Courts will scrutinize schemes intended to take advantage of distressed homeowners. In a recent case, the court challenged the language in a sale/leaseback agreement with defaulting homeowners and analyzed the transaction in a way that curtailed an attempt to evict them.
The court’s action falls under the rubric of “re-characterization” of an agreement into something other than how it had been labeled by the parties. In Bernstein v. New Beginnings Trustee LLC , it meant that a document labeled a “lease” to the homeowners was held to be an “equitable mortgage,” which meant that the homeowners’ interest in the property could be terminated only through a foreclosure action.
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