From Santiago G. via e-mail:

The Spanish PAH (Plataforma de Afectados por la Hipoteca / Mortgage Damnified Platform) has released this video. It gives a good idea of the level and intensity of fights developing in Spain, and I think it gives a good idea of the damage that austerity is causing in places like Spain, and I guess in Greece. One of the first measures Syriza adopted was stopping evictions, and I guess Podemos will do the same in November in Spain.

In addition to the use of #BlackstoneEvicts, there is a related page on Facebook, “International Action Against Blackstone” Protestors staged actions against Blackstone in Barcelona, New York, and San Francisco on Wednesday. In Spain, the protests center around mortgages that Blackstone bought last year. As the Wall Street Journal described it:

Blackstone paid €3.6 billion to buy €6.4 billion of the Catalunya home loans in a government-run auction, outbidding investors including Oaktree Capital Management LP and Apollo Global Management LLC. The deal is expected to close by the end of this year.

The purchase expands on Blackstone’s growing presence in Spain. In July 2013, the New York firm run by billionaire Stephen Schwarzman bought 1,869 government-subsidized rental apartments from the city of Madrid for €125.5 million.

That deal already has brought headaches. Foreclosures by Blackstone have triggered protests by renters and the Platform for Mortgage Victims, an advocacy group known by its Spanish acronym PAH.

Opponents of the Blackstone evictions have taken to squatting in vacant foreclosed homes as a form of protest. If you watch the video, a bone of contention is that the mortgages were sold to Blackstone at a price where many borrower could have met the payments if the mortgage had been restructured. It’s an echo of the picture here, where servicers refused to do mortgage modifications, as banks routinely did in the stone ages when they retained the mortgages they had originated. Given the large losses incurred as a result of servicer bad incentives and outright theft from investors, there were clearly many cases where a deep principal reduction would still have left both investors and borrowers better off. Huge amounts of unnecessary homeowner stress and wealth destruction, as well as investor losses, were the direct result of the Administration decision to paper over pervasive abuses in servicing.

In the US, Blackstone, as the buyer of over 40,000 houses, is the biggest private equity landlord, and by most accounts, the worst. We’ve written about their misconduct repeatedly. An example from last April:

But the biggest fish in this ocean, Blackstone, is clearly taking the opposite approach, of doing as little as they can to maintain the houses and trying to fob off the responsibility onto the tenant, even when local regulations clearly prohibit it. So managing dispersed homes is no problem if you never planned to do the job in the first place.

Blackstone tries to evade this duty formally, through lease terms, and informally, by making themselves inaccessible. And because Blackstone is the largest and highest profile player in this space, they may be hoping that if enough PE landlords follow their lead, communities will accept the new finance-dictate bad standards, just as they have with foreclosure abuses.

But the difference here is while stressed borrowers were the ones that were hurt in foreclosures, and foreclosures and bankruptcies are seen as shameful event, there’s no reason for a victim of a bad landlord to be seen as unsympathetic. Moreover, deliberately negligent PE landlords like Blackstone traditionally have hurt the value of neighboring properties. If this trend continues, abused tenants and their neighbors face a common threat.

Notice that contracts that violate local law are almost certain to fail a legal challenge. In New York, which has more extensive tenant protections than other cities, landlords sometimes try to include provisions that are impermissible, like prohibiting a tenant from having a roommate. Housing court judges exhibit a bit of zeal in smacking down landlords when challenges to those leases come before them.

NC readers got early warning that this strategy in a March 2012 post, via this comment, which we flagged in later posts, from someone clearly affiliated with a PE fund:

In many markets, the maintenance obligations fall to the tenant. Grab a sample set of local real estate board form leases and you’ll find this to be the case. Moreover, while these same form leases do place the burden of capital repairs on the landlord’s side (as is the case with multi-family properties), this is an identifiable risk that can be assessed just as it would be by a skilled operator acquiring larger-scale multi-family properties. Falling trees are non-discriminatory – they will crush the roof of a single-family home and a two or three story garden-style apartment building with equal vigor. The previous run of the “for sale” cycle has created legions of well-qualified providers of ownership related services, from inspectors to repair specialists, many of whom are thrilled to raise the tenor of their operations by contracting locally and regionally on a bulk basis with professional owners. At the risk of introducing cliche, don’t overlook how frictionless the management oversight of this type of service effort has become in this age of pervasive connectivity.

