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Article Courtesy of The Tampa Bay
Times
By Susan Taylor Martin
Published June 7, 2016
Two years ago, a new Tampa company called RE-710
declared bankruptcy to halt foreclosure of nearly 50 homes it was renting out
for thousands of dollars.
The company was so new it didn't have employees, equipment or furniture. It had
acquired most of the properties just a few days before the bankruptcy filing. It
collected rent but wasn't responsible for the mortgages, as those were still in
the name of the original borrowers.
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But all 40 lenders approved
RE-710's reorganization plan, and now the company could soon
emerge from bankruptcy court. What once was considered a "bad
faith" filing today is viewed as having been a unique,
innovative way of settling legal claims, paying off debts and
getting dozens of homes occupied and out of foreclosure.
Even the judge who handled the case had words of praise.
"No matter what the dynamic is, no matter what the reason is,
it's bad for society to have empty houses with vandalism and
mold," U.S. Bankruptcy Judge Catherine Peek McEwen said at one
hearing. "This is a wonderful thing for the neighborhoods."
But whether RE-710's case can serve as a model for other real
estate investors is an open question. By using the bankruptcy
laws to its advantage, the Tampa company succeeded in getting
ownership of some nice houses at what could be considered
bargain prices. But it also has taken two years and a battery of
attorneys. |
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In this photo taken May 23, 2016, Kevin Byrne, a manager
with RE-710, poses in front of a Valrico, Fla., home his company
recently bought, fixed up and is now renting out.
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"There are huge legal expenses," says
Kevin Byrne, a Tampa real estate broker and certified public accountant who
serves as RE-710's manager. "We were fortunate because of the timing."
RE-710's roots lie in the homeowner association foreclosure auctions that drew
hordes of deal-seekers to the Hillsborough County courthouse several years ago.
HOAs can foreclose on owners who don't pay their association dues. For just a
few thousand dollars, enough to cover the delinquent dues plus attorneys fees
and court costs, the winning bidder could get temporary title to a home and rent
it out until the bank foreclosed.
Byrne took title to some houses that way. The big player at the auctions,
though, was Barry Haught, who acquired dozens of properties.
Properties obtained through HOA foreclosure auctions are not long-term
investments; the rent windfall lasts only until the bank takes back the house.
In order to get full ownership, the temporary title holder might have to deal
with several different parties — banks, other lienholders, county tax
collectors, community associations, perhaps the IRS.
That gave Tampa lawyer Richard McIntrye an idea: bring all parties together in
bankruptcy court. There, judges can strip away unsecured second mortgages. First
mortgages on non-homesteaded property can be renegotiated at terms more
favorable to the bankruptcy filer.
McIntrye shared his idea with Byrne, one of his clients. Byrne approached Haught,
who had a lot of houses and was excited about the idea.
In early 2014, Haught incorporated RE-710 and transferred more than 40 homes and
condos to it. Two weeks later, the company filed a Chapter 11 bankruptcy that
immediately halted all foreclosure action.
Under its reorganization plan, the company agreed to pay HOA fees, property
taxes and other carrying costs while it rented out the properties and negotiated
with the lenders over the next two years.
To get to this point, he estimates, the legal fees have been "hundreds of
thousands of dollars." |
