What can I do if my landlord is in foreclosure?

Do I have to pay rent if my landlord is in foreclosure?

Many tenants and renters are finding out their landlords are in foreclosure which usually causes an immediate sense of panic to set in. They want to know what they can do if their landlord is in foreclosure and if the have to pay rent. In most instances renters will be protected for the term of their lease and if no lease exists you will generally have 90 days to vacate. These time-frames start upon the conveyance of the property which usually means a foreclosure sale.

A lot of tenants want to know if they must continue to pay rent even though their landlord is in foreclosure. While many tenants stop paying rent, under the terms of most leases a tenant is still responsible for paying rent. Tenants are usually very angry that they are paying rent that the landlord is pocketing instead of paying their mortgage. While this certainly seems wrong it happens all the time. However it is best to continue paying rent if you want to stay for your full term of the lease.

If your rental premises are sold at auction back to the bank or to another party and you receive an eviction notice you need to draft a letter to the new owner, Tenant Foreclosure Protection Letter.

The Protecting Tenants Foreclosure Act protects you from this type of early lease termination or eviction.  If you have a term remaining on your lease the owner can not evict you until the lease ends.  If you do not have a lease,  at a minimum you must receive 90 days notice of termination of your tenancy. And if this owner attempts to give less than 90 days you need to send a letter about the law, your lease, and how he must comply. New owners acquiring homes or property through a foreclosure sale must honor existing leases. 

This ONLY applies to Bona Fide Tenants which are defined as someone other that the owner/mortgagor, their children, parents or spouse; and the lease must be the result of an arms-length transaction; tenants can’t  pay rent that is substantially  below market rent.

Additional THIS LAW DOES NOT APPLY if the new owner plans on moving into the residence as his primary residence.

Tenant Foreclosure Protection Letter

Things to Remember

• Do not stop paying rent. If you stop your landlord can then under the law he can attempt to evict you. The terms of your lease are still in force. Also keep copies of your rent checks or get receipts if you pay in cash.
• Make a copy of the letter you write to your landlord addressing the attempted eviction.
• Always send your letters to the new owner by certified mail, return receipt requested, at the address the new owner put on his/her notice to you.
• These notice periods begin at conveyance of the property, not from the date the foreclosure started.
• The Protecting Tenants at Foreclosure Act applies to foreclosures of all residential property not just federally related mortgage loans or single family properties. This law applies to federal related mortgage loans, single family homes, and all residential property including tenants of multifamily property, condos, even those renting a mobile home, are all protected by the Act.