they contacted an attorney who filed a Quiet Title and a Lis Pendens. The renter argued that they had been told by me that they could rent for a while and then buy the house back. That was never discussed, and never an option and never attempted.

The renter stopped paying rent. I couldn’t afford the additional cost. I tried selling, but the Lis Pendens prevented my selling the house. The bank wanted to do a forbearance agreement, but decided not to when they found out the renter was no longer making payments and I needed that income to qualify. The house went to foreclosure sale. The house is worth about $650,000. The renter showed up at the sale with her attorney and bought the house at foreclosure sale for $393,600, the amount owing, for penny’s on the dollar. The attorney spearheaded the Quiet Title, Lis Pendens, provided the contact for the money to buy the house, allowed the client to stop making payments and guided her through the foreclosure purchase process. They then "high fived" when the auction was over and she was the successful bidder.

Is this a legal and ethical action by the attorney? i.e. Tie up the property so that it can’t be sold or refinanced, then go to the sale with someone and help them purchase the property?

Can I file a Lis Pendens on the property since the original Quit Title lawsuit is still active?

The judge does not yet know what has happened.

Why didn't you have an attorney represent you?

What the other attorney did was legal and ethical. That attorney is required to represent his client, not you. It sounds like he did a very good job of representing his client. If you had an attorney representing you then they would have fought the quiet title, the lis pendens and the non-payment of rent.

Get yourself an attorney immediately. You may have a shot at getting something back but you can't wait.

Hello nw:

I'm not going to look back, but this is a case you've asked about before - and not very recently. You ARE involved in litigation with them, if my memory serves me correctly.

Well, are you winning?? Doesn't look like it.

excon

Actually, this is a "joined" case from a second Quiet Title. It gets a little complicated.
The actual first cause was started in Dec of 2006. The first Quiet Title claims he never signed the deed. His deposition shows perjury. He is represent pro bono by a law clinic.
I was represented by counsel until I ran out of money.
The first Quiet Title approached the second Quiet Title whom I was evicting, and got them involved.

The second Quiet Title never disputes selling the house and the cause was joined in April 2008. The attorney for the second Quiet Title is the action in question regarding my post. My attorney, when I can afford him again, believes I will prevail in both.

However, meanwhile, the second Quiet Title forced my remaining assets into foreclosure, then purchased the property.

A third party attorney believes the attorney committed fraud.

I was hoping an attorney with an ethics understanding and real estate experience would comment.

And the question remains: Since the cause is still open, can I file a Lis Pendens against the property? The renter/now owner is the same person who started the Quiet Title.

Well, I am an attorney with over 20 years of real estate experience and I believe an excellent understanding of ethics.

As long as the tenant/seller's attorney did not commit fraud (which is something I cannot address without knowing every detail), then they did an excellent job of representing their client and taking advantage of the fact that you did not have an attorney representing you. There is no ethical obligation for an attorney to "take it easy on you" because you are representing yourself. Their only obligation is to represent their client to the best of their ability without taking action that is illegal or fraudulent. From what you've told us here that is exactly what he did.

Go back to your attorney and retain him. Make a payment plan if you have to in order to pay the legal fees. It's possible, if you win this case, that the judge will require the tenant/seller to pay your legal fees. If your attorney can prove that the other attorney committed fraud then you will almost definitely win legal fees.

But don't wait! Retain that attorney immediately!

Well Lisa is a real estate attorney and I think I can vouch for her ethics. While I think the lawyer may have skirted the law in his actions I don't think he broke any. He may have believed his client that you had promised them that they could buy it back.

But without an attorney to get you through this I don't see you getting anywhere.

Hmmm,

I bought the house in Sept 2001 which is more than 6 years ago.
The Statute of Limitations for a Real Estate contract in Washington is 3 years.

How is filing the Lis Pendens ethical?

[QUOTE=LisaB4657]Well, I am an attorney with over 20 years of real estate experience and I believe an excellent understanding of ethics.

As long as the tenant/seller's attorney did not commit fraud (which is something I cannot address without knowing every detail), then they did an excellent job of representing their client and taking advantage of the fact that you did not have an attorney representing you.

I had represenation. That does not stop a foreclosure sale or get a Lis Pendens released and it is absurd to suggest that it does.

But, Ah, I get it.

I can place a Lis Pendens on YOUR property, even though I have no case, have you go into foreclosure and then buy your house at the auction and you have no problem with that?

