As the number of foreclosures across the nation continues to set records, there is a sub-set of society that is being impacted that most people don’t first think of when they think of foreclosures…
Renters.
It is becoming more common for someone to have signed a rental agreement with a landlord who at some point during said agreement becomes delinquent and allows the property to go into foreclosure. What kinds of rights do you have if you are a renter in this situation?
According to Valley Real Estate Attorney Christopher Combs, here is what is possible should your landlord go into foreclosure and you still have a period of time left on your lease:
Under a new federal law that took effect May 20, the bank generally would have to honor the lease of bona-fide tenants.
One of the exceptions to the new law is that if the bank sells the home to a buyer who will use the home as a primary residence, the bank can then furnish a 90-day notice of eviction to the tenants.
In regard to your liability as the landlord, if your tenants are evicted, you can be held liable for your tenants’ monetary damages, such as higher rent and moving expenses, due to the early termination of their lease.
Who says all the smart people live in Silicon Valley?
Ok, so there are plenty of people with over-sized brains in Silicon Valley… but the first solution that I have seen to attack this problem was actually developed by a local company right here in the (Southeast) Valley.
At LemonLandlord.com you can actually monitor whether or not your landlord is in foreclosure. From what I understand, not only did the idea get grown here right in the Valley, but the back-end technical work was done by the Tech-Wonk-Super-Stars at Integrum which is one of the founding/anchor companies of the phenomenon known as Gangplank.
If you are renting a property in today’s market, I don’t see how it doesn’t make sense to keep an eye on your landlord.
Just in case.
About the Author: Justin McHood is a mortgage broker with VanDyk Mortgage Corporation. You can find him at Arizona Mortgage Team, on the Zillow’s Mortgages Unzipped Blog, and at most East Valley Friday Nights gatherings. He’s the one in the blue shirt.
The Phoenix Real Estate Guy was started by Jay Thompson, and I have a little blogging problem... he liked to say...
Some lemon landlords will overlook a tenant's poor credit history, to capture a few months rent. Only victims in these cases are the people that play by the rules: the taxpayers/owners/tenants that honor contracts and pay taxes, while a few take advantage in our current environment.
Wonderful article, myself dealing with commercial REO its always an obsticle when dealing with units already tenant occupied. I know the law as indicated above applies for residential. How does this law apply for commercial or aparment buildings?
@PrescottScott,Cool name! I grew up in Flagstaff love golfing in your neck of the woods. Thanks for stopping by and commenting. I can't personally say that as a loan officer I see this situation too much – but I have been hearing about it more and [email protected],Thanks for stopping by! I can't even claim that I know where to find the answer to your question about commercial property law. I suspect there is a chance that a RE Attorney (or some other individual who is much smarter about this topic than I am ) will browse by here, flex their mental muscles and leave us the answer though…Justin
The renters will probably notice things stop working before they find out the landlord has not been paying the bills… Little stuff like heat, water, and electricity
This phenomina has actually caused some of our buyer clients, who have been waiting for the market to "Hit Bottom", to now decide it is time to buy. Their concern is that they will get a knock on the door and be asked to move without warning. We have also seen sellers of short sales lease their home only to have the tenant steal everything from the house. The suspicious mind may think that the seller and tenant are working together.
Very cool site, thank you for pointing this out. *crosses fingers that my landlord does not end up on this site*-Tyler
Great post Justin – I can't wati for lemonlandlord to go viral and encompass all 50 states….
Justin, nice post and welcome to the PREG Blog, I have read your last couple posts. This is an interesting point that you bring up. We have dealt with the same issue in San Diego and probably run in to this issue on a weekly basis. Unfortunately the thing that frustrates me the most is that these landlords will yell, scream and demand payment even after the foreclosure has taken place. They scare some people enough to make them think they have to make their rent payment. We wrote a blog post a few months ago about this very subject. Anyone who would like to view please click on the link title above.
