Foreclosure Eviction of Tenants
Foreclosure is a tough situation for any householder, but when you are a tenant, and it's your landlord who's being foreclosed on, it can be even more complex. Fortunately, there is legislation in place that protects tenants during a foreclosure and may prevent an untimely eviction, allowing you breathing room to find another place to live.
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History
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Before May 2009, tenants involved in a foreclosure had very few rights. Once the bank took possession of the property, their lease was considered null and void, and the lender could evict them at any point, in order to sell the home at auction as expeditiously as possible.
Protecting Tenants Act
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Faced with rising numbers of foreclosures on investment properties, the federal government took action in 2009 to protect tenants. Under the Protecting Tenants in Foreclosure Act, a tenant's lease survives a foreclosure, and the foreclosing bank must honor the complete term of the lease, unless the behavior of the tenant gives cause to break it. If the tenant has a month-to-month lease agreement, the bank must give three months' notice before requiring him to move.
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Owner Occupier Exception
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The only exception to the rule is when the foreclosed property is bought by someone who intends to live in it himself. In this situation the lease can be broken, but again, the tenant must be given three months' notice.
Tenant Responsibilities
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In order to benefit from the provisions of the legislation and avoid eviction, tenants must behave in a responsible manner, and must fulfill all the terms of their lease, including timely rent payments. When a property is in the process of foreclosure, it can often be tricky to pinpoint who owns the property. Before handing over rent payments, you should ask for proof of ownership, and you should ask for a receipt for your records. If you cannot track down the owner, keep your rent payments set aside, and again, keep records that you attempted to pay.
Cash for Keys
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Some lenders want to sell the property as soon as possible to get it off their books, and may offer what's known as "cash for keys"---a one-time payment to the tenant to break her lease and for her to vacate the property. If you are a tenant in this situation, you are not obliged to agree to a cash-for-keys offer. If you do want to take the offer, negotiate with the lender to get the best deal you can before signing any paperwork.
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References
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