Seems like a pretty sweet deal to me.

Well, I will get back to you after the Attorney General gives his opinion.

Quote:

Originally Posted by pacific nw

I had represenation. That does not stop a foreclosure sale or get a Lis Pendens released and it is absurd to suggest that it does.

Absurd? Either you're not telling us the whole story or your attorney was lousy.

Quote:

But, Ah, I get it.

No, apparently you don't.

Quote:

I can place a Lis Pendens on YOUR property, even though I have no case, have you go into foreclosure and then buy your house at the auction and you have no problem with that?

Seems like a pretty sweet deal to me.

If you had put a lis pendens on my property when you had no case I would have had it lifted in a heartbeat. I wouldn't have gone into foreclosure because I would have had the tenant evicted for non-payment just as soon as the payment was one day late. If a judge refused to evict due to the pendency of a quiet title action then I would have moved for the tenant's rent to be paid into the court and then have the court forward the payment to the lender in order to preserve the property for resolution of the litigation. If the judge refused to order that then there are definitely more issues here that you are not telling us.

Quote:

Well, I will get back to you after the Attorney General gives his opinion.

Best of luck.

It looks like the mistake at this point was not having everything in writing with a renter. And of course allowing the seller to remain in the home often causes issues,

In the end, you were foreclosed because you stopped paying the lender, if you had several properties, you need to fund money from other areas to keep these payments up. This is why 1000's of people lose their properties every year, they buy rental or "flip" units and don't have enough income or money in the bank to pay the paymnets for months and months if there is no income coming in.

Had these people moved out, and the home merely sat empty for 6 months you would have ended up being foreclosed anyway, you got foreclosed by not having the resourses to continue paymnets without rental income coming in.

While this may nor may not have been the plan of the past owners, once it went into foreclosure someone was going to buy them at auction, I buy them at auction had the renters not bought it, I may have bought it, then you would be here calling me names most likely for buying it for pennies on the dollar.

Ahh... almost missed this one.

Quote:

Originally Posted by pacific nw

Hmmm,

I bought the house in Sept 2001 which is more than 6 years ago.
The Statute of Limitations for a Real Estate contract in Washington is 3 years.

How is filing the Lis Pendens ethical?

Based on the limited information you've provided here, if the tenant was claiming that they were entitled to buy back the property then the statute of limitations shouldn't have started to run until after the termination of their tenancy. In that case the filing of the lis pendens by the tenant's attorney was not only ethical, it was necessary.

Do you understand what a Lis Pendens is? Its simply a notice that there is pending litigation against the property and that the litigation needs to be resolved before title can be conveyed.

The Lis Pendens alone would not have led to foreclosure. If the tenants stopped paying, then you should have started eviction proceedings immediately as Lisa outlined.

It sounds to me like you were up against a sharp lawyer who took advanaage of the fact that you were without representation. Is that ethical? Yes, since his job was to represent his client.

Hello again, NW:

Again, I'm not going to look back... But, I recall that your opposition at some time or other was, or IS, represented by some law students or the law school itself. If I recall correctly, you questioned the ethics of the law school for representing them and doing it well. Finally, if my recollection serves me correctly, when you were told THEN that they did nothing wrong, and in fact, did everything right, you were antagonistic towards us, kind of like you are now.

Look, I can see that you got screwed. I'd like to help. But, you don't endear yourself to people like us who volunteer our time and talents. I, actually think there IS stuff you can do, but you ask the wrong questions. If you told us what you're doing NOW, and what has transpired RECENTLY, we could probably help. But, you keep asking rhetorical questions about ethics and crap.

What is your attorney telling you NOW? Do you have an attorney NOW? What legal steps is he taking NOW? What do you want from us?? Do I think there are unethical lawyers out there? Sure. What else do you want from us?

excon

Sorry about the antagonistic response. I didn't mean to let my emotions get involved in this and was just letting off a little steam. Nothing personal meant. My Humble Apologies. :-)

There are TWO Quiet Title actions.
The one with the Law School representing the non-paying client has progressed to depositions and the client has committed perjury. (My "withdrawn" attorney's comment.) In addition, under oath, client claims he makes under $5,000 a year ($417 per month for the last 7 years) does "EVERYTHING IN CASH" and "ISN'T REQUIRED TO FILE IRS TAXES" yet still can afford his mortgage, water, lights, food, gas, transportation, travel to Panama twice a year, internet, cell phone and entertainment, among other things. Has two "classic" cars and $40,000 in recording equipment. Has filed for welfare, and food stamps. Welfare in WA allows ONLY $2,000 in assets. (Tells welfare, under oath on application, he has NO ASSETS) You can see where this is going... There is more, but I digress..

