our landlord is selling our house, we have 6 more months on our lease and the house is about to go foreclose?
May 5th, 2010he hasn’t paid the morgage in a few months and the house is about to go into foreclosure so he is trying to get a fast sale. We didn’t pay him the rent this month but we set it asaide and a different bank account, are we doing the right thing, does he have to buy out our lease or the nes owner or are we just s.o.l.
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Posted in Questions & Answers | Comments (7)
May 5th, 2010 at 10:26 pm
The new owner must honor the lease, but if you haven’t paid rent, the lease is broken anyway, and you can be made to move. To make sure you are within your rights in your state, you should consult an attorney in your area.
May 5th, 2010 at 10:26 pm
Even before you read what I have written, my recommendation is to go to your local city clerk, tell them of the situation and ask them what to do. Every State has Tenant Right Laws, make sure you find out what your rights are in this situation.
You might find, that it is in your best interest to start looking for another place to live.
Most renters will lose their leases upon foreclosure. The rule in most states is that if the mortgage was recorded before the lease was signed, a foreclosure will wipe out the lease (this rule is known as “first in time, first in right”). Because most leases last no longer than a year, it’s all too common for the mortgage to predate the lease and destroy it upon foreclosure.
That doesn’t always mean the lease-holding tenants have to leave immediately — but those who remain join the ranks of month-to–month renters, all of whom can be terminated with proper notice, usually 30 days. And the new owners tend to move quickly to terminate, giving as little notice as is legally possible (sometimes no more than three days).
Tenants who refuse to leave face an eviction lawsuit, for which they usually have no legal defense. The impact of an eviction on a tenant’s ability to find future housing can be devastating. No law prevents a future landlord from automatically rejecting tenants with evictions on their record, even when those tenants were the innocent victims of a foreclosing bank.
There are some notable exceptions, however, to this grim scenario. Tenants who participate in the federally financed Section 8 program will see their leases survive, as will tenants in New Jersey, New Hampshire, the District of Columbia, and, as of the end of November 2007, Massachusetts. In these states, new owners cannot evict lease-holding tenants unless the tenants have failed to pay the rent or violated any other important lease term or law. Tenants in other states who live in cities with rent control “just cause” eviction protection may also be protected.
Does It Make Sense to Evict Tenants?
New owners evict existing tenants because they believe that vacant properties are easier to sell. Common sense suggests otherwise. In many situations a building full of stable, rent-paying tenants will be more valuable (and command a higher price) than an empty building. Emptied buildings are also prone to vandalism and other deterioration – after all, no one is on site to monitor their condition. When entire neighborhoods become a wasteland of empty foreclosed multifamily buildings, their value drops even further. It’s hard to understand why new owners choose to pay lawyers to start eviction procedures instead of paying a modest fee to a management company to collect rent and manage the property while they wait to sell.
May 5th, 2010 at 11:09 pm
If you have a binding lease and he sells the house then the new owner is required to honor the lease.
However if the house is foreclosed that wipes out all leases and you would be out on the street. Since he is having money problems you will not likely get any deposit back.
If I am not going to pay rent anymore, I would think I should move out. You legally have to abide by any lease that is binding. Just the same as the landlord has to. He might let you move out- but I think you ought to pay him as long as you stay.
May 5th, 2010 at 11:28 pm
If you have a legal agreement it has to be honoured, i am going through the same thing it gets very messy. DO NOT PAY HIM A PENNY!!!! The receivers will assign it to an agency and the rent paid to them, keep your monthly rent separate so you can pay once it is called upon by the receivers.
May 5th, 2010 at 11:43 pm
Few things:
1. Read your state laws, even though you may have escrowed the monies, as long as the landlord holds title to the land, you do not have a case to just hold the rent and live rent free in the house, its called unjust enrichment
2. You can make a case for anticipatory breach of the lease, which then would allow you to terminate the lease before the foreclosure and move out, Note: also under this fact pattern rent free is not an option either
3. If the owner tires a short sale, then the new owners would have to honor the lease for the entire term of the fixed term lease
4. If the mortgage company forecloses on the property, then that senior note wipes out all encumbrances including your lease so your lease would be voided
May 6th, 2010 at 12:36 am
No. You’re doing the wrong thing.
If you have a valid lease (which you appear to have), then you owe the rent to him. It’s in the lease–a contract which you agreed to.
And as a practical matter, you’re making things far worse for yourself by withholding rent. Maybe he’d be able to negotiate a forebearance, or a mortgage restructuring. That doesn’t require him to make up the full amount, but he needs some cash…probably the cash that you’re withholding. So all you’re doing is pushing him into foreclosure even faster.
He’s trying to do a short sale (not a “fast” sale). If he were able to–if you don’t push it over the edge–then the lease obligations would transfer to a new owner. If, however, the property is foreclosed upon, then your lease is terminated.
And no one–the current owner or the new owner–has to buy out your lease. The new owner (in the case of a short sale) might wish to. That’s his choice.
The worst scenario from your standpoint is a foreclosure. And by withholding your rent, you’re accomplishing nothing except speeding up that process.
Check with a lawyer for further details.
May 6th, 2010 at 12:52 am
As long as he owns the house, you owe him the rent. If he sells the house, the new owner will have to honor the lease if you are not in default (which you currently are). If the foreclosure goes through and title passes to the mortgage holder, you can be evicted. Sometimes the bank will make an offer of cash for keys to avoid the hassle and expense of a foreclosure action.