What can renters do if their landlords are in foreclosure?

by Xin Lu on 15 December 2008 26 comments
Photo: Eviction

Lately many tenants across the United States who faithfully paid their rents on time were surprised to find eviction notices tacked on their doors because their landlords have not been paying the mortgage.  Other tenants are receiving "cash for keys" offers from the banks that reposessed the homes.  If you are a renter, here are some precautions you can take to make sure you do not face an unexpected foreclosure related eviction and also a few tips on what to do if your landlord is losing the home you live in.

If you are living in a rental home now in a state with a high rate of foreclosure such as Nevada, Florida, or California, then you should definitely check the public records for any liens or judgments on the home you live in.  Fortunately, many counties now have land and tax records online.  For example, for San Mateo County you can simply search for "San Mateo Tax Assessor" and find the Tax Assessor's homepage.  From there you can search for a specific address and see if the taxes are paid ontime.  If the taxes are late or in default on the property, then that is a warning sign that the property may be in financial trouble.  You can also search the land records to find any Notice of Defaults, which is usually the first step in a foreclosure in California.  If public records are not available online where you live, then you could go to the county seat and search for the record at the county offices.  Public records are available to anyone, but some offices charge a small fee to do a search for you.  You can also find detailed information such as which bank holds the mortgage on the home, and what the mortgage amount is.

Another way to check if the home you are renting is in financial trouble is by searching the local real estate listings.  It is possible that your home is on the market as a short sale and your landlord did not inform you.  If that is the case then the home is probably about to foreclose.

If there is any sign of financial distress then it may be a good idea to speak to your landlord and ask what is going on.  If your landlord tells you everything is okay when there is a Notice of Default in the public records, then he or she may not be completely honest with you and it is probably a good idea to find a new place and get your security deposit back.

If you already received a "cash for keys" or eviction letter from the bank then you should also check the public records to see if the bank already owns the home.  If the bank is indeed the recorded owner then you should definitely stop paying your old landlord rent.  At this point you could either pack your bags or try to negotiate with the bank.  Some banks may prefer to have occupied homes because they are less likely to be vandalized so in rare instances they are willing to sign new leases, but you still have to be ready to leave when the home sells.

Eviction laws also differ from state to state so in some cases it is worthwhile to fight a foreclosure related eviction.  In this article from the Harvard Crimson, a group called No One Leaves is helping renters in Boston stay in their homes and get settlements from banks because in Massachusetts foreclosure is not legal grounds for eviction.    However, this is not true in every state so you must research if a legal battle is worthwhile for your situation.  Fighting an eviction also makes a renter undesirable to other landlords in the future even if the renter wins so you must make sure that you are willing to take that risk. 
 

The good news is that the powers that be are realizing that these unjust and surprising evictions are becoming problematic for many communities.  In July California passed a law that gives tenants a 60 day notice to leave a rental unit after the property is sold in foreclosure, and yesterday Fannie Mae announced that it will not evict renters in the foreclosed homes it owns.    Hopefully other banks will follow suit and keep the good renters in their homes as long as they need. For now, if you are a renter, remember to protect yourself by verifying the ownership and financial status of a home through public records. Since landlords usually run credit checks on tenants, I think it is only fair for renters to find out the financial situation of their landlords.  Hopefully in the future landlords will be required to disclose their financial troubles for the benefit of renters.

Have you been evicted due to your landlord's failure to pay mortgage?  What did you do?
 

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Guest's picture
Barbara

Wow, that's really scary to think I can be evicted because of irresponsible landlords. Naive as it might be, I didn't even consider that the foreclosures could affect me because I'm a tenant. Thanks for bringing this topic up. I'm definitely going to check the public records on my building!

Guest's picture
Stressed

Well this just happened to us. We got the eviction notice on our door. Mind you it said "2nd Notice". We were like what happened to the first notice. We had been receiving in the mail all these notices to help you avoid foreclosure addressed to tenant/owner. We called the property manager and was told that the owner had "plenty" of money and that we had nothing to worry about. This was in Nov.2008. We kept receiving the notices (while paying our rent mind you) and were told the same thing. Not to worry. Well in Feb is when we got that eviction notice... taped to our door.. for all of our neighbors to see.. Of course we called the property manager who then told us she would call us back and that she thought she received a TRO on the property. What a TRO was we didn't know so we looked it up. Its a Temporary Restaining Order. We didn't pay the rent because we felt like we had to move and really didn't know what was going on and wasn't sure how temporary this TRO was. We were offered the cash for keys from the bank to move and managed to negoitate a time to move out. We told them about the TRO and they said they would look into it and get back with us. Mind you we still hadn't received a call back from the property manager, so my husband called her back. She then said that we needed to pay the rent or be evicted. We were like what proof do we have that the home wasn't in foreclosure and she said because of her verbal, that should be proof enough. Well as we were trying to verify this TRO, we got evicted by the owner and now we are going to court. Talk about stressful.

