Sep242010

Squatting Among the Rich and Famous

I recently wrote that squatting is becoming a way of life for many delinquent borrowers.ramdy_quaid

Of course, this doesn’t meet the technical definition of squatting which is possession of real estate without the owner’s permission. In this instance, the squatters are technically still the owners of property, so there is nothing illegal going on, but these owners are generally hopelessly underwater and failing to make their mortgage payments. They are in possession of real estate that can be called to auction at the discretion of their lender at any time. Ultimately, they will lose their homes.

Today, we are going to look at other forms of squatting from the traditional adverse possession to the return of former owners who couldn’t leave their entitlements behind.

Squatters moving into upscale neighborhoods

With thousands of mansions vacant, some see easy pickings

By Bill Briggs
msnbc.com contributor
updated 9/23/2010

On the big screen, actor Randy Quaid may be best known for his mooching, move-in-and-never-leave character “Cousin Eddie” from National Lampoon’s “Vacation” films. Last weekend, he allegedly followed his own Hollywood script.

Quaid and his wife, Evi, were arrested Saturday after they were found living in a guest house on a million-dollar, Montecito, Calif., property Quaid once owned. While Quaid claims his name remains on the deed, the actor and his wife were jailed until they were able to post $10,000 bail.

 

For those of you who don’t read the gossip on TMZ, here is a recap of this bizarre story:

Randy Quaid and Wife Arrested for Burglary

The Quaids — Fifty Percent Punished

Randy & Evi Quaid — Pretty in Pink Handcuffs

Quaids Show Up to Court, Plead Not Guilty

Quaid is hardly alone in his distinctly post-bubble legal trouble. Such high-end “mansion squatting” has becoming an increasingly visible irritant in or near Seattle, St. Louis, Chicago and Los Angeles and probably elsewhere, industry experts say.

And the trend appears to be growing, as the housing bust means thousands of mansions around the country are languishing on the market, often under the control of banks that have foreclosed on them.

It’s immoral but I do understand, logically, how people get this idea in their heads,” said Tara-Nicholle Nelson, a former Bay Area broker agent and now a consumer educator for the real estate website Trulia.com. “I also think this happens a lot more than we know.”

Yes, it is very easy to understand how this idea gets into everyone’s mind: it’s because they all see their neighbors doing it. Ask yourself, in your circle of friends and acquaintances, how many people do you know that are not paying a mortgage and living in a property that has no equity? How is that different from squatting? It is because their name is on title? What is title without equity? A lease… except that even a lease requires payment.

Luxury homes that are for sale or foreclosed are often unoccupied and under the care of asset managers who typically may be responsible for a lengthy list of idle properties. Many mansions are isolated, walled, cloaked by trees or otherwise hard for passersby to see.

“Squatters realize these places may not get showing for months at a time,” said Nelson. “That’s what makes these properties more of a target.”

Better the squatter you know than the one you don’t? That seems to be the reasoning of banks these days.

Before the recession, squatters were known to slip into average- or bargain-priced homes for short, secret stays. In Oakland, Nelson recalls escorting clients to available, empty properties during which “you walk in and there’s like a shaving kit and mattress on the floor, and you go in the next room and find somebody there.

“Traditionally, this has been something you see more in low-end neighborhoods where there are more people around, where more people need a place, and perhaps where police have higher priorities than checking on a pushed-in door or broken window,” said Nelson, who has written about the trend for WalletPop.com, a personal finance news site.

The sad truth is that squatters like that often live in squalor and are frequently the victims of crime.

But squatters have moved into nicer neighborhoods now. Realtor Adam Kruse discovered last February that his company-hired house cleaner was living it up – and sleeping over – at a $2 million, 10,000-square-foot home he had listed in St. Louis. The mansion, owned by an out-of-town seller, was nestled near a golf course and boasted large swaths of open space, a media room and “a gorgeous kitchen (with) really just bedrooms, bathrooms galore,” said Kruse, who works with the Hermann London Group.