We’ve been to a couple of conferences where PE landlords keep saying they’ve found these great local guys to handle the maintenance. But this sounds an awful lot like those bank servicers who hire firms to secure vacant homes….that often wind up falling into disrepair and being stripped of appliances and copper.

Doug Terpstra took issue with this cheery view about making tenants maintain their rentals:

Your perception of being able to put all maintenance responsibility on plantation tenants only goes so far. Beyond neglect, a whole lot can go wrong in a hurry from a disgruntled or distressed tenant. And even in regressive red states like Arizona, there’s a lot of legal wiggle room for a put-upon tenant who might decide to get uppity:

“The landlord and tenant of a single family residence may agree in writing, supported by adequate consideration, that the tenant perform the landlord’s duties specified in subsection A, paragraphs 5 and 6 of this section, and also specified repairs, maintenance tasks, alterations and remodeling, but only if the transaction is entered into in good faith, not for the purpose of evading the obligations of the landlord and the work is not necessary to cure noncompliance with subsection A, paragraphs 1 and 2 of this section.” (Subsection A, BTW, is quite comprehensive and affords tenants considerable leverage, including damages for untimely compliance)

Now to the update on Blackstone’s latest escapades, via some original reporting at In These Times. The article, Game of Homes, makes for good one-stop shopping if you want to get friends and colleagues up to speed on this topic. For NC readers, the first two-thirds of the article covers familiar terrain. Here are the sections that discuss how Blackstone, which is using “Invitation Homes” as its brand for its single-family rentals, is trying to evade its duties as landlord:

Antonio Hernandez, 34, moved with his family into an Invitation Homes-owned property in Chicago’s Belmont Cragin neighborhood in February 2013. He says the company has tried to shift most of the responsibility for maintenance of the home onto him….

When Hernandez began renting from Invitation Homes, he was also perplexed by a section of his lease that says he must rent the property “as is.” He isn’t the only one. In These Times obtained a copy of Invitation Homes’ lease and presented it to Mark Swartz, legal director at the tenants’ rights organization Lawyers’ Committee for Better Housing, and Kelli Dudley, director of the nonprofit Resistance Legal Clinic. Both housing attorneys told In These Times that several sections of the lease violate Chicago’s Residential Landlord Tenant Ordinance (RLTO), a longstanding document that establishes the baseline of tenants’ rights and governs most residential agreements in the city.

In response to inquiries from In These Times about the legality of the lease given to Chicago tenants, Invitation Homes spokesperson Andrew Gallina wrote in an e-mail, “Invitation Homes complies with all fair housing laws and regulations. We use standardized leases adopted by state and local real estate associations, which comply with local statutes.”

But Dudley notes, for example, that while commercial leases sometimes say that tenants have to rent a property “as is,” putting this stipulation in a residential lease “is a violation of the RLTO, which clearly places the greatest responsibility for repairs on the landlord. … [Invitation Homes] is definitely overreaching and trying to shift all the risk and the expense to the tenant,” she says. Swartz adds that the lease’s attempt to indemnify Invitation Homes for any damages, including those caused by its own negligence, violates Illinois’ Landlord and Tenant Act. He also points to several other sections of the lease that are illegal under the RLTO, including a stipulation that tenants must pay the associated fees in the event that Invitation Homes employs an attorney to enforce an eviction or collection of rent.

Keep in mind that unlike New York and San Francisco, which have strong protections for tenants, Chicago does not have a reputation of being a pinko, pro-tenant town. It’s not hard to imagine that its tenant-related laws are middle of the road. Thus Blackstone and any of the other PE players that are joining its race to the bottom in major cities are likely in violation of local ordinances. And Doug Terpstra’s Arizona example suggests that even low-density, supposedly conservative states aren’t necessarily any landlord-friendlier.

Back to today’s post. The effort to organize against Blackstone in different cities around the world is in its early stages. I hope you’ll tweet #BlackstoneEvicts and otherwise circulate this post to help the effort along.

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  1. cnchal

    These smarmy PE people couldn’t care any less what the law says. To the finance fuckers, laws are just a suggestion, never taken seriously when it might cost them 10 cents.