Guest's picture
Walt

Today, Fannie Mae changed their policy, and is allowing renters to stay in foreclosed homes...

http://money.cnn.com/2008/12/15/news/economy/fannie_housing/index.htm?po...

Guest's picture
Guest

how would i get the security deposit back if it's foreclosed?

Guest's picture
Guest

you don't get your deposit back, it just happened to me, I moved right away!

Xin Lu's picture
Xin Lu

Walt, if you read my article then you'll see I already mentioned the Fannie Mae change, but Fannie Mae doesn't own all the foreclosed homes out there.  They're only helping around 4000 displaced renters, but there are a lot more.

Xin Lu's picture
Xin Lu

Guest, you ask for your security deposit back from your landlord, but if they're strapped you might not get it back.  Sometimes people go over small claims court over this, but it doesn't always work.

Guest's picture
Kate

There is much good information in this article. I've got a list of links in a post at http://paycheck-chronicles.military.com/2008/11/what-if-your-la.html. As you said, it can be hard to figure out your individual situation because it is nearly always covered by state law and therefore varies by state.

If you are entering into a new rental agreement, you can ask to do a credit check on your landlord(s) similar to the check they will be doing on you. The court records that you mention are excellent sources of information.

The more you know, the better you will be able to make good choices during these challenging times.

Thank you for such an important post.

Guest's picture

These issues are why I think my daily L.A. Times subscription is a good value! I recently read there that all apartments In the City of L.A. under rent control (mine is) are protected from eviction from landlord foreclosure - and they are extending the protections to other renters (altho I am hazy on the details here).

If you face this sort of situation CONTACT YOUR LOCAL GOVERNMENT REPRESENTATIVE for help and info! Also get the Nolo Press Book on Evictions and Tenants' problems from the library! If you are broke enough, perhaps a legal clinic can help you, too!

I have successfully fought a mistaken notice of eviction - by doing my own paperwork - Keep copies of everything and send ccs to everyone, too!

Guest's picture
Guest

Thank you for this article. I checked the property tax records for the house I am renting, my landlord is behind on the taxes. Only 4 days now, I will be keeping an eye on it.

Guest's picture
Guest ALI

I've just got the letter form my landlord

" Attention All resident "

Effective January 1, 2009 Residences will no longer offer a promise to pay for rent deferment after a 3 day notice to terminate tenancy for non payment of rent has been issued to a household. all rent is due on the first of the month and is late after the 5the if outstanding balances are not paid by the 10tht of the month, eviction proceedings will begin on the 11the . those promise to pay arrangements currently in effect will be honored until December31,2008

Extreme financial difficulties requiring assistance must be approved by the regional manager at our corporate office before any future promise to pay will be granted, with a maximum of one per calendar year. all rent deferment requests must be approved before the 5th of the month. any requests made later than that date will be declined.

late rent is no longer going to be acceptable. please make certain that paying your rent is a financial priority.

in addition, we will no longer allow late fee balances to carry over from month to month. any payments made will be applied to outstanding balances before current rent charges.

************************

my questing do you think we are in good hand

thanks

Guest's picture

Any idea how to know if your apartment complex is about to be foreclosed on? In Houston, we've recently had entire complexes evicted from their apartments due to the complex owner going into foreclosure.

Guest's picture
Bill M

A lot of this is happening in my area, landlords take first, last month and security deposit, 3-4 months later, everyone is getting evicted

Guest's picture

Oh the stories we hear on a daily basis. It is very important for renters to know what is going on with their landlord's mortgage. California has done a pretty good job with the required 60 day notice, the city of Los Angeles has though most post foreclosure requirement in the nation and they are working on expanding them!
We have a site that is a bit easier to use than most of the county sites out there and RentalForeclosure.com is free to use.
I can't stress enough, it's very important to get this information. We talked to a tenant in San Diego yesterday who paid 2 years rent in advance in February, her landlord was foreclosed on December 9th. Another tenant told us that the landlord came in while they were gone and removed all of the stainless steel appliances prior to the foreclosure sale.

Guest's picture
Guest

If you are renting a home or apartment and you are forced to move because the landlord couldn't pay the mortgage, you should contact an attorney. You may have a civil suit against your landlord. You won't have to pay rent from the time you are notified about the foreclosure and you may be able to get money for your moving expenses and other costs.

Guest's picture
Guest

Does your landlord being behind on their property taxes mean they are behind on their mortgage? I searched and their are no public notices of default or foreclosure for the property or my landlord.

