Foreclosures in Rental Homes and Landlord Tenant Laws

It is estimated that 40% of pre-foreclosure properties have tenants. A pre-foreclosure property is one in which the owner still owns the property, but is in default on their mortgage. The owner’s lender may have instituted foreclosure proceedings. Once a foreclosure judgment is entered against the owner, and/or the property has been sold at a foreclosure auction, the owner no longer owns the property. The parties residing at the property must ultimately vacate the property.

Landlord Tenant Laws in a Foreclosing Property

Prior to May 2009, there were no national foreclosures tenants’ rights in existence. Under the new foreclosure tenant law signed by President Obama this past May, tenants now have legal protection from foreclosure evictions. The tenant may stay in the property until their lease expires, and remain an additional 90 days thereafter before they have to vacate the premises.

For tenants that are on a month to month or have no lease, they may stay 90 days from when they receive a foreclosure notice from the lender to vacate. The new law does not specify when the notice must be given to the tenant. Tenants should check the laws in their state regarding foreclosures tenants’ rights and foreclosure tenant law.

Landlord and Tenant Complaints

Common legal issues that occur in a pre-foreclosure situation include the following:

• Landlord is no longer maintaining the property, paying the utilities or making repairs
• Landlord does not advise the tenant that the property is going into foreclosure
• Landlord fails to maintain the property insurance or pay the taxes
• Tenant decides not to pay their rent
• Tenant vacates the property and terminates the lease without landlord’s permission.

Landlord Liability in Foreclosure Rental Properties

A foreclosure creates legal liability for both the landlord and the tenant if either or both fail to live up to their obligations under the lease. For the tenant, failure to pay their rent to the landlord can result in an eviction. If the tenant breaks their lease early, the landlord may be able to collect damages for lost rent. The tenant may be able to sue the landlord for breach of contract, moving costs and for the return of their security deposit. This can cause a great deal of inconvenience and financial burden to the parties. The parties should try and resolve the matter in a friendly manner.

Help from a Lawyer

If you and your landlord cannot come to a mutually agreeable solution, then seeking the help of a real estate attorney may be the best solution. A real estate attorney can write a letter on your behalf, file an action in court on your behalf and defend you in any landlord/tenant legal action. The attorney will be able to advise you on the best legal remedies for your situation. Since landlord/tenant disputes and tenant foreclosure laws are complicated, it is recommended to seek the advice of an attorney to assist you.