I guess local realtors aren’t the only ones stuck on the word “gorgeous.”

You have to admire a squatter who has the nerve to squat in a multi-million dollar mansion.

After tidying up the place, the house cleaner “started having friends over, too, and drinking and partying and staying there … for days at a time,” Kruse said. The squatting went on for about three months until the cleaner – or one of her “guests” – accidently got locked out.

“We found a broken window by the front door and are to believe that at some point the squatters … needed to break in to get back in,” Kruse said. “We just saw party scenes – remnants that looked very similar to beer pong games.”

 

The cleaner was fired and no criminal charges were brought against her. The house is no longer on the market.

Upscale squatters have been nabbed in at least three other cities:

  • In Sugar Grove, Ill., a suburb west of Chicago, cops arrested 42-year-old Steven Hawthorne in April 2009 after he moved his furniture and big-screen TV into a vacant, $700,000 foreclosed home. He introduced himself to neighbors as the new owner and stayed for about eight months. Hawthorne, who also managed to have the power, gas and water turned on at the dwelling, was eventually charged by authorities with two felonies, including theft of government property (the utilities).
  • In Malibu, Calif., Wells Fargo executive Cheronda Guyton occasionally occupied a $14.9 million beach house to host swanky social gatherings, according to newspaper reports. One catch: the property’s former owners had lost the home to foreclosure after they were victimized by Bernie Madoff – and the estate was claimed by their bank – that’s right, Wells Fargo. When residents within the gated community glimpsed the parties, they got Guyton’s name from security guards and turned her in. Wells Fargo fired Guyton in September 2009.
  • In the Seattle suburbs, a small group – nicknamed the “Mansion Squatters” – has taken a more creative approach. In June, one of its members, Jill E. Lane, 30, moved into a foreclosed and vacant 8,000-square-foot-home in Kirkland, Wash. valued at $3.3 million. She posted a note on the front door that read: “Privately owned property. Not for sale.”

The home takeover attempt also involved James McClung, a former real-estate agent and owner of a business called NW Note Elimination. He reportedly runs that business with Lane. Police soon arrested Lane on a criminal trespass charge.

Lane told the Seattle Times that her squatting was part of a protest movement: “Banks do whatever they want and nobody holds them accountable. It makes me ill to see what the banks are doing. They aren’t using their bailout money to help anyone. So I’m standing up for the people who are being brutalized by banks every day.”

Ordinarily, I would cheer her on for having such a great attitude. Unfortunately, everything she said is complete and utter bullshit.

In August, McLung apparently tried to stake claims to three more Seattle-area mansions, including a $2.2 million home in Bellevue. He posted similar notes on the doors of all three homes, according to the Seattle Times. Mark von der Burg, real estate agent for both the $3.3 million Kirkland property and for the Bellevue luxury home, did not return several phone messages seeking an interview.

I’ll bet he didn’t return the phone call. What would he say? He was either complicit in the scheme, or so totally disengaged from his job that he should hide his face in shame.

According to media reports, Lane’s short stay in Kirkland cost von der Burg’s client, a bank, $35,000 in legal fees and locksmith bills as well as increased security and cleaning.

Nelson said the targeted homes in the Seattle area were all owned by failed banks.

The squatters apparently believe “they’re going to come into this gap between ownerships and somehow trick someone into believing they now own this place for real — which is absurd,” Nelson said. “Even if the (original) bank fails, somebody owns those assets.”

In St. Louis, Kruse can see why desperate people in some cities are making a bid for a taste of the good life – albeit a temporary one.

“People are seeing all the negative news (about the housing market) and just deciding to be more gutsy and stay in riskier places,” Kruse said. “With all the vacant homes, (they figure) their chances aren’t that bad.”

Isn’t squatting just another manifestation of entitlement? The people living in houses they are not paying for are doing so because they believe life owes them something. It doesn’t matter to these people that others who actually pay their bills live with less as long as they get what they deserve. The housing bubble has changed both the rich and famous and the ordinary and anonymous and made them into something less.