Renters’ Rights in a Foreclosure
Every month, you dutifully send in your rent on time. You assume that your landlord is just as dutiful in paying the mortgage. However, one day, you come home and see a foreclosure notice on the door. The landlord hasn’t paid the mortgage in months and is going to lose the home. What are your rights? Do you have to move?
In the past, foreclosures invalidated existing leases, forcing tenants to move on short notice. However, the federal Protecting Tenants at Foreclosure Act of 2009 gives renters new rights. If you have a lease on a property that is foreclosed on, you are allowed to stay in the home until the lease expires, unless the new owner is planning to use the home as his or her primary residence. In that case, you must be given at least 90 days notice before being required to move. You must also be given 90 days notice if you are renting month to month. If your state’s or city’s laws provide stronger protections than granted under federal law, those laws apply.
Homes without tenants are often seen as more marketable than homes with tenants in them. Some lenders offer “cash for keys” – giving you money in exchange for moving out early. Before accepting this, think about if you have a place to go and what your costs will be, including a security deposit on a new place and moving expenses. If the amount the lender is offering is too low, let them know you want more money to move out early. Be sure to get any agreement in writing. If you do not want to move early, don’t be afraid to assert your rights.
In some states, the foreclosing lender is required to refund your security deposit if your old landlord does not. If you had a lease that was terminated early, you can also sue your previous landlord for rental application fees (for new places), moving costs, and the difference in rent between your old and new place (if you have to pay more).
Hopefully, you will never come home to see a foreclosure notice on the door. But if you do, knowing your rights can help you make the best of a bad situation.
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