What should you do if the property you are renting is being foreclosed?


Q. What is foreclosure?

A. Foreclosure is a court process where a bank or a mortgage company sues a property owner to take away that property. Your landlord probably owes money to the bank and did not pay on the debt. Now the bank is trying to take your landlord’s property by foreclosure. If the bank wins the foreclosure, the court will set a sale date.  Your landlord will lose whatever rights he or she had in the property.

 

Up until the foreclosure sale becomes final, your landlord may sell the property to pay off his debt or can come up with the money needed to pay off what is owed.

 

Q. Will the foreclosure affect me?

 

A. Yes. Tenants may be named as defendants in foreclosure lawsuits. While you may have done nothing wrong, the bank could use the foreclosure to evict you. In the meantime, you can take steps to protect your rights:

 

      1. If you hear that a lender is trying to foreclose on your landlord’s property, or if you got papers naming you as a defendant, KEEP PAYING YOUR RENT!  Until the bank wins the foreclosure and gets title to your landlord’s property, your landlord is still the owner of the property.  You should deal with all matters relating to your apartment with your landlord.  If you stop paying rent, your landlord can evict you if while the foreclosure is going on.

       2. The bank cannot throw you out of your apartment unless you are named as a defendant in the foreclosure. If you are not yet named as a defendant in the foreclosure, try not to call attention to yourself to the bank. At some point, however, the bank will probably figure out who you are, and name you as a defendant in the foreclosure. Once you are served with papers naming you as a defendant in the foreclosure, you should file an appearance. 

       3. The bank may get a court order appointing a “receiver of rents” during the foreclosure. If the court enters an Order appointing a “Receiver” you must then pay rent to the receiver instead of to your landlord. If you do not pay the rent to the receiver, you could be evicted for nonpayment of rent.

 

Q. What if I am named as a defendant?

 

A. Do not ignore the foreclosure! In addition to paying your rent to the landlord or the receiver, pay attention to the court deadlines, and file your papers on time.  You should file an appearance.  An appearance is an important form that tells the court you are not ignoring the foreclosure. You state your name and contact information and filed with the Clerk of the Court. Once you fill out and file the appearance, you will get a notice of everything that happens in court.

Q. Can I charge the Landlord for the cost of filing the appearance?

A. No, you cannot charge this expense to the landlord.

Q. Can the bank kick me out of the property I am renting though I have a lease and the termination date is not for several months?

A.  If the bank gets the property back through a foreclousre and you were named as a defendant, the bank can terminate your tenancy and have you removed.

Q. What if during the foreclosure the owner files for bankruptcy? Does this delay the foreclosure? Does it affect my security deposits or prepaids? If so, how?

A.   If the landlord files bankruptcy while the property is in foreclosure, this may just delay the foreclosure slightly to give the bank time to file documents. Security deposits and prepaid rents are monies due to the tenant. They are not included in a bankruptcy or foreclosure.

The above information provided by Kinberg & Associates, LLC, is general in nature and is not, nor is it intended to be, legal advice.  You should consult an attorney for individual advice regarding your own situation.

© Kinberg & Associates, LLC, 2007