Tenant Rights on a Foreclosed Home

In many states, a tenant's only protection from eviction after foreclosure is 90 days' advance notice.

"More and more renters nationwide are being evicted and displaced, not because of anything they have done wrong, but because of their landlords' financial woes." So concludes an article on tenant evictions as a result of foreclosure published by Northwestern University in 2010. One thing is clear: If you understand all of your rights, you will be in a better position to marshal your resources.

Federal Rights

The Protecting Tenants at Foreclosure Act of 2009 gives tenants in foreclosed properties two important rights. First, it requires foreclosing lenders to honor existing leases. Second, it requires these lenders or anyone who buys a foreclosure at auction to give tenants at least 90 days' notice before filing for an eviction action in court. If you have a month-to-month lease, or are without a lease, you will be entitled to the 90-day notice. If you have a fixed-term lease that has not yet expired, you can stay until the end of the lease. The only exception to the first right occurs when a buyer intends to live in the unit himself; in this case the lease is voided, but the owner must give 90 days' notice before filing for eviction.

State Rights

Tenant rights associated with foreclosures afforded by state law vary widely. According to the National Housing Law Project, a lot of states don't offer any special protections to tenants affected by foreclosure. However, about half require either landlords or foreclosing lenders or both to notify tenants before the foreclosure is final so that the tenants will have more time to make plans. Several states, including Arizona and Minnesota, require landlords to disclose a pending foreclosure to prospective tenants. And three states -- Massachusetts, New Hampshire and New Jersey -- along with the District of Columbia prevent eviction after foreclosure without just cause, such as failure to pay rent.

Local Rights

In addition to the several states preventing foreclosure evictions, according to the National Housing Law Project, 22 cities -- most in California and New York -- also limit evictions to "just cause" through rent-control ordinances. Most predate the housing meltdown that began in 2006 and were implemented to prevent landlords from evicting tenants to avoid rent control; however, some, such as those in Richmond and Ridgecrest, California, were passed in 2009 specifically to prevent post-foreclosure tenant evictions.

Ability to Negotiate

Any tenant has the right to negotiate any term of tenancy with a landlord, whether the property is in foreclosure or not. The landlord is not obligated to respond but in the case of evictions after foreclosure, most foreclosing lenders do. In fact, many of them have a program called Cash for Keys that opens the door to a negotiation over both move-out date and cash settlement. Cash for Keys provides occupants with a cash settlement in exchange for voluntarily moving out. The lenders are agreeable to the idea because it saves them the expense and time associated with going to court for an "unlawful detainer" action -- essentially an eviction court order. If you have received a 90-day notice to vacate from a lender, call the lender and ask for more time and a settlement. You may only get one or the other; you might get both.

References

• Medill Reports, Northwestern University: Renters Face Eviction, Betrayal in Landlord Foreclosure; Kathryn Lindsay Dobies and Erin Halasz; February 2010
• Nolo: Renters in Foreclosure -- What Are Their Rights?
• National Housing Law Project; State and Local Tenant Protections; November 2010
• Reuters; "Cash for Keys" Aids Home Borrowers, Investors; Al Yoon; March 2010