This is another excellent reason people considering renting should make the leap into home ownership. But those in the valley of decision better act quick…time is ticking away for the $8,000 tax credit. All transactions must be complete by COB 30 November 2009. LemonLandlord.com is a great tool for renters looking to protect themselves and investors looking for short sale opportunities.
I think it is great that tenants are actually going to have the right to stay now. They have always gotten screwed over by paying their rent month after month, only to have their landlord blowing the money on other things.
@Trang,Thanks for stopping by and leaving a comment! From what I have been hearing, all of the utilities are usually in the renter's name so under most circumstances, the first that a tenant hears about the landlord being in foreclosure is in a "weird circumstance" such as a knock at the door, a letter in the mail, etc.But anything is [email protected],Good point – I hear that this is one of the "new" reasons that it is a great time to buy and I agree that it probably could be added to the list (long list right now) of "good reasons to buy vs rent". Thanks for the comment!Justin
@JoeI am pretty sure they told me that their service worked in all 50 states… and if it doesn't now, I bet it does soon. Thanks for stopping by and leaving a comment!Justin
@Alex,Thanks for sharing your info with the rest of us — as usual, Arizona trails California when it comes to this problem, but it is here now for everyone to deal with. The more help/advice that we can get from our friends in CA, the better, so feel free to share as you can!Justin
@Augusta [email protected], each state has their own laws, so whether or not the tenant gets to stay may differ in each state. Thanks for commenting!Justin
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Wow. Great website. This should aid renters moving forward!
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With this act now being implemented landlords can't force the renters/tenants to abandoned immediately as the lease contract expires.
With this act being implemented, now landlord will no longer force their tenants/renters to immediately abandoned the house as the lease contract expires.
Useful article, me too have a hard time dealing with units that are already occupied by tenants. I just want to be educated what is the scope of this law.
Useful article, me too have a hard time dealing with units that are already occupied by tenants. I just want to be educated what is the scope of this law.
Hi, as an unfortunate renter in an foreclosure house, I am relieved to read your blog about this new law. However, while seeking advice from a couple of tenant associations, they told me I can still be evicted in 2 weeks or shorter because the new owner/bank doesn't have obligation to honor my lease with old landlord. Is this true? I have called HUD and Secretary of State for documents on Tenants Rights, but they all point me to those non-profit tenant organizations that I already called.
I have found Obama's Tenant Protection Act in the Library of Congress but want this reconfirmed by state officers. Is there an official place in Arizona that I can contact to reassure me that new owner/bank will abide by the rule and that I will be protected by the 90-day law President Obama signed? It really doesn't make sense if I have to spend thousands of dollors to hire a lawyer to tell new owner/bank that they need to give me 90-day notice before evicting me. I don't mean to occupy my rental house. I just need more time and don't think it fair if I will be evicted immediately after the new owner/bank take over the house. Thanks.
Meg,
You are right, the Tenant Protection Act clearly says you have at least 90 days. And if the new owner is NOT going to be a owner-occupant, he/she has to honor the full term of your lease. I would forward them a copy of the Tenant Protection Act. As with most new legislation, the real problem is enforcement. Since there is no "rent police," some aggressive owners are preying on unaware renters. If you let them know you are informed and know your rights, they should honor it.
Hi Meg,
Mike is right.
The best advice I can give is to forward them a copy of the Tenant Protection Act and have a discussion with them.
Justin
Interesting. I had always thought contract law prevailed for the tenant in that if he has a lease the new owner was bound to honor the lease or to buy it out. And another thing, and a qwerstion, if it takes the agreement of all parties to a contract to change it, who does the tenant pay, the landlord or the new owner if he does not agree to pay the new owner with a change in contract?
Nice post. Informative.
What a great idea. I love it. Thanks for the info. I know this is a hot topic right now. Tenants are very nervous that they will be out on the streets.
I faced Foreclosure by my landlord just few days back đ
that was the most tense condition for me till I haven't met to UK Replacement Certificates to get out of this worst situation.
Thanks for making aware to others…