Tenants in Foreclosed Property
May 12, 2009
This past week I have received several questions from agents and their clients concerning the rights of the owner and of the tenant of a property which is in the foreclosure process. In researching this issue, I learned that the laws that apply are dependent on the terms of the rental agreement plus when the rental agreement was actually executed vis a vis when the mortgage was put on the property.
The following are just a few of the laws that may apply.
1. If the tenant has a lease agreement that was executed prior to the mortgage, the tenant may stay until the term of the lease is completed. (This is a pretty rare situation as most homes are purchased with a mortgage and then rented. Of course, with the large number of refis that occurred in the past several years, it could be a possibility,)
2. If the tenant has a month to month rental agreement or a lease executed after the date of the foreclosing loan, a California law effective July 2008 requires that the tenant receive a 60 day notice to move. When the 60 days are up, the tenant must have vacated or be subject to an unlawful detainer action and eviction.
3. Even though a property is in the foreclosure process, the tenant must continue to pay the rent to the owner that is due under the rental agreement. A tenant should be particularly careful to check out anyone who claims to have the right to collect rents.
4. The owner or the property manager are not legally required to disclose to the tenant that a Notice of Default has been recorded against the property, However, it is in every one's best interest to do so as the tenant will be obliged to vacate should the property become bank-owned or be purchase at a trustee's sale.
5. The landlord is required to return the tenants security deposit or transfer it to the lender so that the lender can return it at the termination of the rental period.
As I stated at the beginning of this post, the issue is a complex one. Both tenants and landlords are well advised to seek out a reputable attorney who can clearly describe their rights.
This past week I have received several questions from agents and their clients concerning the rights of the owner and of the tenant of a property which is in the foreclosure process. In researching this issue, I learned that the laws that apply are dependent on the terms of the rental agreement plus when the rental agreement was actually executed vis a vis when the mortgage was put on the property.
The following are just a few of the laws that may apply.
1. If the tenant has a lease agreement that was executed prior to the mortgage, the tenant may stay until the term of the lease is completed. (This is a pretty rare situation as most homes are purchased with a mortgage and then rented. Of course, with the large number of refis that occurred in the past several years, it could be a possibility,)
2. If the tenant has a month to month rental agreement or a lease executed after the date of the foreclosing loan, a California law effective July 2008 requires that the tenant receive a 60 day notice to move. When the 60 days are up, the tenant must have vacated or be subject to an unlawful detainer action and eviction.
3. Even though a property is in the foreclosure process, the tenant must continue to pay the rent to the owner that is due under the rental agreement. A tenant should be particularly careful to check out anyone who claims to have the right to collect rents.
4. The owner or the property manager are not legally required to disclose to the tenant that a Notice of Default has been recorded against the property, However, it is in every one's best interest to do so as the tenant will be obliged to vacate should the property become bank-owned or be purchase at a trustee's sale.
5. The landlord is required to return the tenants security deposit or transfer it to the lender so that the lender can return it at the termination of the rental period.
As I stated at the beginning of this post, the issue is a complex one. Both tenants and landlords are well advised to seek out a reputable attorney who can clearly describe their rights.
posted by shirley harry at 8:20 AM
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