Renters get relief from foreclosure
Many of the households affected by the foreclosure crisis are actually renters, and a federal law is designed to keep them from being evicted with little or no notice.
A federal law enacted this year offers renters more protection from eviction if their landlord loses the property through foreclosure. The law has some fuzzy requirements, but should be a boon to renters who otherwise might have been evicted with little or no notice.
"The fundamental purpose of the Protecting Tenants at Foreclosure Act is to ensure that tenants facing eviction from a foreclosed property have adequate time to find alternative housing. To that end, the law establishes a minimum time period that the tenant can remain in a foreclosed property before eviction," a Federal Reserve memorandum states.
The national foreclosure crisis has not been kind to renters, despite their seeming bystander status. Indeed, the National Low Income Housing Coalition (NLIHC) has estimated that some 40 percent of households that have lost their homes due to foreclosure have been renters.
The law should provide some relief from immediate evictions, according to NLIHC President Sheila Crowley. "This bill brings long overdue relief for the most blameless victims of the foreclosure crisis — the families who, after paying their rent each month, are suddenly told they must move out of the homes because their landlords have been foreclosed on," Crowley said in a statement.
Renters will get 90 days' notice
The new law allows tenants who have a lease to remain in their home until the end of the lease period unless a new owner purchases the home at a foreclosure sale and intends to occupy it as a personal residence. In that case, the renter can be evicted with 90 days notice even if a longer-term lease is in force.
A rare but potentially important exception occurs if the renter signed the lease before the owner obtained the foreclosed loan. In that case, the lease will still "survive" the foreclosure, according to Janet Portman, an attorney and author of "Every Tenant's Legal Guide."
Tenants who don't have a lease also are entitled to 90 days notice prior to eviction under the new law.
Technically, the law applies to "any foreclosure on a federally related mortgage loan." That requirement shouldn't be a burden for tenants because, as Portman explains, the definition of "federally related" encompasses virtually all loans.
The law became effective May 20 and is scheduled to end Dec. 31, 2012.
Only 'bona fide' renters are protected
The law protects only a bona fide lease or tenancy, which is defined as a situation that meets three criteria:
- The renter may not be the former owner of the home, or the former owner's spouse, child or parent.
- The terms of the rental must be at arm's length between the landlord and renter.
- The rent cannot be substantially less than the fair-market rent, unless the rent is subject to a government reduction or subsidy.
The arm's-length and fair-market rent requirements "are designed to prevent a sweetheart deal" between a defaulting landlord-owner and a renter whom the landlord wanted to protect from eviction after the foreclosure, Portman says. For example, if a landlord and renter signed a two-year lease at a very favorable rent just prior to a foreclosure, that likely wouldn't meet the bona fide requirement.
Broken lease can lead to lawsuit
Renters who have a lease and are evicted may be able to bring a breach-of-contract lawsuit against the former landlord to recoup the costs of their forced move, according to Portman.
Bing: Search & decide
"You go to court and say, 'We had a deal, and he didn't deliver,' " Portman says. "The guy may be long gone. But if you get a judgment, that's good for many years, and you could probably eventually collect on it."
New law doesn't affect rents, deposits
The new law doesn't pre-empt any state or local laws. Instead, it specifies that it won't affect "the requirements ... of any state or local law that provides longer time periods or other additional protections for tenants."
State laws apply to most landlord-tenant issues that are beyond the scope of federal law. Examples include prepayment of a last month's rent and reimbursement of a security deposit. Neither of those issues is mentioned in the new law.
- Facebook users: Become a fan of MSN Real Estate
"Many states, including California, protect the tenant at any cost. They say basically that it is up to the buyer and seller, or in this case, the bank and the (former) owner, to figure out how to (handle those sums)," Portman says.
The bottom line is that landlords and renters have new rights and responsibilities in foreclosure situations. While renters may face challenges in their attempts to exercise those rights, knowledge and action can prevail.
After reading these comments, I am sorry to hear about their situations. It might be wise to look into renting in a complex, with a full management staff, as oppose to renting an apartment in a house that could be foreclosed on with an uncaring landlord who doesn't bother to tell you that the property is being foreclosed on because he/she didn't pay the mortgage and kept the rent money that the renter has been paying them.
Also, if you are considering renting with someone else, I would recommend that in the lease each tenants is only responsible for their share of the lease, and that there should be a clause that if your roommate doesn't pay their share, than the paying (innocent) roommate has an option to get in an apartment of their own, and that they should not have to be subjected to an eviction or negative credit when they have paid their (paying - innocent roommate) share.
It is ashamed that so many innocent rent paying tenants have been so unfairly been blanked out of their housing. However, not all landlords or renters are bad and careless.
I do Unlawful Detainer in California and the law here is straight forward when it comes to renter's rights. The landlord CANNOT collect rent if the house has been foreclosed on. Additionally you have 90 days in which to vacate. In some instances we have stopped a Sheriff's lockout. Some of these people are also victims of Loan Modification fraud.
