Rights of Tenants When a Landlord is in Foreclosure

If you learn that the place you rent is being foreclosed by the landlord’s bank:

You cannot quit paying rent. Non-payment is a reason to evict you, and eviction can happen much faster than foreclosure. Be extra-sure to keep records of your rent payments.
You don’t have to move out right away. You may not have to move out at all.

Your rights as a tenant when foreclosure is filed in court

You have a right to be notified by the landlord that the unit you want to rent is already in foreclosure. §

If you are already living there, you have a right to get a copy of the Summons and Complaint for foreclosure in the mail from the bank. §.

The Summons and Complaint should tell you that your right to stay in your unit may end when the foreclosure is done.
If you give the court your name and address, the court will send you notices of the status of the foreclosure — either by mail or email. § Use this Notice of Appearance form and select “Other.” Then write “Tenant.” Get the form to the court and also send copies to your landlord (or their attorney) and the bank or lender who is listed as the plaintiff. Also give the court a Certificate of Service to tell them you did that. If you have questions, ask the court clerk.
You are not required to hire a lawyer. You are not required to pay any money toward the lawsuit or your landlord’s mortgage.

At a minimum, federal law says you have a right to 90 days to “vacate” (to leave) your unit from the date you are served with a Writ of Possession. A Writ of Possession is a written order from the court that gives the landlord or building owner the right to take possession of your rental unit. You may get to stay in your unit until the end of your rental agreement under a federal law called “Protecting Tenants at Foreclosure.” The judge in your case will have to decide how the federal law applies to your case.

Do I have to keep paying rent?

Your landlord owns the property and has the right to the rent until there is a foreclosure sale of the building. If you stop paying rent, your landlord can start an eviction case for non-payment of rent. If you need to stop paying rent in order to save money for a move, you should put the money in a separate savings account.

If the property is sold, you must pay rent to the bank or new owner of the property. If you don’t know where to send the rent, or the rent is returned to you after you send it, you should put the money in a separate savings account. If you do not pay your rent, you can be evicted.

Can I stay in my unit?

The short answer is sometimes. But it is not up to you. What happens in a foreclosure depends on the decisions of the landlord, the bank and sometimes the court. Unless they buy the building, tenants do not have any ability to change the outcome of a foreclosure. Here are some of the things that could happen after a foreclosure is filed:

The landlord could “redeem” the building from the bank by paying the whole amount due. That ends the foreclosure and the landlord is still the landlord.
The landlord may try to sell the building to pay off the bank. That ends the foreclosure, but there is a new landlord.
The bank could try to make all the tenants leave before a foreclosure sale so that the buyer gets an empty building.
The bank could end up being the buyer at a foreclosure sale. The bank could decide to manage the building so that the tenants can stay. Or the bank could make all or some of the tenants leave with at least 90 days’ notice.
Someone else may buy the building. If the new owner is going to live in your unit as a primary residence, you have a right to get 90 days to “vacate” (to leave) your unit from the date you are served with a Writ of Possession.

Can I end my rental agreement?

If you want to leave before your rental agreement time is up, be sure to give 30 days’ notice to your landlord. It is a risk because if you do not stay until the end of your rental agreement, your landlord could sue you for the rent until the end of the rental agreement.

What about my security deposit?

Normally, you are entitled to get your security deposit back within 14 days of when you move out. Foreclosure is not normal because during the foreclosure process the title owner of the property can change, and the foreclosing bank has the right to send tenants a notice to leave. So there is no sure way of getting your deposit back.

Ask your landlord for your security deposit back when you learn of the foreclosure. Keep it in a separate account. After foreclosure, if there is a new owner asking for a security deposit, you can give it to them.

If your landlord does not give you the security deposit, write a letter to the court asking for an order that the landlord selling the property put the security deposit into a special account that will be transferred to the buyer after sale of the building. Send a copy of your letter to all the parties to the foreclosure action.