Your Rights in a Rental Foreclosure

Consumer protection

Your landlord stopped paying the mortgage — so can you stop paying rent? If you’re having a panic attack, breathe easy — there are rules for these types of rental disasters. Here’s what to do — and what not to — when your rental goes into foreclosure.

DON’T: Stop Paying Rent

Just because your landlord isn’t paying for the property doesn’t mean you’re off the hook. Violating your rental agreement by moving out early or simply not paying rent can still call for eviction or a lawsuit from your desperate landlord. Foreclosures take time, so don’t expect to be squatting for free anytime soon.

With your lease agreement still in force, your landlord is required to continue maintaining and repairing the property. Take pictures of items needing to be repaired, keep written copies of communication to your landlord asking them to fix it, and get estimates for the cost of the repairs. If your landlord refuses to pay for repairs, you may legally be able to move out and stop paying rent or simply deduct the repair costs (keep your receipts) from your rent. Consult an attorney before taking any action or not paying your full rent.

DO: Stay Put

If your landlord moves out and another moves in, The Protecting Tenants at Foreclosure Act of 2009 protects you from being evicted by the new homeowner. Under the act, the new owner can’t kick you out until the end of the lease or for 90 days (whichever is longer). However, if this is the new owner’s primary residence, you may only have 90 days to vacate. Until then, the bank handling the foreclosure or the new homeowner cannot remove your belongings or rekey the house. Hold on to your renter’s insurance policy to keep your valuables protected, since your landlord’s homeowner’s insurance only protects the structure of the house — not your belongings.

DO: Know Your Rights

Get in touch with the bank handling your landlord’s foreclosure (lawsuits are public record, so court records should give you what you need). Inform the bank that you are living in the apartment and paying rent; you cannot be evicted as long as you are paying rent. Find out from the bank what arrangements can be made for you to legally remain in the apartment until you find a new place to live.

You are still entitled to the return of your security deposit; if your landlord refuses to return it, you may need to hire an attorney or find out if your local small claims court assists persons attempting to recover a security deposit from their landlord. If all else fails, you may be able to negotiate getting your last month’s rent free with the new owner of the property — but talk to a lawyer and make it official (have everything in writing and get receipts for all rent payments).

DO: Keep in Touch

If you are served with a foreclosure complaint for the residence, respond with a letter stating that you do not own the home and attach a copy of your rental agreement. The lender may continue to send notices on what is happening in the foreclosure action, which is good if you want a heads up when it’s time to start packing.