Tenants rights in a foreclosure

Tenants rights in a Foreclosure

First of all, I must preface this by saying I am not an attorney, and I would always recommend that someone consult with a legal and/or tax advisorbefore making any decision. With that said, I recently read an article where a couple had rented a condo, and their lease did not expire until June 30th. The tenants received a notice in the mail from the bank that the condo they were renting was being auctioned off within the next 90 days. When they contacted the landlord, he said that he had stopped making payments for the condo to the bank months ago. I know of several homeowners who are no longer making their mortgage payments, yet are still collecting rent on their home from a tenant. So the questions arose: about the responsibility of the tenants to continue making their rental payment until the condo is auctioned, whether they will be able to stay in the condo until the lease expires, and will they get their security deposit back?

Christopher Combs, a real estate attorney with Combs Law Group PC, responded to this question. He said that under federal law that took effect in May 2009, a tenant is generally entitled to stay in the rented premises until the term of the lease expires, even after a foreclosure sale. The lender, or buyer of the foreclosure property has no obligation to refund the security deposit when the lease expires, so Mr. Combs suggests that you negotiate with the landlord for the return of the security deposit in exchange for continuing to make the rental payments. Mr. Combs also said that by "your landlord not making the mortgage payments for several months," it is probably an "anticipatory breach" of your lease. "Therefore you may not have an obligation to continue making rent payments to the landlord." However, before the foreclosure sale, the bank does have the right to have a receiver appointed by the court in order to collect the rents. If that does happen, you would have to make the rental payments to the bank's receiver and not your landlord.

I don't know about the rest of the country, but this is becoming more and more common here in Arizona.

Hopefully this is beneficial information to tenants currently renting from a homeowner who may end up in foreclosure.