Bank Fraud?

Question

I am in a situation with a landlord and bank that is very unique, and I'm looking for some advice. This website has come up in numerous searches, and I'm hoping the community here may have some insight.

The broad strokes: I own a business in a small commercial strip, and the landlord is in serious financial and legal trouble. We have been paying rent directly to the bank for some time. Now, there are issues with the building, including an ever-increasing leak from the roof. We have been holding the past several month's rent in escrow with our attorney, demanding that repairs be made. The bank has made promises and demanded back rent, but taken no action.

In our latest exchange, the bank sent a quote they claim to have recieved from a commercial roofer, and that they are intending on replacing the roof by the end of the month. The "roofer" referenced on the "bid" they recieved doesn't exist, there is no license # for the contractor, and the address listed on the bid doesn't even exist.

My gut feeling is that this bank is trying to grab as much cash as it can before inevitably foreclosing on the dead-beat landlord. This bid is obviously bogus, are they guilty of fraud?

Patse Bebe · Answer

have you considered approaching the bank and asking for a 'move fee' - I've been under contract with homes that I demand the bank move the current renters out of; as the renters did not pay rent to the previous owner - the bank offered them some $$ to move and in one case the renter got $2 - antoher case the renter got evicted and put out by the sherrif

William Bannister · Answer

Just make sure attorney doesn't release rent to anyone without your approval before the repairs get done. Have you looked for a new home for your business? You might think to find a new place with all this rent u have escrowed? Im not sure the depth or cost of a move dont know how big your operation is? Commercial is so different when it comes to residential law in this matter of repairs. If the landlord already has problems then he might not have assets to attach unless you know where he banks? If you knew where he banked your attorney might be able to go after landlord for repairs too with ability to seize bank acct if he isnt in BK already.. You might just notify bank that contractor isnt licensed to see what they say on that one. I would like to know what there explanation is.

Luis P Reyes · Answer

This sounds like a potential nightmare that's been seen on the residential side. Commercial foreclosures could be the other shoe to drop. You are smart to keep the funds in escrow and make sure the lender has the standing it claims. It would be interesting to see if there is a servicer involved. You should have your lawyer review your lease very carefully. If it parallels the residential side at all then the landlord may be a victim of a bad loan. On the residential side there are strong protections for the tenant depending on the state. The bank has right to the rent only if the landlord is out of the picture through foreclosure in CA. Would be interesting to hear how it is set up on a commercial property.

Chris Masons · Answer

Interesting scnario. It's ESP. interesting to me that the bank is asking for your back rents paid BEFORE the repairs are done. traditionally if a tenant witholds rent due to repair issues the landlord is required to make the repairs necessary FIRST and then the money held in escrow would normally be released to them. I don't see why it should be any different here. Did you tell the bank you will pay the back rent once all repairs are satisfied? What did the bank say to this? Did you mention you could not reach this contractor? What did they say? The fact that they would give you a fictitious contractor is shocking to say the least. I am hoping it is just an error on info. regards, Chris

Jeremy Namen · Answer

You could always submit a contract to the bank to have the work done and take it from your escrow. There should be a profit to be made as well. At least here in Mo you need no special license to contract/manage a roofing job.

David P · Answer

Thanks Bill. Since I'd be on the end of a long line with the landlord, I know I'm wasting my time there. I could get a judgement, but there will be no way anything will even be left.

Jeremy Namen · Answer

I like Bills suggestion of getting more info from the bank. But do it as though you believe what they have given you is true and that you merely want to check their credentials. Dont show any disbelief you dont want them to perceive you as a potential problem.

Bill Gulley · Answer

David, I understand your feelings and situation. The fact is that your problems have arisen from the failure of your landlord. Your recourse lies with the landlord. The bank only has an interest in the property to get the money to pay off the amount owed, that's all. The bank has the legal right to receive rents and apply the amounts received to the debt, this is called "offset". You might ask your attorney about the tenants having the repairs made and making the costs under the workmen's liens provided by state law. Your attention and frustrations really need be aimed at the landlord, you might as well get in line with everyone else going after him. I'm not saying be happy with the bank, but the bank really has little to do with accepting responsibility for the property, although that depends on what they signed with you at that meeting.

David P · Answer

Thank you both for your responses. The lender is based in my state (NJ) and the supposed contractor is as well. We were able to get a meeting with the bank about 2.5 months ago, with our attorney, and outlined a list of issues that we needed rectified. We supplied that to them in writing, and they signed it. Since then, all they've done is ask for money, but have done no work. This is the latest attempt on their part to get money out of us, and its a poor one at best. My attorney has been very pro-active and is doing everything possible to protect us. I am concerened given the complexity of this matter (our landlord being in serious financial and legal trouble) and this bank (who is a local lender, and has multiple loans to this landlord) we are being seriously victimized. It would seem like a poor idea for any bank to do something like this, but these people have not been very forthcoming with us since this process started. Since the bank has been collecting rent, property taxes have gone unpaid, as well as the dis-repair. I have no experience in this realm, so any advice is appreciated.

Bill Gulley · Answer

I wouldn't say it was impossible for a bank officer to pull a fast one, but before we go down that road, I'd consider where that bank was anchored with a home office. If the bank were here in town, but the headquarters`was in KC Mo, and I got that verbage and bid, then I searched for that contractor here in Springfield and didn't find hide nor hair, I'd first think the bank may have a legit contractor from out of my area to come in and make repairs since it is a larger commercial job. So, in going there, did you ask the bank where this contractor is based? Then, after confronting them, it turns out to be bogus, I don't see that the bank has a fudiciary responsibility to tenants as a lender as they only have a collateral interest and rights to offset the loan with rents. Your real issue is with your landlord. So, while the bank may be acting in bad faith, I'm not sure it's fraud. Yes, you should expect that the bank will do all they can to limit thier losses and grab every penny they can, they are lenders, not landlords. Keep in mind too, the tenants could be kicked out after foreclosure in a commercial property and the bank has no interest on who might be in there if push comes to shove. If the roof leaks and tenants are raising heck, and the borrower is responsible for any deficiency in the end, the bank may prefer to empty the place and sell the building, that happens. Not sure what rights you have in your state, but it could be worse. My advice is stick with your attorney and let them take care of the matter, seems they are making some headway since you received a bid sheet for repairs and a date for the repairs.