You are working hard to make a living and pay all of your bills on time. Your rent is paid dutifully each month on or before its due date, so you have nothing to worry about, right? That is, until the day you come home to find an eviction notice on the home your family is renting.
This scenario is happening with alarming frequency across the nation; the renter pays the landlord in good faith, thinking that the landlord is keeping up on his or her mortgage, utility payments and the general upkeep of the premises. How is a renter to know a landlord is slacking? When the bank suddenly forecloses on the rental property. You may or may not be named as a defendant, but be aware that if the foreclosure goes through, you may be served with an eviction notice and be forced to move from your home at your own expense.
"The tenant may be named in a foreclosure proceeding, but only as an occupant of the demised property. A tenant is usually a stranger to the mortgage company and can never have a monetary obligation directly to the bank. This is different from when a landlord files for bankruptcy. There a tenant may be required to pay the trustee or receiver as if he were the landlord," attorney Jordan Davis explains.
There are ways to protect yourself. "The absolute first place to start when learning your rights is your lease," Davis says. "Everything about how you will be treated if the property is foreclosed, sold or otherwise transferred from the owner should all be in the lease. And like all other terms, all of it is negotiable. Make certain that your lease says that your tenancy will continue if the house is hypothecated (used as real property collateral) by the owner. If the owner's mortgage doesn't allow that, make certain that you are entitled to notice of all foreclosure actions and that you get a full refund of your security if you are put out. This is a renter's market. Use that power to your advantage. Renters are encouraged to get more information from an attorney in their area."
"The more informed the tenants are the better they can protect themselves. The first step is to understand the process," says Patty Guertler, public relations and education manager at SurePath Financial Solutions. "A form notice of an upcoming foreclosure sale must be posted and mailed to you, the tenant, at the same time as the notice of sale is given to your landlord. This rule applies only when the property is not owner-occupied."
Whether your new landlord (the bank) has to respect the conditions of your lease depends on which came first, the lease or the mortgage. Guertler clarifies: "In general, once your landlord has gone through foreclosure, your lease with the landlord is 'extinguished.' In other words, it no longer exists. This may not apply if you signed your lease 1) before your landlord bought the property or 2) before your landlord obtained the loan that resulted in foreclosure."
"If the tenant has no right to continue in the property," Davis says, "she may be evicted as soon as the bank or new owner chooses to bring an action. The time from bringing such action to when the sheriff comes to oversee the tenant's removal varies by jurisdiction from a few months to a few weeks. The tenant is responsible for her own moving costs in all circumstances."
According to Maryland's attorney general, "Under a new federal law known as the Protecting Tenants at Foreclosure Act, even though the foreclosure sale is completed and the transfer to a new owner has been approved, the new owner must allow a residential tenant to remain in the property until the lease expires or, if the tenant has a month-to-month lease, for 90 days." However, there are circumstances when an eviction can take less time, such as when the new owner will be using the property for his or her own residence.
Both Davis and Guertler stress that knowledge is power. Know your rights and how local laws will affect you. Read your lease, and contact a local attorney for immediate guidance if anything seems askew.