Renters' Rights on Foreclosed Homes
If you're renting a home and your landlord goes into foreclosure, it can present you with a tricky situation not of your own making. With increasing numbers of foreclosures in 2010, the federal government has recognized the need to protect renters' rights, and there are now specific legal provisions to help renters navigate this eventuality.
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History
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Before May 2009, renters had very few rights in a foreclosure situation. Your lease would be canceled immediately the foreclosure was final, and you could be out on the street with very little notice.
New Legislation
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In May 2009 the Protecting Tenants At Foreclosure Act was signed. The biggest change under the law is that in most circumstances, leases are no longer canceled by a foreclosure. The lease transfers to the new owner--usually initially the bank--and the renter can stay until the end of the lease. Month-to-month tenants must be given 90 days notice to quit. The rent cannot be raised by the new owner for the term of the lease or the 90-day notice period.
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Exception
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A buyer of a foreclosed property who intends to live in the home himself may terminate a lease. However, he must give 90 days notice to sitting tenants.
Rent
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For you to benefit from these new rights, you have to remain a tenant in good standing, meaning most importantly, you must continue to pay your rent. It can be confusing in a foreclosure to know at any given point who owns your property, so if you are unsure, you should ask for proof of ownership before handing over your payment. If you cannot establish who owns the property, or if a new owner refuses your rent payment, set the cash aside each month, and keep records that you attempted to pay. This will protect you in the event of an eviction notice.
Cash for Keys
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To facilitate a sale at auction, lenders who have foreclosed can offer tenants a one-time payment to break the lease, known as "cash for keys." Renters should know that they are not obligated to agree to such a proposal. If you are tempted, you should not take the first amount offered, but negotiate with the bank to secure as good a deal as you can, and get the agreement in writing.
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References
- Photo Credit clef 2 image by Nathalie P from Fotolia.com