They are attempting to settle to prevent having this come out in court. Client has two attoneys and 6 interns helping him. The attorney that I question the ethics of has full awareness of his client's falsehoods, filed every one of the REQUIRED filings late and has been given a break each time, allowing the filings to be late, among other things that are less obvious. The attorney has chosen to not withdraw, though his client persists in committing OBVIOUS perjury. Minor point but turns out the attorney has 22 unpaid parking tickets over the last 18 months. The city had to sue the attorney and is garnishing his wages. This attorney obviously believes he doesn't have to follow the same rules you and I follow. You know, keep the client from committing perjury or withdraw, file papers on time, pay the (22) $20 parking tickets, etc. Or better yet, find a legal place to park. The attorney has asked for $89,000 (as of May) in attorney fees, though they are not charging their client. No surprise there.

This is the attorney that got the second Quiet Title property involved. They were probably looking for substantiation for their "story". The second Quiet Title "joined" in May 2008. Turns out the first Quiet Title has committed perjury so frequently that he is an unreliable witness. Equity lost when first Quiet Title went to foreclosure sale $170,000 Case still active. Both the attorney and client are minorities. Does this matter? Hmmm, I spent 5 years volunteering in a “black” majority High School tutoring and helping kids. I think I know preferential treatment by the University and Court when I see it. The judge sits on some “minority advisors” committees. Hiding the impact of that influence does nobody any good in the long run.

However,

I had representation for most of this event. My attorney withdrew July 2. (I ran out of money, equity rich, cash poor). After the attorney withdrew:

On the SECOND Quiet Title:
This tenant said I had told her she could buy the house at a later date. That conversation never happened. She has no documentation or witnesses to such a conversation.
I continued with my attempt to evict the tenant so I could sell the property and rehire my attorney. The opposing attorney filed a motion to place the rent into the registry of the court. I responded with a motion to vacate the Lis Pendens and evict the tenant because the tenant was 2 months behind on her rent.

I filed the motion believing the court would pass an “official” copy on to her. Local court rules require that you give the judge a working copy of any motions. I did not know this. The judge did not see my motion in opposition. The motion to deposit was granted. Two weeks later, I filed a motion for reconsideration, to vacate the Lis Pendens and vacate the order to deposit to the registry of the court because the tenant was still in violation of the order to pay rent to the registry of the court, was two months behind on her rent and that the statute of limitations on the real estate transaction at question had passed 3 years earlier. I gave the judge a working copy. The opposing attorney filed a motion opposing my motion to reconsider and the judge granted the opposing motion objection to reconsider. The opposing attorney then had his client deposit into the registry of the court.

I tried twice, but could not get the Lis Pendens lifted. The attorney knew this. The money for the lender was tied up in the registry of the court and the judge refused to release it. As the foreclosure date drew near, I had a buyer who would not complete the transaction because of the Lis Pendens. They didn't want the liability that goes with a Lis Pendens.

The attorney knew all of this, and in my opinion, in a knowingly and calculating manner caused the foreclosure to occur by tying up the funds in the registry of the court. The attorney then arranged for a hard money lender to assist the renter in buying the house at auction and bought it for far less than value. My equity lost at foreclosure sale was about $200,000 Case is still active and “joined” with the still active first Quiet Title.

The judge has not been made aware of this yet.

I didn't want to take up this much space, since reading this much detail can be tedious, but with the comments posted and the questions raised, I ventured forth with more detail.

So I have been fighting three attorneys, and six interns over two separate properties that have been joined. Case began in Dec 2006, trial date has been continued 3 times (by the opposing side, they claimed they weren't “ready” yet) and joined by a second party in May 2008.

I am now trying to figure out which direction to go and welcome any experiences people have had.

I'm still having trouble making sense of your situation, but I can tell you 2 things that you can (should) do immediately:

(1) file a lis pendens on the property; and
(2) GET A NEW ATTORNEY NOW. Either get one on a contingency basis or make arrangements for a payment plan.

Asking questions here isn't going to get your $200,000 back. Blindly filing motions on your own is not going to work either. You need an aggressive attorney who is going to take immediate action.