Tenants Suffer When Landlords Are Foreclosed
With foreclosure rates at all time highs all over the United States, tenants who rent from troubled landlords are also suffering. In many cases, renters are suddenly surprised to find that their landlord is no longer the owner and that even a long lease doesn’t save them from eviction unless they leave willingly. Perhaps equally distressing, renters are discovering that getting back their security deposit from financially strapped former landlords can be difficult if not impossible.
In most cases, renters of houses, duplexes and condos must vacate a property after it has been foreclosed and either a new individual owner or a bank has taken possession. Renters rarely hear about a pending foreclosure of their rented residence until being told that they have thirty to sixty days to vacate by a representative of a financial institution. That’s due to the fact that landlords are not legally obligated to inform their tenants about an impending foreclosure.
Tenants on a month-to-month basis have no right to continue renting their property from a new owner unless he wishes o re-negotiate a new lease. Those who do have a lease are usually entitled to thirty days notice unless they have been in residence more than a year in which case it will be sixty days. The single exception is someone renting in a rent-controlled building in areas with ‘just eviction’ laws that don’t include foreclosure as a reason for eviction. One additional exception is when a renter signed the lease prior to the owner taking out the mortgage.
In most states, landlords have three weeks to return a tenant’s security deposit after they move out. In cases of foreclosed properties, landlords frequently default on this too and filing a civil lawsuit is their only hope. The idea of withholding the last month or two’s rent from the owner also usually fails, since the tenant ends up with an eviction on his credit report making it difficult if not impossible to secure a new rental.
Even when a renter does become aware of the eviction proceeding upon the owner’s receipt of a Notice of Default, he only has approximately four months until he must vacate the residence. On occasion, tenants with this ‘heads up’ about the pending foreclosure have attempted to contact the lender to ask to remain a tenant. Unfortunately, banks and financial institutions are not interested in being landlords and this request was not granted. Instead, they asked that the tenant vacate as quickly as possible once the foreclosure was completed by a sale.
In some cases, banks and financial organizations will offer the tenant a cash reward (normally $1,000 or more) to move out within two weeks and leave the property clean and ready for new occupancy. This is called a ‘cash-for-keys’ transaction and most renters are completely unaware of the possibility and don’t bother to explore it.
Of course, it is always possible for a tenant to stop paying rent and gamble that the landlord will not go to court and start an eviction proceeding. Under the law, the landlord must give 3-days notice to the tenant before filing such a proceeding. Once the eviction takes place, it appears on the tenant’s credit record as a very-black entry.
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Is there a reliable number of how many tenants are facing eviction because of foreclosure? Nationwide, or in different states? I’m interested in Ohio, especially.
Of all the homes I could have picked to rent…I picked one that was going into foreclosure. What makes it even more unfortunate is the fact that I was going to be on a lease-to-own program after a year. I’m a hard working, single mom with a teenage daughter. I just finished school in September and looked so forward to finally having a real “home” and not some apartment. The process server just served me notice of foreclosure on Saturday. I’m heartbroken and can’t believe this is happening.