Written by attorney S. David Cooper

Help! My Landlord is Getting Foreclosed! -- Tenants & Foreclosure

So, you have rented the perfect home. You finally got that last box unpacked. Time for a glass of wine, dock the iPhone, and play your favorite Schubert, or maybe you kick back on the couch, pop open a brewski, and watch the game live in 1080HD. Life is good, right? Just then, the doorbell rings. It is a process server handing you legal papers. Your new home has just gone into foreclosure! WTH!? Don’t panic! It is not as bad as you think, but it is serious, so pay attention. Before reading this article, you might want to take a quick look at my last article, which gives a basic intro to Foreclosure.

First of all, you are wondering, “Can the landlord even rent to me if the property is in foreclosure?" Yes, he can. There is no Florida law that prevents him from it, and no; he is not required to tell you that the property is in foreclosure (I will tell you how to deal with that below). Since the landlord has no obligation to advertise to everyone that the property is in foreclosure, you might have even signed the lease the day before the foreclosure sale and have a new landlord the next day! Before we get into what happens after the foreclosure sale, let’s talk about your rights and obligations as a tenant BEFORE the foreclosure sale. If your landlord is not paying his mortgage, he probably isn’t paying the fees to the homeowners’ or condo association. If he is not, that can affect you, the tenant.


If the landlord is not paying the association fees, Florida law grants certain powers to the association. The association can deny you the use of the facilities (like swimming pool, club house, gym, etc.). It can also demand that you pay your rent directly to the association and not to the landlord (to pay the landlord’s debt). Of course, the landlord doesn’t want you to do this, so he will scream and shout, threatening to evict you if you do not pay him. Although that puts you in an awkward situation, you are required by Florida law to pay the association if the association makes a proper Demand in writing. While the landlord cannot evict you for paying the association after a proper Demand has been made, the associationcan evict you if you do not pay rent to the association. That Demand has to have specific language that is printed in the governing statute, so if you get such a Demand from an association to pay rent directly to it, compare the Demand to Fl.Stat. 718.116(a)(1). If there is any discrepancy, or if the Demand is missing the language in 718.116(a)(1), then contact an attorney to seek advice before making another rent payment. If the Demand is valid, future payments should go to the association. If it is not, future payments should go to the landlord until a proper Demand is made. You do not have to pay again for any months already paid (for example, if you paid last month in advance), and you are NEVER obligated to pay the association fees of the landlord, unless your lease requires you to do so.


It is important to note that the landlord’s mortgage lender is not the only party that can foreclose on the property. The association can foreclose for those unpaid assessments, and there are several others who can foreclose, as well. In today’s market, you are most likely going to be facing a mortgage foreclosure, an association lien foreclosure, or both. You will be named as a defendant in the foreclosure lawsuit, by name if it is known or as an “Unknown Tenant" if it is not. Do not worry about this. They cannot go after you personally; it will not affect your credit. You must be named in the foreclosure because you have an interest in the property. By your lease, you have the right to possess the property, so you must be named.

While the foreclosure case is proceeding, the landlord is still the owner. Unless you receive a Demand as described above, you must keep paying the rent to the landlord – nothing about the lease changes. The landlord is still the landlord…until he is not. That day comes when the foreclosure sale is held and somebody else wins the auction. Although there is a waiting period before the new owner is issued the Certificate of Title (to give the foreclosed owner one last shot to pay the debt), assuming the property is not “redeemed" by the foreclosed owner during that waiting period, the new owner has the right to collect the rent as of the date of the foreclosure sale. If you are scheduled to pay rent around the date of the foreclosure sale, you should wait to be sure to whom you need to pay it. You don’t want to pay the wrong person and have to pay again, right? You can check the status of the case online by entering the case number (which will be on the documents you get).


In the case of a mortgage foreclosure, it is almost a certainty that the lender will be the one who becomes the new owner, at least until it is able to sell it on to someone else. The lender will not likely bother you, but it might contact you and ask you to pay rent to the lender.


The lender may offer you cash to move out early. Knowing your rights under the PTFA will help you negotiate a stronger deal with the lender. It will also arm you against those new owners who either do not know the law or are trying to take advantage of your lack of knowledge to force you out early. Prior to the PTFA, if the tenant was named in the foreclosure, the lease was also extinguished when the Certificate of Title was issued to the new owner. Tenants were forced to move out upon 24-hour’s notice. Seeing the chaos created by the huge number of foreclosures and tenants being put out with almost no notice, Congress passed the PTFA to slow down the transition and to allow tenants time to find new homes. The key parts of this law revolve around 1) your relationship to the landlord, 2) amount of rent you are paying, 3) how much time is remaining on your lease, and 4) who is the new owner.

  1. To be protected by the PTFA, you must be a bona fide tenant. That means that you are not the spouse, child, or parent of the former owner…and u are not the former owner leasing the property to himself. It must be an “arm’s-length" transaction; not some secret, back-room deal to somehow take advantage of the situation.
  2. To be a bona fide tenant, you also have to be paying a fair market rent. Your rent can be less than “fair market," but it cannot be substantially less. There is no real test to determine what is substantial; it is a subjective test. A 10% discount would not likely be substantial, but a 40% discount would almost certainly be. A substantial discount is allowed if the rent is discounted because of a federal, state, or local subsidy.
  3. Even after the Certificate of Title is issued to the new owner, you are permitted to stay in your home until the end of the lease. For example, if you signed a 12-month lease the day before the foreclosure sale, you cannot be forced to move or pay an increased rent until that lease expires in 12 months. Of course, every rule has exceptions.
  4. There are two exceptions to #3. The first exception is when the property is sold (either at the foreclosure sale or later) to a purchaser who will occupy the property as a primary residence. This usually comes about when the lender, who won the bid and took title, sells the property to a 3rd party. The 3rd party might want to make the property his/her primary residence. They cannot say it is for a primary residence just to get you out early and then rent it to somebody else. The second exception is when your lease has already expired and you are on a month-to-month lease. For both exceptions, the new owner must give you 90 days written notice to move out.

In other words, the minimum amount of time you have in the home, if you are abona fide tenant, is 90 days (remember, the 90 days only starts to run after the notice to vacate has been given, and they cannot send the notice until they own the property). If the lender has a buyer lined up who wants to move in right away, the lender will be very motivated to move you out sooner. Since they cannot force you out, you have the power to negotiate a good deal. It is common for the lender to pay all moving expenses plus a month’s rent or more to encourage you to leave sooner. Remember, the lender does not want to own the property, and it does not want to lose a potential buyer.


What else can you do to protect yourself as a tenant? When we are talking about leases, you have to protect yourself from the beginning – PUT IT IN THE LEASE! Before signing a lease, make sure that the lease includes a clause indicating the landlord agrees that there is no foreclosure action currently pending. This will not stop a foreclosure from being filed and will not give you any special rights to get out of the lease unless you write those into the lease, too; however, this will do one of two things. It will let you know if there is a foreclosure already filed, or if the landlord lies, it will be grounds for getting out of the lease if you want. Knowing if a foreclosure action has already been filed will help you determine how soon you might have to deal with the issues we discussed above with the PTFA. If the case is in the early stages and you only intend to stay a year or so, you might not ever have to deal with the issue. So…sit back, armed with the knowledge you now have, and dock that iPod or pop that brew and have a great day!

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