Rights of Tenants When a Landlord is in Foreclosure

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.

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.

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.

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.