Foreclosure Tenant

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READER QUESTION

If a property is in foreclosure, do I pay my rent to the landlord or the bank?

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Bills.com Resident Expert
Jan 17, 2012
BILL'S ANSWER

Under common law, a renter owes all rent payments to the owner until the property is sold. A foreclosure does not terminate a landlords rights to collect rent until the property is sold in either a court-supervised or private sale. The rules vary by state. Therefore, you must continue to pay the landlord until the property is sold to another party.

Foreclosure and a lease

Under common law, a foreclosure terminated a lease. However, this rule changed when President Obama signed the "Protecting Tenants at Foreclosure Act of 2009" on May 20, 2009. Before this date, renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease (this rule is known as "first in time, first in right"). Because most leases last no longer than a year, it was common for the mortgage to precede the lease and destroy it upon foreclosure.

After May 20, 2009, leases survive a foreclosure, which means a tenant may stay at least until the end of the lease. Month-to-month tenants are entitled to 90 days' notice before having to move out.

Here, if you have a lease you may stay until the end of your lease term. If your lease agreement spells out the terms for a month-to-month lease, then then if there is a foreclosure then you have 90 days to quit the property.

I hope this information helps you Find. Learn & Save.

Best,

Bill

bills.com

Comments (2)


Avatar
S H.
Streamwood, IL  |  January 17, 2012
Does this mean that you have to pay the bank your rent payments after the landlord is long out of the picture and the property has been recorded as bank owned? Or are you able to live rent free for those 90 days?
Avatar
Bills.com
January 18, 2012
The Protecting Tenants at Foreclosure Act of 2009 does not provide for free rent. The law requires the new owner to provide you with at least a 90 day notice before eviction and honor any existing lease, if you have one.
Thanks for your feedback!

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