If your landlord is facing foreclosure, stay put
December Rental Advice: Just learned your landlord is going bust? Try not to panic. Even if buyers try to hustle you out, the law protects your right to stay. Find out what the laws are in your area.
Outside of a doctor's office, few notices are more terrifying than an eviction.
Since the housing bust, more than 8 million properties in this country have gone into foreclosure. An estimated 40% of the people living in those homes were, and are, tenants, according to RealtyTrac, a foreclosure marketplace, and the nonprofit National Low Income Housing Coalition.
Being uprooted is frightening for anyone. But renters endure added stressors: They often are the last to know that a foreclosure is in the works, having paid their rent faithfully each month; and they typically are the most misinformed about their own rights, through no fault of their own.
While a 2009 federal law requires that tenants be allowed to stay for the duration of their lease or, without a lease, for at least 90 days, no federal agency oversees the law's implementation, says Linda Couch, senior vice president for policy and research with the housing coalition.
"From the number of calls that we get, it certainly appears that there is a gross unevenness of compliance," Couch says. "Tenants still don't get told about their right to stay."
So what does this look like on the ground? Tenants see a foreclosure notice, then get a knock on the door. Standing before them is not someone helping them, or even informing them of their rights under various laws, but agents representing the building's new owner -- the bank or the real-estate group -- who have their own interest at heart: to get the renters out.
"Very few tenants are accurately informed of what their rights are after foreclosure," says Dean Preston, executive director of Tenants Together, a statewide tenant advocacy group in California. "Particularly with the real-estate agents, there is clearly a financial incentive that they have to vacate the properties as quickly as possible."
(Tenants: Have you had trouble finding the information or help that you need with rental issues? Let us know, and we'll write more on this in the January Rental Advice column. Send an e-mail to email@example.com.)
5 things renters need to know about eviction from foreclosed properties
1. The lease and tenancy take precedence.
The Protecting Tenants at Foreclosure Act of 2009 is a federal law that allows renters to remain in a foreclosed building for the duration of their lease. Tenants who have a month-to-month lease or who are under an oral agreement -- so-called tenants at will -- can stay at least 90 days from the date they receive a written eviction notice. Because this is a federal law, it applies to renters in every state, city and town.
The only exception is if the new owner plans to live in the unit himself before the lease or the 90-day period expires.
2. If someone official tells you otherwise, take a name.
While strict ethical codes govern what real-estate agents must disclose to buyers and sellers, the same principles do not seem to apply to what agents do, and do not, tell tenants, Preston says.
"There is a widespread violation of tenant rights by agents of banks after foreclosure, and some of the worst violators are the real-estate agents," he says.
Agents will request to show the unit multiple times a day, or dozens of times in a week. Some have posted notices falsely proclaiming that an eviction proceeding has begun, even though none has. Many aggressively push cash-for-keys programs that are not a good deal for the tenant.
Tenants, after all, are not their clients, and agents are essentially rewarded for clearing a property quickly. If you think you have been provided misleading or erroneous information, report the incident to the state's department of housing or the local real-estate association.
3. Get it in writing.
"A lot of these tactics that are used to deceive tenants are done verbally," Preston says. That's intentional. Agents don't want to get in trouble.
"Tenants can make a lot of these verbal harassments go away just by demanding everything in writing."
So if someone is at your door, simply tell that agent: I don't wish to discuss my tenancy any further. Please put it in writing.
4. Cash for keys is only a request.
The tactic currently in favor is to offer tenants -- many of whom aren't aware they can even stay through their lease or 90 days -- cash to leave quickly. This may be a good option for some tenants, but often it is not.
Typically, the tenant receives the cash only after handing over the keys, far too late to use as a deposit on another apartment. Often the amount is less than the security deposit, which the tenant might lose. Worst of all, many tenants grab the cash unaware that they could have stayed in the apartment longer, giving them more time to find a new home.
Preston's advice: Always seek help from a local tenant advocate in the case of an eviction.
If you do accept cash for keys, ask for a good portion of the money upfront.
5. State and local laws may offer additional protection.
A small but growing number of localities are passing just-cause eviction laws that exclude foreclosure. There are state laws in Massachusetts and New Jersey.
What this means is that landlords can never evict tenants without cause, and foreclosure is not considered a cause.
Do I still have to pay the rent?
One of our readers asked a common question: If the landlord is delinquent, where do I send the rent? Should I even pay the rent?
It's a good question. We've all heard stories about landlords who, headed toward foreclosure, have decided to pocket the rent money. It's also true that many such properties have already been neglected. Being told to pay anyway is a tough pill to swallow. Besides, if you have to move and the landlord is bust, isn't there a good chance you've already lost your security deposit?
So, here's the key question: Do you want to stay in the unit? If the answer is yes, then you need to do two things, says Janet Portman, a housing lawyer with Nolo, a legal-information service.
1. Pay the rent. On time and in full. You don't want to give new owners any ammunition against you.
2. Confirm the identity of the current owner, and pay that owner. Document everything in writing.
In buildings with one to four rental units, lenders are permitted by law -- except in Michigan -- to collect the rent directly from tenants once the owner has defaulted. In that case, the tenant will be notified of the change in writing. To guard against scams, confirm the address of the lender before mailing the rent check and make copies for your own records.
If you don't receive such a letter, there are other ways to find out who owns the mortgage. The information may be on your lease, and will definitely be in county records, available either online or in person.
Contact the lender, then follow up with a "letter of understanding," Portman says. In it, reiterate the conversation, including the statement, "It is my understanding that you want me to send the rent money to X address. If this is incorrect, notify me immediately." Make a copy and, if possible, send it certified mail so you'll have a return receipt.
