Tenants of a foreclosed property no longer have to worry about losing their lease before it’s up. A foreclosure used to wipe out any lease agreement in most US states, forcing tenants to move out of their rented property. But thanks to the Protecting Tenants at Foreclosure Act of 2009, tenants are now able to continue occupying a foreclosed rental property unless a new buyer intends to make it his primary home.
What Happens When A Property You Are Renting Is Foreclosed
Although it is the duty of a landlord to inform his tenants if a property is into foreclosure, most of them might just not do so. Tenants of a foreclosed property often have no knowledge that a foreclosure proceeding is under way until a court-appointed receiver shows up at their doorstep. As tenants of the property, you need not panic. You will not be asked to move out; rather a receiver will simply meet with you to put things in order.
In most cases, landlords of a property that is about to be foreclosed continue to receive rent from tenants during the 90-day foreclosure period and even after. They may no longer respond to tenant requests for service or repairs, or worse, they will stop paying utility bills on the property even if that was part of the original lease agreement. In the case of your landlord, he no longer holds any interest on the property, so he might just decide to cash in on whatever is left including your rental payments which really belong to his lender once the property is foreclosed.
Why A Receiver Is Appointed
Lenders are currently dealing with thousands of foreclosures and are utilizing receivers to cut down on losses, prevent damage to foreclosed properties and reduce issues on deferred maintenance. A receiver is a court-appointed individual who is empowered with custodial responsibility over a home that is used as loan collateral by the borrower in default. In your particular case, the borrower is your landlord.
Duties Of A Receiver
It is the receiver’s primary duty to guard the property, collect rents from tenants and prevent potential damage to the property that may arise from the borrower’s spite or frustration. In most cases, receivers will opt to change the locks and provide you with a new set of keys. This is just a preventive measure to guard against cases of disgruntled borrowers stripping the property of fixtures or appliances they might try to resell.
A receiver will send you written notice informing you of the change in property management. You will be provided with a new point of contact and details on where to forward rent payments as they become due. He may also arrange to meet with you personally to discuss other relevant concerns, particularly on operation and maintenance issues on the property.
Duties of A Tenant
It is important for tenants to fully cooperate with the appointed receiver of the home they are renting. While receivers primarily protect the interest of the property’s lender, know that lenders prefer to preserve occupancy on a foreclosed rental property in order to minimize their losses.
It is beneficial to get legal advice if you have an active lease on a property that has been foreclosed. Consult with a lawyer to know your rights as tenants.
