rental properties

Compared to other homes, rental properties are especially vulnerable to foreclosure. If landlords are having financial difficulties usually they will pay the mortgages on their personal residences before paying the mortgages of their rental properties. The landlords may also be detached investors who decide that based on the terms of their mortgages and the conditions of the housing market it is best to just walk away from the homes. The renters, who are paying their rent on time, may not know that there is a problem until a notice of sale is placed on their doors. Usually a foreclosure invalidates an existing lease (unless the lease was signed before the mortgage was taken out), but if you are renting a property that is foreclosed on you still have some rights.

Depending on your state, the foreclosing lender is required to give you three to sixty days notice that you need to move. The notice must be in writing, must be served in person or through the mail and posted on the door, and can only be served once the lender has legally repossessed the house. In some cases you may have more than thirty days. For example, in cities with rent control laws you cannot be evicted without just cause, so your lease may have to be honored by the new owner. (Whether or not you are protected by your city’s rent control laws depends on the particular details of the laws.) Also, if you have a lease under Section 8 (a federal housing program) you may not have to move either. You can call your city hall and the state attorney general’s office to find out what the laws are in your city and state.

You cannot be arrested for not moving out by the timeframe set by your city’s or state’s laws. Eviction is a civil matter. If you have not moved out after thirty days the lender must file an unlawful detainer action with the courts. (You will receive a summons if an unlawful detainer action is filed against you. You should respond to the summons within the allotted timeframe and go to court when instructed.) If you have not found a place to live the judge may be willing to give you more time. Regardless of the outcome of the case, waiting for the lender to file an unlawful detainer action will give you more time since the lender will have to wait for the court date before you can be evicted. However, eviction proceedings will appear in the public records section of your credit report, and this can make it difficult to rent another place. If you do not move out by the deadline that the judge has set then the police can forcibly remove you from the home.

In some states the foreclosing lender is required to refund your security deposit if your old landlord does not. While not required, many lenders also offer what is called “cash for keys”- giving you money for moving out early. Before accepting this think about whether or not you have a place to go and what your costs of moving will be, including a security deposit on a new place and moving expenses. If the amount they are offering is too low let the lender know you want more money to move out early. If an agreement is made between you and the lender get the offer in writing so that you will have proof that an agreement was made if the lender does not actually pay you. If you had a lease you can also sue your previous landlord for rental application fees (for new places), moving costs, and the difference in rent between your old and new place (if the rent is higher), due to the landlord violating his or her legal duty to provide the rental for the entire lease term (formally called “the covenant of quiet enjoyment”).

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