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How
foreclosure impacts the tenant and tenant's rights in foreclosures.
THE LAWS VARY BY
STATE and in SOME CASES BY JURISDICTION. AS THE TENANT DO NOT IGNORE ANY
FORECLOSURE NOTICES. CONTACT A LOCAL LEGAL AID SOCIETY or LAWYER FOR ASSISTANCE.
“A foreclosure doesn’t differentiate between a
homeowner and a renter residing in a defaulting property,” said U.S. Senator
Chris Dodd in a statement supporting protections for residents of
foreclosed property.
On November 18, 2007, (it's almost one year later)
the New York Times published with a front-page
article entitled “As Owners Feel Mortgage Pain, So Do
Renters.” The paragraph says it all, “In the foreclosure crisis
of 2007, thousands of American families are losing their homes without
ever missing a payment. They are renters in houses whose owners default on their
mortgages — a large but little noticed class of casualties.”
If
a bank or lender is foreclosing on your landlord's property, the landlord
owes money on the mortgage. The bank is trying to take your
landlord’s property by foreclosure.
If the bank wins the foreclosure, it will get title to the property, and your
landlord will lose whatever rights he or she had in the property. Good chance
you as the tenant will as well. The bank may
either become the owner or the property may be sold at public auction to a new
owner.
If
you are the TENANT, you may receive a summons / complaint as well - you could be
a DEFENDANT in the foreclosure proceeding. If you receive notice, read it and
understand it. BE SURE TO FILE A RESPONSE. Protect what rights you may have as a
tenant. LAWS VARY BY STATE and COURT JURISDICTION.
If you are a tenant,
these new owners might try to convince you that you do not have the same rights
as other tenants and that they do not have the same obligations as other
landlords. But for the most part, your rights are the same as in any
landlord-tenant relationship. (In those states where a foreclosure does not
cancel your lease...)
As a tenant, you are
responsible for paying the rent. Until a foreclosure sale, you should continue
to pay rent to your old landlord. If you cannot locate your old landlord
anymore, hold on to your rent and put it into a separate bank account, if
possible.
If there has been a
foreclosure sale, do not continue to pay rent to your old landlord. The old
owner no longer has the right to collect rent from you. But being in a
foreclosed building does not mean that you get to live rent-free. After a
foreclosure, the new owner has the right to collect rent from you.
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The old
landlord may try to hide the fact that she has lost the property in
foreclosure and will improperly continue collecting rent. If this
happened, you may be able to sue the old landlord to get your money
back. Whether you sue or not, if you paid rent to the old landlord after
the foreclosure sale, you should hold on to any receipts or other proof
you have that you made these payments. If the new owner tries to collect
rent from you for the months you paid the old landlord, these receipts
may help support your claim that the new owner must collect from the old
landlord and not from you. |
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If
a bank or other lender is the new owner, it may decide not to ask you
for rent. It may even refuse to accept rent if you offer it. You should
still offer to pay rent by sending a letter to the new owner and asking
to whom you should pay your rent
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If
you cannot figure out who the new owner is, or if the new owner ignores
or rejects your offer to pay rent, save the rent money. Put it
into a separate bank account if possible. Lenders often refuse to accept
rent, then bring an eviction case against the tenant and sue the tenant
for the back rent. The best way to protect yourself against eviction or
ruling by the court that you owe the landlord money is to have the money
set aside.
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Banks
or lenders who take over residential buildings after foreclosure
frequently do not pay the water bills and other utilities for which they
are responsible. If you had a lease with your old landlord, the new
owner—even if the new owner is a bank—is responsible for all the
utilities your previous landlord was required to pay under your lease.
If you were a
tenant at will
, the new owner must pay for all utilities, except those you had agreed
to pay in a written agreement with the old landlord.
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After foreclosure, banks or
lenders who take over residential buildings often attempt to evict the
tenants based on the unfounded belief that it will be easier to sell the
building vacant. Many hire local real estate agents to
try to intimidate the tenants and force them out of their apartments.
But no matter what type of tenancy you have, it is illegal for the bank
to treat you as a trespasser or try to force you out of your home by
locking you out or shutting off your utilities. Tenants in foreclosed
properties have the same rights as tenants in other buildings (with a
lease) in many states, but NOT ALL. In some cases only a court can evict you!. Consult your
local legal aid society or court for further advice.
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You MIGHT NOT
lose your right to get your security deposit back just because a bank or
other lender has foreclosed on your landlord's property. The old
landlord is obligated to transfer your security deposit to the person or
entity that purchases the property at the foreclosure sale. If
they do this, the new owner is then fully responsible for the security
deposit and must notify you within the required number of days as if a
new deposit were given that it has the deposit and is holding it in a
separate interest-bearing account. (varies by state). See more in Security
Deposits
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