What is the foreclosure process on rental property?

Tenants of a foreclosed property are put into a difficult situation, and undoubtedly, when the situation is thrust on them, have a myriad of questions regarding what will happen to them as the property they reside in is foreclosed upon. With that in mind, tenants need to be aware of the following.

If the landlord of a property being rented out to a tenant finds himself going through foreclosure proceedings he is required to give his tenants 90 days notice before the house is allowed to go up for auction for the foreclosure sale. Once the tenant receives this 90 day notice, they only have 20 days to vacate the premises once the sale of the property goes through.  The new owner of the property is not required to extend to the tenant any further notice. So, once a tenant receives that first notification that the property is going into foreclosure need to immediately begin a search for a new location to live.

Should the tenant fail to vacate the rental property within the 20 days afforded them following the property's sale at auction, the new owner can begin the eviction process at that point. Should the tenant be forced out by an eviction, this action becomes part of the public record and will be on the tenant's credit record, thereafter harming their ability to buy or rent any new property themselves.

The tenant is best served by contacting a real estate attorney who is trained to help renters in these very situations avoid the complex foreclosure laws, and complex problems that accompany them, and help the tenant maneuver through this process according to the laws in the state where they reside. 

In the positive column for the tenant, with the foreclosure comes the completion of the original rental agreement between the tenant and the landlord, thereby putting the tenant in the position of negotiating new terms with the new owner - assuming he is willing to continue a rental agreement with the tenant. In some cases, the new landlord will honor the original lease agreement, which will result in no particular new change for the tenant other than the change of the landlord himself.

A tenant who is faced with this situation should, at the very least, contact the landlord regarding the return of the security deposit. Under these circumstances where the tenant is losing his lease on the property, the original landlord is responsible for returning the security deposit.