    A bunch of them need to find themselves in Ferguson’s putrid jail. The sickening Steven Schwarzman can be first. It is a certainty that Blackstone has stolen more money from it’s investors suckers and the hapless companies it crapifies, than all the people combined that have ever passed through that jail.

    1. Jim A.

      I see a similarity to the way that these guys just try to hand wave away and ignore any aspects of landlord tenant laws that they find inconvenient and Uber’s attempt to ignore the laws regulating taxis. If you don’t like laws, ignore them. When called on it, buy some politicians to change them.

  2. Karma Fubar

    I believe I read a while back that there are some peculiarities in Spanish foreclosure law that forces the borrower to surrender the property but still owe the balance of the mortgage for the asset they no longer possess. If that is the case, I can see why Spain would be a desirable place for a soulless PE firm to invest in mortgages. The worst that could happen to them is the homeowner would pay off the mortgage on schedule, while the best that could happen would be for the homeowner to fall behind, get foreclosed upon, and in effect pay the mortgage holder twice – once for the loan balance and again with the surrendered property.

    1. Santi

      This is true: under typical mortgages the debt is not canceled under eviction, only the residual value of the property discounted. As interests are often capitalized this make for huge debt-peonage and, worse, if provides an “extend and pretend” scenario for banks.

      Banks would have to assume losses when foreclosing those properties, so instead they push the losses under the rug (of the tenants) and sell the property heavily discounted without having to recognize the losses. A very sad situation, worsening day after day while they keep the appearance of a recovery.

      I guess they will accuse the government of hiding the reality of the economic situation here when the euro collapses, after Greece… I think we go before Portugal and together with them, and given the size of the Spanish economy, we will end the euro unless Italy wins our hand or the powers that be see the lights of the economic science, which they don’t look they are.

    2. Jim Haygood

      ‘Peculiarities in Spanish foreclosure law force the borrower to surrender the property but still owe the balance of the mortgage for the asset they no longer possess.’

      This is true in 38 U.S. states as well. Twelve non-recourse states (with California serving as the poster child) allow a homeowner to ‘mail in the keys’ and avoid liability for any balance still owing after foreclosure sale.


  3. Jay

    It seems to me that any enterprising attorney’s office could do a county property search, identify Blackstone properties (or other PE landlords), notify renters of their rights, and offer their legal services. Maybe start a class action suit. So why don’t they? For the same reason they don’t act to disbar members of the legal community who presided over foreclosure fraud? Not enough money in it? Any enterprising community activist or a left-leaning political party could at least identify renters and notify them of their rights. Maybe start a campaign to get local authorities to start enforcing laws already on the books. Stir the pot with local news media coverage. Get they local clergy involved. So why don’t they? Are they already bought off? Not sufficiently sophisticated?

    Where did the good guys in the professional class go?

    1. Fool

      While you’re at it, walk into the inner city and explain that things said (and deleted) on Facebook can be used against one in a court of law….

      Most citizens don’t know their rights, and who can blame them? After all, legal professionals — because of their clients? their overeducated associates? — have (intentionally?) obfuscated the law.

    2. Ulysses

      It’s becoming ever harder for even good guys to go up against the power of concentrated capital. Big corporations were the ones who pushed class actions in the first place, since they could consolidate their legal spending, avoid the negative publicity of multiple cases in multiple jurisdictions, and usually settle for pennies on the dollar. When good class action litigators on the consumer side began to get traction, the big corporations, and their lackeys in the legislative and judicial branches, looked for ways to make it difficult to bring most class action suits.

      Here’s a good place to start wading into the class-action weeds:

    3. Yves Smith Post author

      There have been changes in the law both at Federal and state level that make it very difficult to get class action certification. I know two attorneys in Alabama who came up with what we call the New York Trust theory, which was endorsed by all the five attorneys who are official advisors to New York state on trust law matters. It is particularly devastating as far as establishing that there is no way a bank who shows up in foreclosure on a securitized loan has standing (as in all the steps regarding the wet ink endorsement of the borrower notes had to be done basically by no later than 90 days after the trust had closed, and that looks to have pretty much never happened starting with the 2003 refi boom).

      They took on about 200 foreclosures in Alabama and couldn’t find a class action theory. And they were class action attorneys. Both wound up getting divorced as a result of the cost on their marriages of the time and effort they were putting into this effort.

