Foreclosure Tenant

UpdatedOct 14, 2013

If a property is in foreclosure, do I pay my rent to the landlord or the bank?

I live in a property that has been auctioned twice. Do I still have to pay the the rent to the person who says he still owns the property? He says that the foreclosure is not true, although it is listed on Realtytrac for sale by trustee.

Under common law, a renter owes all rent payments to the owner until the property is sold. A foreclosure does not terminate a landlord’s right to collect rent until the property is sold in either a court-supervised or private sale. The rules vary by state. Therefore, you must continue to pay the landlord until the property is sold to another party. When you receive a notice the property has changed ownership, contact the new owner. It is likely he, she, or the property management company will contact you as soon as the new deed is filed with the county.

Foreclosures & Leases

Under common law, a foreclosure terminated a lease. However, this rule changed when President Obama signed the "Protecting Tenants at Foreclosure Act of 2009" on May 20, 2009. Before this date, renters lost their leases upon foreclosure. The rule in most states was if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease (this rule is known as "first in time, first in right"). Because most leases last a year or less, it was common for a mortgage to precede the lease and destroy it upon foreclosure.

After May 20, 2009, leases survive a foreclosure, which means a tenant may stay at least until the end of the lease. Month-to-month tenants are entitled to 90 days’ notice before having to move out.

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Here, if you have a lease you may stay until the end of your lease term. If your lease agreement spells out the terms for a month-to-month lease, then if there is a foreclosure you have 90 days to quit the property. Consult with a lawyer who has property experience or your local tenants’ union to learn more about the 2009 law, and any local laws protecting tenants.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

10 Comments

ppaul, Jan, 2020

i received a notice to vacate in 72 hours. If I do not leave can I be locked out or does this mean the eviction process will start?

DDaniel Cohen, Jan, 2020

Immediately contact a Legal Aid agency in TN. Here are four I found at nationalevictions.com.

• Legal Aid Society of Middle Tennessee and the Cumberlands – 1-800-238-1443
Offices in Clarksville, Columbia, Cookeville, Gallatin, Murfreesboro,
Nashville, Oak Ridge, and Tullahoma • Legal Aid Society of East Tennessee – 1-865-637-0484
Offices in Knoxville, Johnson City, Chattanooga, and Cleveland • West Tennessee Legal Services 1-800-372-8346
Offices in Jackson, Dyersburg, Huntingdon, and Selmer • Memphis Area Legal Services 1-888-207-6386
Offices in Memphis and Covington

KKathie, Mar, 2014

What if the tenant is also finding out the apartment is illegal? are they entitled to the same 90 day notice? the bank offer me and the landlord 1650 to be split between us to be out in 3 weeks. I just paid rent last week. My landlord lied to me all along and now im no where near prepared to move. The bank is asking for a counter offer, they said they are willing to separate the offer from the landlord and me at this time. Does that mean that i dont have any other rights? Please help!

BBill, Mar, 2014

I do not see how the apartment meeting your local zoning rules would have any impact on this situation. The fact is you are a tenant, paying rent, and occupying the space in accordance with a contract between you and the landlord.

AAdenelly Indigo Light Duran, Nov, 2013

My landlord is losing their home to foreclosure. I notified the courts and the judge dismissed the foreclosure there for honoring my lease, which will terminate as of 11/31/2013. Will I be given an additional 90 days to vacate or could the process take longer if the bank waits to refile the foreclosure?

BBill, Nov, 2013

Your question is difficult to answer because it is very fact-specific, and we don't know all of the facts. Under common law, residential leases become month-to-month after the lease term ends. Here, if there was no foreclosure in the background and you and the landlord didn't discuss the lease but instead made your monthly rent payments on time, the lease would become month-to-month.

Let us change the facts a bit, and say for the sake of argument the foreclosure happens not now when the lease is set to expire, but sometime after 11/31/2013. You would have 90 days from the foreclosure to quit the property if the new owner asks you to leave. Or, the new owner could continue to accept your rent payments for a few months, then stop and ask you to leave. At that point, you would have 90 days to leave. Or, the new owner could sign a new lease with you.

If the foreclosure happens before 11/31/2013, then consult with a lawyer immediately to learn how the Protecting Tenants at Foreclosure Act applies in your situation. If the foreclosure happens after 11/31/2013, then you have 90 days to negotiate a lease with the new owner, or if that fails, quit the property.

aandrea, Oct, 2013

My home is at the sheriff's sale today. I am assuming the bank will take it back. My property is a duplex; I live in the first floor, tenants on the second. Do the tenants continue to pay ME rent until their lease is up? Or will the bank step in? As far as me, can I still live here longer than 90 days? Could I now rent from the bank?Also, am I to understand I cannot take the appliances with me when I leave?

BBill, Oct, 2013

Generally, the moment a deed changing the ownership is filed with the county, the tenants are notified by the new owner that rents need to be paid to the new owner.

Call the bank today to learn if it purchased the property, or if not, who the new owner may be. Consult with a lawyer in your state who has property law experience, or contact a local tenant's union to learn the laws in your city and state regarding evictions. Were it me, I would plan to leave immediately and would finalize my living arrangements elsewhere now. Don&#146t assume the new owner will want you to remain as a tenant.

Regarding appliances, the general rule is major appliances are the personal property of the owner, and are not required to remain in the residence.

SS, Jan, 2012

Does this mean that you have to pay the bank your rent payments after the landlord is long out of the picture and the property has been recorded as bank owned? Or are you able to live rent free for those 90 days?

BBill, Jan, 2012

The Protecting Tenants at Foreclosure Act of 2009 does not provide for free rent. The law requires the new owner to provide you with at least a 90 day notice before eviction and honor any existing lease, if you have one.