Renters' Rights When the Owner Is Being Foreclosed Upon
Foreclosures do not just affect homeowners. Renters also experience the hardships of a foreclosure if the home rented becomes owned by a bank. Even though a tenant may have to move after the conclusion of a foreclosure process, the renter still has rights she can exercise against the original property owner.
Other People Are Reading
-
Rent Collection
-
During the foreclosure process, tenants living in an affected property still must pay rent to the landlord until the process is complete. However, once the courts issue a foreclosure judgment and a judge approves the sale of the property, a landlord cannot collect rent from the tenant because he no longer owns the building. Once another party purchases the property, the new owner becomes the landlord because the rental agreement, or lease, survives the foreclosure sale. Consequently, the tenant will make rent payment to the new property owner, but the payment amount should stay the same.
Security Deposits and Bankruptcy
-
If a property is foreclosed upon because the owner filed for bankruptcy, the tenant's security deposit remains protected. This is because landlords are to place security deposits into an escrow account so the money is held in trust for tenants.
-
Property Owner Obligations
-
During the foreclosure process, property owners are still required to perform the obligations required of them as outlined in the lease agreement and state laws until the court approves the sale of the rental property. For example, if the property owner, before the foreclosure process, paid for utilities as part of the rental agreement, she must continue to make these payments. The foreclosure process does not excuse property owners from neglecting their responsibilities as landlords.
Eviction After Foreclosure
-
After the completion of a foreclosure process, tenants can remain in the property for at least 90 days, per the federal Protecting Tenants at Foreclosure Act. If a tenant is a "bona fide tenant" with a "bona fide lease," the individual has the right to stay in the rental property until the lease expires. A tenancy or lease is considered "bona fide" if the tenant is not directly related to the property owner involved in the foreclosure, the lease was the result of an "arm's-length" transaction, the rent cost is not significantly lower than the fair market rent amount or the rent want not reduced by a government subsidy. Arm's-length transactions are those in which two unrelated parties looking out for their own interests negotiated the lease contract.
-
