Tips for Tenants #2: What Do I Do When My Landlord Gets Foreclosed On?

All over the Valley, tenants are being confronted by landlords or their property managers informing the tenants that the house or apartment has been sold, that the tenants have to get out immediately, and that, if they don’t, the sheriffs will usher them out.

“There oughtta be a law . . .", as they say, putting these people in jail. This sort of bullying is not only cruel in its effect on tenants, who are put into panic by these representations, but it is deceitful because, as these landlords and managers know full well, the foreclosure does not mean the tenant has to move.

One of the first and best things done by President Obama when he got elected was to push through the Landlord-Tenant Relief Act. Because it was rushed through in response to the housing crisis, it is not particularly well-written. But it is clear about some things, including the following:

First, if you have a written lease and you are in integrity with that lease (which usually means that you’ve paid the rent) at the time of the auction/sale, you are permitted to stay in that property until the end of the lease term. The new owner is entitled to your rent, but you don’t have to leave. The only exception is if the new buyer intends to occupy the property. But even in that event, you don’t have to move out upon auction or sale: they must give you written 90-day notice.

Most of the homes which go to foreclosure are not bought by anyone: rather, they go back to the lender. The lender does not qualify as an owner-occupier, so it cannot kick you out. And of the people who do buy at these auctions, virtually all of them are investors, rather than occupiers. So they can’t throw you out either. The fact that they might want to sell to an owner-occupier is irrelevant.

Second, if you do not have a written lease and are month-to-month, you still do not have to move until the new buyer gives you written notice, and you have ninety days from the date of that notice.

Word to the wise. A lot of tenants, when they get notice that the landlord is in default, stop paying their rent. Big mistake! You are protected by the Obama Act only if you are up to date in your rent. The one thing you do need to do if your landlord goes into default is keep a written record of your payments so that you can protect yourself when the new owner takes over.

[Please understand that the above blog provides only a capsule summary of the relevant law and cannot substitute for a consultation with an experienced lawyer.]