Renting a Recently Foreclosed Property – What Are Your Rights?

With foreclosure rates in some cities reaching 40% of all listed properties, it’s not just the homeowner who is being forced to move. What about all those tenants who have rented in good faith and paid their rent on time?

Should you continue to pay rent?

Absolutely! Don’t stop paying your rent. You do not want to continue paying rent to the landlord if they are no longer your landlord. Pay the rent to the bank, lender, or court-appointed receiver, or if you’re not sure who owns the property, talk to a lawyer and open an escrow account and pay the rent into that account.

Does my lease protect me?

Not precisely. In some states, you lose any right to the property.

1. In most states the first in time, first in right rule applies. That is, if the mortgage date was prior to the signing of the lease, you will lose all your rights to stay.

2. Banks can foreclose in most cases, but check with your state’s laws.

3. Unless you are in section 8, your lease will survive until the termination date.

Do I have to move?

Possibly. Banks may want to keep you as a tenant, partly for cash flow and partly because the occupied property won’t be vandalized. But those who remain join the ranks of month-to-month tenants, all of whom can be terminated with proper notice, typically 30 days. You can expect banks to be absentee homeowners and much less inclined to make repairs or provide decent service. They are overwhelmed and if they want you to leave they can make your life hell.

cash for keys

Because eviction is so expensive for the banks that they are willing to charge you. If you just leave, they are often willing to pay moving costs and a small fee for a quick exit. Do your best to bargain!

do i have any recourse

Yes. You can sue the landlord who just defaulted. Basically, when you sign a lease that has been terminated due to foreclosure, the defaulting landlord has missed the full term of the lease. And so you can sue. It is true that the owner is probably broke, but the lawsuit will last for many years and when the owner recovers, he may be able to collect.

Thank you for reading

howard bell