Shumaker, Loop & Kendrick, LLP fights foreclosure auction fraud for Tampa Bay community association

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Shumaker, Loop & Kendrick, a full service business law firm with offices in Tampa and Sarasota, is fighting a new foreclosure auction scam for the 366-unit town home association at Eagle Palms in Riverview, Fla. The association is fighting a new type of scam, in which foreclosure sales are being botched by fake bidders.

Jonathan Ellis, Shumaker, Loop & Kendrick attorney

"Scam artists and fake bidders have added a new complexity to foreclosures in the Tampa Bay area,” said Jonathan Ellis, Shumaker attorney who specializes in community associations and litigation.

Shumaker, Loop & Kendrick, LLP, (slk-law.com), a full service business law firm with offices in Tampa and Sarasota, is fighting a new foreclosure auction scam for the 366-unit town home association at Eagle Palms in Riverview, Fla. The association is fighting a new type of scam, in which foreclosure sales are being botched by fake bidders.

“Scam artists and fake bidders have added a new complexity to foreclosures in the Tampa Bay area,” said Jonathan Ellis, Shumaker attorney who specializes in community associations and litigation.

Ellis said bidders who pay an initial fee but never follow through with the property purchase are hijacking online, court-ordered auctions. “We are seeing this happen countywide,” said Ellis. “The fraudulent investor can rent or lease a property for a longer time period before another sale is scheduled, throwing a roadblock in the process,” he said.

At Eagle Palms, several properties with unpaid homeowner association assessments went up for auction online, but sales were never completed after would-be investors backed out, leaving the property in limbo.

“We have to schedule another sale, and in the meantime, they put a renter in the unit who has paid first month’s rent and a security deposit,” said Madeline Fischer, secretary and treasurer of the association.

Ellis said what happened to the Eagle Palms homeowners association is not an isolated incident. The scam is a new trend in the foreclosure market statewide, Ellis said, and one he thinks could be a criminal act.

“Anybody can get a list from private subscription newsletters or in the newspaper about upcoming mortgage foreclosures,” he said.

“A unit that is behind in its assessments is about to go to auction and a would-be investor will find out and give the owner $1,000 or $2,000 and get the title in a quit claim deed,” he said. “They’ll put 5 percent down when they are the successful bidder but then don’t pay the rest of the purchase price. This forces the sale to be reset, but in the meantime, they can put a tenant in and collect rent.”

"Adding to the complexity of this new fraudulent scam," said Ellis, "is that frequently the renters, often unwittingly, have bypassed the required rental application and background checks, which violates the homeowner association’s bylaws."

“They often don’t know they are living in a foreclosed unit,” Fischer said. “They think they were just subletting the property from a legitimate company.”

The renter is eventually evicted and left with no recourse to recover their security deposit, she said.

Ellis has tried tracking down the fake bidders but his search has resulted in fraudulent names, incorrect addresses or parcel post addresses at UPS stores with no record of the owner.

Ellis and his business law firm is tackling the problem by requesting live auctions for clients rather than online auctions, requiring bidders to show up and make payments.

“We are also putting receivers in the properties which takes away the control of the unit from the investor,” Ellis said.

Ellis handles matters in condominium law, homeowners association law, construction claims, contract disputes, corporate control issues, creditors' rights, derivative actions, employment agreements (including non-compete issues), foreclosure, franchise law, fraud, injunctions, mediation, securities and UCC disputes.

About Shumaker, Loop & Kendrick, LLP
Shumaker, Loop & Kendrick, LLP is a full-service business law firm with more than 240 lawyers, 60 paralegals and 495 employees in five offices: Toledo and Columbus, Ohio; Tampa and Sarasota, Florida; and Charlotte, North Carolina. In each of its markets, Shumaker is the premier provider of quality legal services to individuals, small businesses, health care providers, nonprofits and Fortune 500 and international corporations. For more information, call 813-229-7600 or visit slk-law.com.

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Candice McElyea
@360candice
since: 01/2011
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