"If they tell you, 'Go ahead and keep paying the landlord,' then you write them" another letter of understanding, Portman says. "Whatever they tell you, you send a letter confirming that, because it protects you.
"Remember, if you've got a lease, you can stay, but not if you haven't paid the rent," she adds.
Situations can get confusing, but renters who keep a record that they have paid someone, even the delinquent owner, should be protected from eviction.
As always, seek advice from a local tenants group. Tenants Together, which serves all of California, has counseled more than 5,000 tenants in foreclosure and set up a special foreclosure hotline.
Questions? Comments? Do you have a question about renting or a suggestion for a future topic in this column? Submit either in the comments section below or on Facebook, or email firstname.lastname@example.org. Brief questions have the best chance of being selected.
"Fly now pay later ... spend their money on good times" ... I will take your words and take a guess on your ability to critically think ... I am pretty sure my odds are better than the odds placed on bad bets in the mortgage world.
I'm a landlord who did NOT short sell her house because the tenants love it and want their kids to go to school in this neighborhood. I am struggling -- lost my job and still maintain the property and cover the difference in the mortgage every single month.
I tried to get help to refi or qualify for the programs to lower the interest so the rent covers the mortgage. No moss -- I have tenants. Since that's the case, no programs can be offered. Oh yes! Under the new harp I would qualify -- because I have always paid on time. Problem is that Bank of America -- who I have been working with for years to try to get "modified" SOLD MY MORTGAGE AFTER SAYING I WOULD QUALIFY FOR HARP2. They didn't sell -- they transferred to Greentree -- WHO IS NOT LICENSED TO OPERATE UNDER HARP 2 in my state.
My unemployment will run out. My tenants are the BEST EVER. Then what do I do? I can't continue to pay the difference and feed my kids.
But hey -- continue to make your assumptions on people who go into foreclosure -- that we are taking rent money and having a good time!! Ammmmazzzzing.
There is a difference between debt and fraud.
I feel for renters and I am HAPPY TO KNOW THIS EXISTS. If I can't pay, I will reduce their rent, extend their lease and the banks can kiss my toosh. Any rent they pay me will go into a bank account because the banks can come after me years later for the difference. I'm sure they will ...the only thing we produce in this country is an economy off of transactions. We almost NEED this to happen. I hope it takes them years to get my tenants out.
United Corporations of America. The banks made money on intial settlements. Inflated the market value of homes. Took bad bets on loans. Sold homes like mad dogs. Got them backed by the government. Took government bailouts and are now sitting on TRILLIONS. Crashed the real estate market and continue to devalue homes. Programs are out there and they find every way NOT to offer them to the consumer. If you foreclose, they get paid by frannie or freddie. Then they get paid on the resale of the home. Then they have years to come after you.
Did I mention FRAUD??
Not all renters are trying to get over. But sooo many are that it makes it hard for a legit person. I currently have a renter in my home. I checked her credit, job etc... She has NEVER paid her rent on time, in the 4 months she has been there. The earliest I receive it is 2 weeks after the 1st. I got behind in my mortgage dealing w/ HER! I almost lost it... She does a great sympathy, "I wouldn't do anything to anyone I wouldn't want done to me" act. Did I mention she gave me a bad check - luckily the bank called me and pulled it from my account before it bounced.
I'm sorry but I can not sympathize. Too many folks are just trying to get over. I'm moving back in my house and will NEVER rent it out again!
Hey BunnySlayer....I don't care who the INTENDED recipients were....the step-by-step how to squat for free was posted on the WORLD WIDE WED!!! I called references, verified employment, pulled a credit report, and performed every single law allowable check available to me and it still is never enough to protect Landlord's rights or property the way this article so one-sided in nature gives to renters. That's my complaint!!!
Diacula, yes, the renter can stay for the 90 days from the date they are notified of the foreclosure.
Even better, one of my neighbors found out the home she was renting was in foreclosure. She came to see me, and I helped her arrative to put the rent she would otherwise have paid the landlord who would be losing the property anyway into a separate savings account. She worked with the bank handling the foreclosure, kept everything above board with them, and when the home went on the auction block three months later, she bought it herself!
There was one statement, people were overlooking keep your payments up to date then you are out..I had a deadbeat nurse who tried not paying her rent because they were trying to foreclosure on me. I save the house but kicked her dead beat **** out.
Whoa! Speaking from the perspective of both a renter AND a landlord (25 years experience in property management), I can tell you that scum comes in every color, shape and size.
That said, first of all Ticked Off, this article was directed to a small sub-group of tenants who have been paying their rent, but the landlord's property has been foreclosed. This article is NOT talking about the standard eviction process between a landlord and a deadbeat tenant. I'm sure every landlord on this board can tell horror stories about trying to get bad tenants out.
Also, I'd like to remind both renters and landlords of the immortal words of Ronald Reagan to Mikhail Gorbachev, "Trust, but verify". Both parties to the rental agreement should do their due diligence in advance of signing on the dotted line.
Renters, make sure the property really belongs to the party that says they own it (I've seen people rent empty houses that they have no right to!). At the very least ask for the contact information of former renters so that you can do a reference check. If the landlord won't give you any reference information, that's a red flag.
Landlords, likewise, don't just call the number the potential renter gives you for their former landlord, make sure that's who you really are contacting, and not just some friend who agreed to lie for them. A public records check, in addition to a credit check, will tell you if they're already facing eviction elsewhere.
Better foreclosure than continue to pay Mortgage to the Bank. My question How wil stimulate all those people ho buy property 2006 and pay regularly without penalty. Bank diidnt stimulate, motivate them and didint decrease nothing They continue to grab from them and offered them refinance and to still more mone for closing costand all other applications. This is is not fair for them I am on of them. So what do you advise me Foreclosure or to continue to pay for property