Few things in life are more anxiety-inducing than coming home to find a notice of foreclosure taped to your door. If you’re renting the place, this induces a great deal of confusion as well. After all, you’ve paid the rent on time every month, why should you lose your home? The good news is you can breathe a bit more easily. It doesn’t necessarily mean you have to move out. Here’s what to do if your landlord is facing foreclosure.
The 2008 financial crisis wasn’t all bad. For renters, it moved Congress to pass the Protecting Tenants at Foreclosure Act (PTFA). Among its prescriptions, landlords facing foreclosure must honor the full terms of your lease agreement and when the property is sold, the new owner must also honor your lease—unless it’s a single-family home and they plan to occupy the place as their principal residence. If that is the case, you’ll have 90 days to find a new home from the date the new owner gets the deed to the property.
As illogical as it may seem, you do have to keep paying rent to the landlord with whom you signed your rental agreement—even though they’re in foreclosure. They are still covered under the agreement you signed and entitled to the money. Nowhere in your lease agreement does it say they have to use the money you pay them to satisfy the mortgage. So keep paying them until the property is officially foreclosed upon, at which point you’ll begin making rent payments to the bank.
When the new owner takes over, you’ll then make payments to them. If you fail to make your rent payments anywhere along the line — even if your original landlord says don’t worry about it — you could lose your protections under the PTFA. For this reason, it’s very important to keep detailed records of all of your payments. Ask for receipts every time you make a payment. If the new owner isn’t readily identifiable right away, make sure you save the monthly rental payments so when they do surface you can pay them immediately.
If the new owner does decide to live in the property, you’ll get a notice of eviction. Make sure you comply with all of its tenets, including leaving the place in the same condition it was in when you occupied it. Your agreement with the previous owner in this regard carries forward to the new one. However, if the eviction notice violates any of your rights under the lease agreement, inform the person who served you the notice of eviction right away. Further, if you’re threatened or bullied, contact law enforcement officials. All entities are prohibited from forcing you to leave, as long as your lease agreement is in effect.
Above all, keep records of everything. If the new owner offers to pay you to move out early, get it in writing. All communications with your current landlord regarding the situation should be by email or letter so they can be presented in court if the need arises. You should also make arrangements with your current landlord for the return of your security deposit. If they aren’t forthcoming with it, you can sue them in small claims court to recover your funds.
Still, even with these legal protections in place, it’s a good idea to start looking. Who knows what the future might bring? Even with a 90-day grace period working for you, if you’re in a very competitive rental market, you’ll want to have feelers out there. You’re within your legal rights to begin conducting a search and doing so cannot be considered a violation of your lease agreement under these circumstances.
As troubling as it may seem at first glance, learning your landlord is facing foreclosure doesn’t mean you’ll lose you home right away. You might even be allowed to stay if the new owner decides to be a landlord too.
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This article should in no way be construed as legal advice. If you have specific questions about the law in this regard, you should always engage the services of a competent real estate attorney.