June 21, 2008

Renting a Recently Foreclosed Property: What Are Your rights

With foreclosure rates in some towns running at 40% of all listed properties, its not just the owner that is forced to move. What about all those renters who have rented in good faith and have paid rent on time.

Should You Continue to Pay Rent

Absolutely! Do not stop paying your rent. You do not want to continue paying rent to the owner if he is no longer your landlord. Either pay rent to the bank, lender or court appointed receiver or if you are not sure who owns the property speak with an attorney and set up an escrow account and pay your rent into that account.

Does my Lease Protect Me

Not really. In some states, you lose any rights you have in the property is foreclosed.

1. In most states the rule of first in time, first in right applies. That is, if the mortgage was dated before the lease was signed then you lose all your rights to stay.

2. Banks can foreclose in most instances, but do check with the laws in your state.

3. Unless you are section 8, your lease will survive until its termination date.

Do I Have to Move
Possibly. The banks may want to keep you on as a tenant, partly for the cash flow and partly because occupied property wont get vandalized. But those who remain join the ranks of month-to–month renters, all of whom can be terminated with proper notice, usually 30 days. You can expect the banks to be absentee landlords and much less inclined to make repairs or provide decent service. They are swamped and if they want you out they can make your life a hell

Cash For Keys

Because eviction is so expensive for the banks they are willing to cash you out. If you just leave they are often willing to pay moving costs and a small sum for a quick exit. Do your best to bargain!

Do I Have any Recourse

Yes. You can sue the owner who has just defaulted. Basically, when you sign a lease that has been terminated by foreclosure, the landlord who has defaulted has not lived up to the full term of the lease. And so you can sue. True, the owner is likely broke, but the judgment will last for many years and when the owner recovers, you may be able to collect.

Howard Bell
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