Foreclosure Can Leave Tenants Out In The Cold

Posted on November 14th, 2007 by saman

Renters are discovering to their dismay that when their landlord is foreclosed, they are likely to be without a place to live. If the property reverts to the lender, banks have little or no interest in assuming the role of landlord and would rather have the property clean and empty than permit the tenant to remain and the rent to them. On the other hand, if the buyer at the foreclosure auction is an individual investor, there is a reasonable chance that he or she may continue your tenanacy with or without an increase in the rent you pay. Otherwise, you may have as little as thirty days after the property reverts to a new owner to leave before eviction proceedings are commenced against you.

According to recent statistics, there were 223,540 foreclosure filings nationwide in September 2007. Of these a reasonable percentage of the properties were occupied by tenants who had been paying rent to the former owner each month. Some of these tenants had leases, other were on a month-to-month basis, but it really doesn’t matter unless you rented the property under a lease before the landlord obtained the mortgage or refinanced it. That’s because the foreclosure makes all leases obsolete. Odds are you will have just 30 days to make other living arrangements.

If you found out about the landlord’s financial dilemma at just about the same time he received his Notice of Default, the process in California will give you about 120-130 days until you have to move. Other states may give you a bit more or less time depending upon state and city laws covering such things.

First, talk with your landlord. If you have had a good relationship and he isn’t entirely destitute, he will probably agree to let you take back your deposit out of one of the three remaining rent checks due to him before he is foreclosed. Otherwise, he has a few weeks after you’re out to refund your deposit.

Next, you know just how much time you have at the most. Start looking for a new place. If you live in an apartment or a condominium, you may be able to find another rental in the same building. And it may pay to stay in the building even if the rent is a little higher, because you avoid a major moving hassle. If nothing is now available, don’t count on something showing up at the last minute. Start looking within 30-45 days before the date of the foreclosure sale.

Remember that getting upset or angry about the situation despite the fact that you always paid your rent on time, will only serve to make what you’re facing more difficult. Your problem is a matter of law and there isn’t much you can do even if you spend more money fighting the problem. Save your energy for problem solving in the time you have to do it.

You can always check on the status of your rental property by going online to a service called RealtyTrac.com. They maintain listings and offer a free trial membership during which you can keep tabs on what’s going on. Just sign-up and follow instructions on their website. Remember, though, if you fail to officially cancel your membership within the time allowed for your free trial, RealtyTrac will bill your credit card.