The Impact of Foreclosure on Tenants

Foreclosures are difficult for homeowners but are just as troubling for renters. If you are renting a property, you may suddenly find out the property was foreclosed without knowing the owner was going through foreclosure. Suddenly, with a new owner of the property and no communication, it’s not clear how long you will be able to stay.

As a renter, you have some legal protections if the property goes through foreclosure. However, tenant protections can vary by state and local law. Contact a local landlord-tenant lawyer for advice about how a foreclosure will impact your rental options.

What Happens to My Lease if My Landlord’s Property Goes Into Foreclosure?

When a buyer cannot make mortgage payments, the lender begins the foreclosure process. After foreclosure, the lender takes the title. A homeowner has notice of the foreclosure, gets notices, and has time to make payments from the bank or lender. However, tenants may not know the foreclosure proceedings when the owner rents rooms or apartments.

The Protecting Tenants at Foreclosure Act (PTFA) is a federal law that protects tenants from eviction after foreclosure of their rental units. The PTFA first went into effect in 2009 and became permanent in 2018. Under the PTFA, any immediate successor in a foreclosed property assumes the interest subject to the rights of any tenants.

The new owner, including a bank taking title, has to give at least 90 days’ notice to vacate before they can start the eviction process. Some states may require more than 90 days’ notice.

Generally, you can stay in the property until the end of the lease. However, there are two exceptions. You may only have 90 days’ notice if there is no rental agreement. If the property sells to a buyer who will use it as a primary residence, you may only get a 90-day notice.

Do I Still Have To Pay Rent if the Bank Takes Over the Property?

Yes, you still have to pay rent under the lease terms. While you are the tenant, you pay rent to the landlord until the bank takes over. Then, the bank assumes the interest in the lease, and you have to pay rent to the bank. During this time, create a record of your rent payments, when you made them, and where you sent them.

Can the New Owner Evict Me Before My Lease Expires?

If the new owner will not occupy the property as a primary residence, they cannot evict you before the end of your lease. For example, the new buyer takes over the house and plans to move in and live there as their primary residence. You won’t get until the end of your lease, but they still have to give you a 90-day notice to move out.

Who Does Repairs and Maintenance After Foreclosure?

After a foreclosure, the new owner is responsible for maintenance and major repairs. If you need repairs to the apartment, send a written notice to the new owner stating the required repairs. The new owner has to respond to major repairs in a reasonable time. If the new owners don’t fix the problem or don’t maintain the property, you can take them to small claims court for damages.

Is There Any Way To Prevent Eviction After Foreclosure?

Depending on the type of property and the new owner, they may want any renters out of the property as soon as possible. The new owner may have new plans for the property or want to make improvements to increase rent. As the tenant through a foreclosure, you have certain rights.

You can stay on the property until the end of your lease unless the new buyer uses the property as a primary residence. Otherwise, you have 90 days’ notice if you are a bona fide tenant. You may also be able to negotiate with the new landlord to stay on month-to-month or sign a new lease term.

How Long Does the Foreclosure Process Take?

The foreclosure process can take a few months to a year or more. Your landlord may have already gotten months of notice of default and a notice of sale before you even find out the property will be foreclosed.

Generally, the lender has to wait a certain amount of time after the buyer misses mortgage payments before they will start the foreclosure lawsuit. There may be another notice period before the foreclosure sale. The new owner may take even more time to take possession of the property. This leaves many unknowns for tenants who are unsure when they will have to leave.

Who Should I Contact About My Rights After Foreclosure?

Finding information about your tenant’s rights after foreclosure is complex. Be careful when talking to the former landlord. They may no longer own the property but may try to keep collecting payments. Talk to a lawyer for legal advice about your rights during foreclosure.

Foreclosure and landlord-tenant laws vary by state. A local lawyer will be able to investigate your situation and identify the seller and owner. Your lawyer can also negotiate with the new owner to allow you to stay in your property for the tenancy term or even renew your lease so you don’t have to move.Speak to a local landlord-tenant attorney to understand your legal rights if your rental unit is going through foreclosure.