leasing rights after foreclosure

What Are Your Lease Rights After a Foreclosure?

The escalating rate of home foreclosures is one of the most unfortunate yet inevitable occurrences following an economic downturn. Hundreds of thousands of homes get foreclosed every year, which doesn’t just affect the house owner but also renters and tenants that occupy the property when the foreclosure occurs. Foreclosures are a harsh fact of life, and you should be aware of your rights as a tenant if this were to happen to your landlord.

Is Your Lease Written or Oral?

If you have an oral lease, the new owner is required to give you at least 90 days to move out. This notice to move out should be in writing. The landlord can begin the eviction process if you haven’t moved out even after 90 days.

In case you have a written lease, the new landlord has to let you stay till the end of the lease or 90 days, whichever is longer. The landlord may begin eviction if the deadline in the notice has passed. However, it is important that you keep paying your rent on time. Otherwise, the new landlord will have good cause to evict you.

Protecting Tenants at Foreclosure Act of 2009

The Protecting Tenants at Foreclosure Act of 2009 is good news for tenants all across the country. You don’t lose your rights automatically if the house you live in gets foreclosed. The lease agreements have to survive the foreclosure. And, in case you are a month-to-month tenant, you need to be given a 90 days notice before eviction can happen.

Tenants with a written agreement can be asked to leave only if the owner that purchases the property wants to live there themselves. In this case, the tenant needs to be given a 90-day notice by the new owner.

Eviction Rules for Elderly and Incapacitated Tenants

There are separate rules for eviction in the case of people that have a mental or physical disability and those that are 62 or above. The disability whether mental or physical should be expected to last a minimum of 12 months. You can only be evicted if the new owner has good cause. However, the building should have 5 or more units.

Good cause means the owner should have a good reason for eviction. An example of good cause is that you did not follow the owner’s rules in terms of building or that you did not pay your rent. This is why paying rent is important if you don’t want to be evicted.

Tenants are eligible for the good cause rule if their spouse, sister, brother, parent, child, or grandparents are living with them and are disabled or are at least 62 years old.

Negotiating a New Lease

Tenants are required to be offered a new month-to-month lease if the new owner is Federal Home Loan Corporation or Federal National Mortgage Association. The monthly lease has to be offered until the property is sold. You may be able to negotiate a new lease if you want to continue staying even after the property is foreclosed.

This is usually in those cases where the new owner sees the property’s potential and rental value. Creating a new lease is usually a positive situation for all involved properties. With that said, you should make sure that you always meet your rental obligations on time so that the owner can see the wisdom in keeping tenants on the property.

Regardless of the situation, you are assured a minimum of 90 days’ notice even in the worst-case scenario. This time should be enough for you to find suitable housing even if the property gets foreclosed.

Getting Your Security Deposit Back

The rule is that whoever owns the property is required to return the security deposit. You will be given the security deposit back by your new owner. This is regardless of whether the previous owner gave the deposit to the new owner or not. You would need to mail a letter to the new owner and include a copy of the security deposit receipt. Don’t forget to mention your new address and contact information. You can also mail the letter to the realtor or bank’s attorney if you don’t know who the new owner is.

Cash for Keys

In some cases, banks offer tenants money to make them move out early. This is also known as cash for keys. The bank can wait until your move expires and doesn’t really need to offer this. However, the bank may choose to offer money if they have a lucrative deal on the table. The offer should be the highest of the following:

  • $2,000
  • Two months’ rent
  • Twice the security deposit

You can always bargain for more.


Talk to a Real Estate Attorney Today

There are several issues that need to be considered when you are a tenant living in a property that has been sold because of foreclosure reasons. The real estate attorneys at Davis, Bingham, Hudson & Buckner, P.C. have years of experience in handling such situations and other real estate disputes and matters. Schedule a free consultation today to learn more about your legal options. Speak to us at 334-821-1908 or reach us online.

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