While most people think of a foreclosure as problem for the property owner, it can also affect renters living in that home. If you are renting your home and your landlord is being foreclosed on, you can usually stay in your home until your lease runs out, provided you pay your rent on time and in full each month.
Safeguarding Your Lease
Until recently, you could be forced out of your rental home by the foreclosing lender even if you were current on your rent and still had more time on your lease. The Protecting Tenants at Foreclosure Act of 2009 changed that. In most cases this law gives you the right to stay in the home until your existing lease expires, regardless of the foreclosure. However, you need to continue to pay the rent as called for in your lease to have this legal protection.
Who To Pay
The main problem when renting a foreclosed property is who to pay. In most cases, the landlord is entitled to the rent until he has been formally declared as defaulting on his payments by his mortgage lender. Even then, unless you receive an official notice from the lender saying that the lender is legally entitled to receive the rent, you need to pay the landlord. In almost all cases, the lender is legally entitled to the rent after your landlord goes into default, even before an official foreclosure.
Keep Complete Records
It is very important to document everything regarding your communications with your current landlord or the lender. Make sure any instructions you get from the lender and landlord are in writing. If you receive an official notice from the lender demanding your rent, verify its authenticity with the lender. Also get a notice in writing telling you where you should send your rent check. All of your rent payments should be made by check and mailed with proof of delivery.
Continuing to pay your full rent in a timely manner will usually safeguard your right to stay in your home. However, there are some cases where even paying the rent will not help you. If the lender sells your home in a foreclosure sale to a new owner who wants to move in, that new owner can force you out with 90 days notice, regardless of how many months are left on your lease.
Kerry Zias has been a strategic business consultant and college instructor of business administration courses since 1990. He has taught courses and performed professional consulting work in the areas of marketing, management, business start-ups, entrepreneurship, real estate, sales psychology and performance, business communications, business law and political/governmental relations. Zias holds a Master of Business Administration in marketing from National University.