      As to the left, Obama systematically gutted anything to the left of the Vichy Left. The server at FDL is down (!!!) otherwise I’d quote it, but here is the link:


      Basically, Rahm would have AM phone calls with the 15-20 left groups considered important and give them their messaging orders of the day. Those that refused to follow directions or worse opposed what the White House wanted would rapidly see the White House go after their funding sources and get them yanked. The message was that if you relied on institutional funding of any sort, you had to toe the party line or you’d be put out of business. Both parties get a lot of funding from private equity, so any group that goes after the rental housing play will be targeted.

      1. Ulysses

        “Those that refused to follow directions or worse opposed what the White House wanted would rapidly see the White House go after their funding sources and get them yanked. The message was that if you relied on institutional funding of any sort, you had to toe the party line or you’d be put out of business. Both parties get a lot of funding from private equity, so any group that goes after the rental housing play will be targeted.”


        Similar dynamic occurred here at the state level– with the WFP essentially caving in to blackmail, and not supporting Zephyr Teachout against Cuomo. The major difficulty in trying to do anything, that threatens the interest of concentrated capital, is that all of us humans need food, shelter, and clothing. We live in a world where it is physically impossible to survive without at least some level of participation in global capitalism.

        A certain amount of leftie-looking politics will be tolerated by the kleptocrats here in the U.S. to preserve the illusion of an “open society.” Yet, anyone who gets any traction– in actually holding kleptocrats individually accountable for their crimes– will be quickly destroyed.

        Bernie Sanders, Elizabeth Warren, Robert Reich et al. can rail, in vague and general terms, against the criminal banksters all they want. They can even hint at the possibility of actually doing something by using phrases like “too big to jail.” Yet, if they were to actually lay out the watertight case (laughably easy to do) for a criminal fraud indictment against Jamie Dimon et al., and threaten to stop business as usual until the banksters are put on trial, as individuals, on criminal charges, they would be shut down in a heartbeat.

        As things stand, the most we can hope for is that the banksters’ banks will still shoulder the routine cost of doing business, that comes from paying (often tax-deductible) fines that are a small-fraction of their ill-gotten gains.

        Thanks so much again to you, Yves, for continuing to put the spotlight on this fetid cesspool of crony capitalism that fills up our noses with its foul stench!

    4. Oregoncharles

      ” a left-leaning political party could at least identify renters and notify them of their rights.”

      Hmmmm. I think I’ll forward this idea to the Green Party – Illinois, for one, has quite a strong party. Thanks.

  4. Jesper

    I’m not surprised that the deals end up being bad.

    A good deal for both borrower and lender would involve a decision taken close to the borrower but since the representative closest to the borrower has limited or no deal-making authority and the one with the deal-making authority is far away from the situation then some/many deals end up being bad for both.

    Anytime and everytime a tightly controlled centralised organisation is to handle something where the choice is between allowing lower level employees make decisions or outsourcing (in this case selling) the decision-making then there will be individuals suffering.

    & there is a lot money to be made from tightly controlled hierarchical organisations such as too big banks -> Chancers, charlatans and sociopaths will be attracted there as flies are attracted to s**t….

    Efficiency of scale for banks? Nope, the large banks tend to suffer from control fraud leading to credit bubbles and when the bubble later pops then the banks can’t handle the need for customised solutions which leads to costly resolutions and unnecessary suffering. Break up the too big banks.

  5. Fool

    But let’s discuss alternatives…

    Is a “localized” real estate market that much preferable? I’ve seen first hand how aggressive the rapidly gentrifying Brooklyn real estate market can be — the market share of which is in large part the hands of local developers. 30-year tenants are still harassed by their landlords, rent stabilization still circumvented, and credits stretched to the very end. It’s no less cutthroat — just ask Menachem Stark

  6. John

    Just to get the topography of predatory capitalistic evil correct, does #Blackstone refer to the Blackstone that the smart and corrupt Pete Peterson started? Kicked out of MIT for cheating and Nixon’s Sec Commerce, he founded Blackstone in the ’80’s. Our boy has a new book out, Steering Clear. You may want to visit Amazon and offer a review. He got a really nice one fro Billy Bob Jeff Clinton.

