The headlines are filled with home foreclosure stories: the rising numbers, how families get to the point where their homes are at risk, what happens to neighborhoods experiencing foreclosures. Other stories often go untold, however, including those of renters whose apartment buildings have been foreclosed. What happens if you have been doing what you are supposed to be doing (paying your rent on time) but one day come home and find an eviction notice on your door? What are your rights?
Although a foreclosure can be a lengthy legal procedure with strict notice requirements, tenants are rarely included on these notices.
When your landlord purchased the building in which you live, he or she likely applied for a mortgage. If your landlord fails to make the necessary mortgage payments, the lender can take steps to recover the money your landlord owes. If your landlord cannot come up with the money, the lender may foreclose on the property and order it sold. The proceeds from the sale are then used to repay the lender. Although a foreclosure can be a lengthy legal procedure with strict notice requirements (meaning that the foreclosing party must make sure the owner knows about any court hearings), tenants are rarely included on these notices.
This unfortunately means that you may not find out about your landlord's problems until it is too late. Legally, if your landlord's lender forecloses on the property, the lender can evict you and any other tenants, regardless of whether you are up-to-date on your rent. The lease you signed likely included a clause stating that any mortgage-holders would have "superior" rights to your rights in the property This means that the lender's rights take priority over yours, even if this results in you ending up out on the street.
So what can you do if you or a family member find yourself in this dead-end situation? In some cases, depending on where you live, your local government may have already stepped in to provide you with some relief. For example, under California laws, most tenants will receive notice 30-60 days before they must move out. In other locations, local law enforcement agencies have refused to evict tenants of foreclosed properties for a period of time. Further, the federal bailout in early 2009 did contain some language and proposals to help tenants, although the specifics of these plans have yet to be worked out.
In December 2008, Fannie Mae, the government-backed mortgage company, announced that it would attempt to help out the tenants of buildings on which Fannie Mae was foreclosing. Under the announced plan, Fannie Mae will become a temporary landlord - extending month-by-month leases at market rate to the current tenants until the building is resold. This plan should provide some stability for tenants, allowing them a reasonable period of time to find new housing options.
However, if you or a loved one have come home to find an eviction notice on your door, these protections and policies may be too little too late. Your best options may be your local Housing and Urban Development office (visit www.hud.gov to find your local office), tenants association, or attorney. Such an advocate may be able to tell you whether your lease provides you with any protection, and what your next best step is. The most important thing to realize is that if you find out that your landlord is being foreclosed on, you must act quickly.