Should You Stop Paying Rent to a Landlord Facing Foreclosure?
When a home goes into foreclosure while there is an active lease agreement, the lease must be honored by both the homeowners and the tenants.
This can be true even after the sheriff sale of the house for a minimum of ninety days during the confirmation process of the auction.
This is a new law that came into effect this year, shortly after President Obama took office.
In some cases, the lender will get the home back at the public auction and the lease will go on as usual; the former renters will just be making payments to the bank that buys the house at the sale, rather than the former homeowner.
Another option is to make an agreement with the landlord to end the lease and get a credit for the security deposit.
This can be applied to the final month of rent if the landlord no longer has the cash to refund the security deposit to end the lease.
Unless the tenants get a written agreement with their landlord to end the lease, they will still be responsible for making the monthly payments, regardless of what legal problems the owner is facing.
This definitely includes the case of foreclosure -- renters will need to keep paying until the owner's interest in the property is transferred through the auction.
The best advice for renters in this situation may be to make sure they keep updated on what is happening with the foreclosure process.
They can do this by viewing the public record at the county courthouse.
In the event the home is sold at a sheriff sale, the tenants should immediately contact the new owner and try to find out what their options are.
Many people will recommend attempting to purchase the home and take over payments.
This may not be the best option, though, and will only be appropriate in a limited number of cases.
In other situations, this is the worst advice anyone could give, especially without knowing anything about the condition of the property or the tenants' financial circumstances.
If the renters would really like to break the lease immediately and move on to a more stable situation, their best option is to work out a deal with the landlord.
Most landlords are not familiar with the foreclosure process or any of the new laws that affect renters in the event of a foreclosure.
This can work to the advantage of the tenants in negotiating a solution to avoid being evicted after a sheriff sale.
Tenants can simply explain to the landlord that they need to break the lease because they are now aware that they will not be legally capable of living up to their part of the agreement as required by the lease.
No renter wants to live week to week, not knowing when the sheriff is going to show up and evict them, giving them twenty minutes to remove their belongings.
Some courts will also side with the renter, in this type of case, but it is probably not worth hiring an attorney and sue the landlord to get a small deposit back.
A final issue for renters to consider is that many people are able to save their home from foreclosure.
Companies, foreclosure specialists, banks, and mortgage servicers help people find solutions to allow them to keep their homes every week, by using a loan modification, refinance, or other workout plan.
It is entirely possible that the landlord will be able to keep the home and the foreclosure will not affect the lease whatsoever -- and in that situation, the worst action for tenants to take would be voluntarily not paying the lease.
This can be true even after the sheriff sale of the house for a minimum of ninety days during the confirmation process of the auction.
This is a new law that came into effect this year, shortly after President Obama took office.
In some cases, the lender will get the home back at the public auction and the lease will go on as usual; the former renters will just be making payments to the bank that buys the house at the sale, rather than the former homeowner.
Another option is to make an agreement with the landlord to end the lease and get a credit for the security deposit.
This can be applied to the final month of rent if the landlord no longer has the cash to refund the security deposit to end the lease.
Unless the tenants get a written agreement with their landlord to end the lease, they will still be responsible for making the monthly payments, regardless of what legal problems the owner is facing.
This definitely includes the case of foreclosure -- renters will need to keep paying until the owner's interest in the property is transferred through the auction.
The best advice for renters in this situation may be to make sure they keep updated on what is happening with the foreclosure process.
They can do this by viewing the public record at the county courthouse.
In the event the home is sold at a sheriff sale, the tenants should immediately contact the new owner and try to find out what their options are.
Many people will recommend attempting to purchase the home and take over payments.
This may not be the best option, though, and will only be appropriate in a limited number of cases.
In other situations, this is the worst advice anyone could give, especially without knowing anything about the condition of the property or the tenants' financial circumstances.
If the renters would really like to break the lease immediately and move on to a more stable situation, their best option is to work out a deal with the landlord.
Most landlords are not familiar with the foreclosure process or any of the new laws that affect renters in the event of a foreclosure.
This can work to the advantage of the tenants in negotiating a solution to avoid being evicted after a sheriff sale.
Tenants can simply explain to the landlord that they need to break the lease because they are now aware that they will not be legally capable of living up to their part of the agreement as required by the lease.
No renter wants to live week to week, not knowing when the sheriff is going to show up and evict them, giving them twenty minutes to remove their belongings.
Some courts will also side with the renter, in this type of case, but it is probably not worth hiring an attorney and sue the landlord to get a small deposit back.
A final issue for renters to consider is that many people are able to save their home from foreclosure.
Companies, foreclosure specialists, banks, and mortgage servicers help people find solutions to allow them to keep their homes every week, by using a loan modification, refinance, or other workout plan.
It is entirely possible that the landlord will be able to keep the home and the foreclosure will not affect the lease whatsoever -- and in that situation, the worst action for tenants to take would be voluntarily not paying the lease.