I'm not sure of what the rules are in here as far as leaving a telephone number or advertising, but if you are in California there is help for you all.
Good Luck everyone and remember ask questions and demand answers.
I sure hope President Obama jumps right on your issue and responds to your letter. Hundreds of thousands , you say. Is your real name Glen Beck? Sounds lite a TEA party meetin too me. Calm down, its just those sheet wearin good ol boys gettin back at you damn yankees that keep movin down here. Bunch of darn carpetbaggers expect to have rights.
The wife and I held paper on a single wide mobile home 6 times last year, all cash, all paid first, last and a month security before we evicted them after 30 days. Best investment we ever made were them 5 mobile homes.God bless the United States of America, come on down, stay a while
President Obama mind you, the fool should have started with Rick Sanchez if he expected anything done. I have been a "shade tree" broker here in the sunshine state for 30 years now.
I have a question if anyone can help me find an answer to it. We were renting a home and within I'd say 2 months time, was told it was being put on the market. The owner who owned multiple homes said he had to do it so the bank would bargain with him to lower his interest rate on it. He said he had to have it listed for 90 days. So we go through the months showing the home to "prospects", and him telling me he'll try to avoid any showings he can without drawing attention. He also owns a realty company. Eventually, we get a letter saying it is being foreclosed on and he just passes it off like it's nothing big and it's just routine since the bank is in talks with him about lowering the interest rate. This goes on for awhile, and he kept constantly putting me off, telling me not to worry. (He was also my boss). The home was eventually foreclosed upon and sold on November 15, 2009. We took the deal the bank offered us to move.
I sent 3 e-mails to the owner asking him for our deposits back and rent for that month since I figured he probably didn't pay it knowing it was getting foreclosed on. We had a lease. I'm wondering if he knew he was in trouble when we signed the lease. I also know that he told me that what we paid in rent was the only amount he sent in to the bank instead of what his actual monthly payment was (which was higher). He said he was doing that in hopes of them lowering the interest rate to make the payments more affordable. I am wondering if he even made the payments at all. I'm considering taking him to court. Can I take the business he owns to court? Is there some way of stopping all income coming into the business until he pays us? I know it will be hard as he avoids all lawsuit communications from other people who have tried to sue him. He will avoid at all costs so I need to be able to do something to get his attention and let him know I mean business. What are my options? HELP!
I have read through the above stories and they are echoes of what I hear almost daily. I work at a company that researches foreclosures for investors and first time buyers. They subscribe to get the information, and then go to check out the houses they think could be deals. Maybe half the calls we get lately are from renters who just found out they are living in a foreclosure, or are checking before they move in. In fact, we recieved so many that we recently set up a $5 plan just so these renters could do a quick check to see if the place is in foreclosure. And still the calls keep coming...
I went through this when I was in college, and our landlord was the previous property owner. The house was already bank-owned. He rented to us and we were there for months, and he showed up at our door on the first each month to pick up the check. One day the bank sent someone to talk to us, thinking we were the old homeowner. We were stunned. Eventually we just left. The bank had no desire to work with us, and they resorted to threats and intimidation, when they could have easily just accepted a rent check.
People do what their boss tells them to do. The banks are made up of nervous people who don't want to lose their jobs, so they walk the walk and do what they are told to do. Banks can face lawsuits even if they do things with good intentions. So they do not give their people options, and they do not like gray areas. You would be amazed at how they themselves suffer through months and years of the foreclosure process, only to get ownership of a $75k house that cost them Half a Million Dollars!!!
As to the criminal landlords who rent-skim, they should have all their assets seized. Most are in fact realtors who know the law and laugh at it because they know the FBI has limits and that the Feds have handcuffs on. The President really needs to draw the line and hold these peole accountable, regardless of the amount of the loans. If a realtor could never practice after rent skimming, they would stop doing it.
We moved down from a Northern state to a Southern state a few months ago. We signed a 12 month rental agreement - and within several weeks we were served with foreclosure papers on the property. The law that went into effect does not address all of the issues that the innocent, unsuspecting renter faces. What about the security deposit we just paid? What about the moving expenses that will be required to pack up and move to a different property? Why is it not illegal for a rental agency company and/or a landlord to enter into a lease with the full knowledge that they have not made a payment on there mortgage for close to a year? Why are renters legally obligated to continue to pay there rent to landlords/rental companies/owners who are not paying there mortgage? This law covers virtually nothing - in terms of the renters rights. There are many issues that are not addressed, and many innocent - hard working - honest, on time rent paying people and families are suffering as a result. This didn't just happen to me, this has happened to many hundreds of thousands of people and something needs to be done. I wrote a letter to the President regarding this issue. If everyone did, I think someone may take notice. Thanks