    1. Kokuanani

      That’s the same [billionaire] Pete Peterson who’s been going after social security for some time, spreading the lie among young voters that “it won’t be there when they need it” and urging their support of reduced benefits and increasing the age at which one can claim benefits.

      [One of my pet peeves is the “we’ll pay you 8% per year more to hold off claiming benefits.” And just WHO can do this??? Why rich folks who have other sources of retirement income and can sail along for several years before claiming benefits, and folks whose bodies haven’t been damaged by their work (e.g., miners, warehouse workers, waitresses, construction workers) such that they want to claim their benefits as soon as possible to get off their feet.]

      Never a word about raising the f***ing lid on when FICA ceases to be deducted from wages. Currently it’s around $117K, as I recall. I’m sure those making $120K, and particularly $200K, could afford a few more months of FICA deductions. As everyone here knows, such a move would “shore up” the SSI fund they profess to be so worried about.

  7. diptherio

    The $50,000 question is how many people can you make homeless before you spark a revolution? 10% of a population…20%? Blackstone is dedicated to finding out empirically, it would appear.

    And no, they obviously do not give a wet fart about “the law.” Our Tenant/Landlord law here is pretty mushy, and not exactly pro-tenant. For instance, there is no penalty to a LL for wrongfully withholding your deposit. You can take them to small claims court and force them to return it, but there is 0 incentive for any landlord to give back your deposit in a timely manner, so the unscrupulous ones make it a practice to withhold your deposit (or at least large chunks of it) as a matter of course, regardless of facts on the ground. Two of our biggest corporate landlords here in my little burg are pretty famous for it. We’re no New York, is what I’m saying–but even our law, based off the URLTA that most states have used, still requires that LLs maintain the premises in a “fit and habitable condition” and bars the LL from transferring that obligation onto the tenant via lease clauses. Trying to do so is one of only a few violations that will get a tenant punitive damages in court: three times monthly rent is the max. I would be pretty surprised if most states don’t have similar provisions in their local acts governing Residential leases.

    Blackstone seems to be greatly fudging the difference between commercial and residential leases. In general, you can put just about anything in a commercial lease, but it’s long been recognized that tenants require more protection from unscrupulous dealers than business people who are assumed to be a little shrewd–which is the whole reason we have separate Residential acts, at least here in the US. That said, as I mentioned above, LLs already make it a practice to “arbitrage” their tenants unwillingness to enforce the law through the legal system, and I wouldn’t expect Blackstone to do things any differently. But Blackstone is a bigger target than any local LL so this looks like a class action waiting to happen, to me…where you at Susan?

    1. Iolair

      Ah, the Banker’s Manifesto. When I first read that I was sure it was from the fevered imagination of Depression era losers. Conspiracy Theory! Then I lost a house, got divorced and lost another house, all while watching lawyers and bankers who produce nothing get better off then I’ll ever dream of being. I understand being pushing around by The System and being a virtual slave to it now. Welcome to the rez, Iolair

      “When through the process of the law, the common people have lost their homes, they will be more tractable and easily governed through the influence of the strong arm of the government applied to a central power
      of imperial wealth under the control of the leading financiers. People without homes will not quarrel with their leaders.”

  8. sgt_doom

    As Yves Smith featured here one day, Private Equity At Work (Eileen Appelbaum), is the ultimate recent book on the private equity/lbo locusts and lowlifes.

    The Blackstone Group, founded with Rockefeller money by Peter G. Peterson (whose fortune derives soley from debt and is therefore always warning us about debt!!!!) and Schwarzman (Skull & Bones, Yale, chosen by an upperclass swine by name of George W. Bush), responsible for endless destroyed companies and destroyed employment, purchased refineries and closed them to drive up the price of oil, cornered the anthrax vaccine market (as if who really needs that, when many other poisonous substances are far easier to weaponize????), and a host of other crimes and perfidy, just like the excellent article featured here today.

    Carlyle Group, when examined minutely, really behaves as a subset of the Carlyle Group.

    Peterson has funded an austerity group within the New America Foundation, and long ago established the Peterson Institute (with David Rockefeller, of course), to promote the ending of Social Security, Medicare and Medicaid, and the robotic adherence to the WTO’s Financial Services Agreement (and oh yeah, the offshoring of all American jobs).

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