Think You're Safe In An Apartment?

...from the housing crisis? Think again (h/t Atrios).

Nicholle Krause first noticed the weeds sprouting in the usually well-manicured grounds of her 320-unit apartment complex in Chandler, Ariz., in December. Soon, signs of neglect began multiplying: Garbage spilled over from the dumpsters, the water in the swimming pool turned a slimy pea green and the grounds were infested by swarms of bees — especially alarming because Krause is severely allergic to bee stings.

“I couldn’t even go outside to enjoy where I live,” said Krause, a 21-year-old office worker who pays $827 a month for a one-bedroom apartment with garage space. “I shouldn’t have to pay $800 a month to live in a … hole.”

It wasn’t until early March that Krause and other residents learned why the complex – the alluringly named Alante at the Islands — was rapidly going to seed. The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.

As panicked renters in Arizona began holding public meetings to explore whether they could walk away from leases, recoup security deposits or sue, it became clear that the scale of the mess was far larger than they had realized. Companies under the Bethany umbrella owned at least 60 — and possibly many more — large residential complexes across the nation, all of which are now believed to be in bankruptcy or receivership, potentially affecting tens of thousands of renters.

The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis. That’s a situation that some experts say is becoming much more common.

Large apartment complexes are owned by companies who own multiple complexes (I know mine is). These companies have been hit just as hard as homeowners by falling real estate values. They're losing money and are unable to by law in most states to jack up rental prices to make up the difference precisely because values are falling. Some are going under. They are taking thousands, if not millions of apartment renters with them.

You're going to see a lot more of this in 2009. Know who you're writing the checks to if you rent. Do some research. If your rental group landlord goes under, you're out on the street even if you've never been a day late on the rent. Know what the laws are in your state.

Find out what renters' legal protections are in your state now if you're a renter. Strongly consider paying on a monthly basis instead of tying yourself down to a lease.

With this job market and corporate landlords going under, you need flexibility right now.