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Foreclosure house BUT still under rent contract

Rockville, MD |

Let say you rent your house to someone for LESS than what actually rent price is. For example, normal rent for that house is $2k a month but a person rents a house for 5 years contract with only $800 a month and he himself takes care of house problems and gardening for 5 years.

Now, questions is, if the house go under foreclosure by the bank, what will happen to this person, can he still stay because he has a legal contract and pays his rent to the bank instead?

Would be kind from you if you give as much as info you can. Thanks. You guys are the best .

Attorney Answers 3


Depends in what the new owners intend. There would not be a rent free period. In many cases the tenant stays on. In some cases, new owners terminate the lease-with proper written notice which may be as much as 90 days under the PTAF Act.

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If you don't already have a lawyer, hire one to help you. The law is complex and there may be things that can be done that you didn't know about. Good luck!

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Foreclosure is a fairly long process in MD, and the bank does not acquire the right to rental income from a tenant in the property until after the foreclosure sale is actually ratified by the court. That can be 3 - 9 months, or more, after the actual sale date. After final ratification, the title to the house is then transferred and recorded in the bank's name (I say "bank", but it goes into the name of whomever is the winning bidder at the foreclosure auction; however, in most cases where the mortgage is under water, that will be the bank). until final ratification, only the titled owner (you, if you are the one on the deed) has the legal right to the rental income. AFTER the property is re-titled, the bank will usually attempt to contact whomever is residing in the house, and will try to determine whether they are a "bona fide" tenant. Bona fide usually means, a tenant with a written lease negotiated at arms length with the owner at fair market rates, but the term is not specifically defined in the federal Protecting Tenants at Foreclosure Act (PTFA). It is up to the bank to decide whether they are interested in renting to an existing tenant, and they must honor any existing lease until the term of the lease has expired, but very few banks are interested in continuing a foreclosed property as a rental. They want the property sold as soon as possible. The PTFA requires that the new owner give 90 day written notice to vacate to any bona fide tenant before they can start eviction proceedings, assuming the lease term has expired or the lease in in month-to-month status. You can read details about the act here:

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