Xin Lu's picture
Xin Lu

HI guest... if your landlord is behind on property taxes then the county could sell the home if the taxes are late enough.  It depends on the county, but usually if the taxes are defaulted for a few years they could sell the house at public auction if it still isn't foreclosed upon.  In California if the taxes are 3 to 5 years in default then it's auctioned.  See: http://www.sco.ca.gov/col/taxinfo/tcs/pubauctions/index.shtml

Since the consequences are pretty serious, it's a warning sign that your landlord may be defaulting on other bills soon if he or she is not paying taxes

Guest's picture
Allie

A friend of mine in MN just found out his home was in foreclosure. The landlord continued to collect rent and say nothing. Thankfully, the bank offered him a substantial amount of money to move by the 23rd, so he accepted their offer and is moving. Apparently in MN you have to have made no payments at all for 3 years before it can be foreclosed on. Perhaps that can help other renters there to find out about the properties they're renting.

Guest's picture
Yell

I live in San Francisco and we found the foreclosure notice taped to our building a few months ago.

It seems we're fine for now. We are paying rent to someone new and repairs and things that the old landlord never handled are actually happening! It's not always necessarily a bad thing.

Guest's picture
Peg

I happened to stumble upon this when searching for something else. Let me tell you my story that happened to us. We went on a trip to Las Vegas for vacation, and when we got home we came home to an Eviction notice on our door giving us only weeks to get out! We were renting a carriage house at the time, on the same piece of land as another house, a huge barn, little store and old camp site. The other tenants were the owners daughter, husband and child. The owner had approached my husband as possibly buying the property. We gave it some thought but decided not too. What a surprise to find out that the owner was taking our rent money but not paying his mortgage! I went to court and the big bad bank was there with their lawyers. I went alone to speak with the judge, sure that I would receive some justice! Not so...the judge even yelled at me, and told us to be out at the end of the week as he slammed down his gavel! Even though we had done nothing wrong! I was in tears he was so mean to me, that one of the bank managers came over to comfort me. Even though they were the enemy at the time, they understood our dilema. Even so we had to get out. We ended up borrowing money from a family member with interest to get a down payment on a mortgage for a house of our own, but what a way to do it!! Talk about stress!! So hopefully if anyone else goes through what we did, they will make out a lot better. GOOD LUCK!

Guest's picture
lisa

Hi! If you find out your house is in foreclosure or being taken back by the bank or landlord filing bankruptcy, please move out immediately. Our friend here in town, her daughter lived in house on next block from us & she works at gas station & one of town cops told her it was being filed on for bankruptcy. He told her to find someplace to move & get all her stuff out of the house cause , if they didn't when he put a lock on the door in next few weeks ,they would lose everything they had inside & the bank would throw it all away& there is nothing that will be done about it, You lose everything thing you own if they put the lock on it while you are gone. The landlord never did tell them he was losing the place.This is accurate. I checked it out. Lisa

Guest's picture
lisa

Hi! If you find out your house is in foreclosure or being taken back by the bank or landlord filing bankruptcy, please move out immediately. Our friend here in town, her daughter lived in house on next block from us & she works at gas station & one of town cops told her it was being filed on for bankruptcy. He told her to find someplace to move & get all her stuff out of the house cause , if they didn't when he put a lock on the door in next few weeks ,they would lose everything they had inside & the bank would throw it all away& there is nothing that will be done about it, You lose everything thing you own if they put the lock on it while you are gone. The landlord never did tell them he was losing the place.This is accurate. I checked it out. Lisa in Ohio

Guest's picture
Bettie

Allie, I am from Minnesota, and no it is not 3 years. My niece just went through this where she lasted rented. The payments had not been made for 6 months, the townhouse then went to a sheriff's auction. No one submitted an acceptable bid. She still stayed. Another 90 days went by and she was told she had 60 days to move, but if she left it clean and in 30 days the bank would give her $2,000 in moving expences. Needless to say she found a new place and moved out within 30 days! So, no it is not 3 years of non-payment. Now, with so many foreclosed on here, the bank might not have checked to see if the house was vacant, so any rent paid went into the original owner's pockets. Have them call who holds the mortgage about getting money for moving expenses.

Guest's picture
Guest

Last night, my landlord came by to tell me she is filing bankruptcy and I am being named as a creditor because I have a lease. She said the guy who lives in the downstairs apartment will not get a notice because his lease is up and he rents month to month? She said I would be receiving some kind of notice taped to my door this next week and not to worry about it? I don't know what to expect. She has my security deposit and I don't want to make her mad because I need her as a reference for the next place I live. Who will I pay my rent to if I can stay? OR should I be looking for something new.

Guest's picture
sara staines

iam a renter and thepeoplethat we rent the home i am living in and it has is beeing forclosured on august11,2010.we signed aleasefor one year do we stillhave to move?do weget our depositback ?what can we do about this

Guest's picture
kristy

I used landlordreports.org and avoided renting a home which was in foreclosure. For about $29 they check out the property to make sure is clear of any problems. Totally worth it!