Tenants' Rights in Foreclosures
How to Find Out if Your Landlord is Headed for Foreclosure
If you're wondering about tenants' rights in foreclosures, you've come to the right place. Tenants who have so much as an inkling that their landlord might be facing foreclosure should not waste one more minute before finding out. Pending foreclosures are a public record. But as a renter, you don't need to comb the public records every day to see if your landlord is making the mortgage payments.
If you are a tenant thinking about renting a new home, you will want to know if the individual(s) who claim to own the home actually are the homeowners. There are plenty of rental scams from con artists posing as homeowners. You don't want to wake up one morning and find the sheriff at your door, saying you need to move out because you paid rent to a scammer.
Be Notified If Your Landlord Goes into Foreclosure
All states have different laws, but in many states, a tenant has the right to request a copy of the notice of default. In Nevada, for example, you will need to take a copy of your lease agreement with you. In California, it's very easy and cheap to do, and anybody can file for a copy of the notice of default.
Since many states follow California, here is how to request a copy of the notice of default in California. Check with your own state to find out how to do it. This is an excellent way to protect your tenant rights in foreclosure.
Request for Copy of Notice of Default
It's free in California. Normally reserved for a junior lien holder to be notified in the event the first mortgage goes into foreclosure, anybody, actually, can file a request for notice of default in California.
- Go to ForeclosureForum to obtain the form, fill it out on your computer and print it. You can also request this form from a customer service department at your local title company.
- You can pay to get a copy of the deed of trust online, but why? Call a title company to get a copy of the deed of trust for free. You will need the trustor, beneficiary, document number, book and page information to complete the Request for Copy of Notice of Default. This information is provided on the deed of trust. You can also get the information at your local County Recorder's office.
- The form must be notarized.
- Record the form at your county recorder's office.
- County Recorders charge to record the document, but it's cheap. In Sacramento, for example, the fee is $11 for one page.
After the Request for Copy of Notice of Default is recorded in your county, if your landlord's mortgage company forecloses, you will receive a copy of that notice in the mail.
In California, foreclosures take approximately 3 1/2 months to complete from the date the Notice of Default is recorded. This should give you plenty of time to find a new place to live, providing your landlord agrees. If the seller is selling the home as a short sale, it could take longer to close, which will give you more time to find a new home.
Tenants Rights in Foreclosure
Your rights as a tenant in foreclosure vary depending on whether you have signed a lease or are renting month to month. According to The Helping Families Save Their Homes Act of 2009, month-to-month tenants have a minimum of 90 days to move, but other laws vary. Bear in mind that even if your landlord is not paying the mortgage, a tenant is still required in most states to continue to pay rent.
Some tenants in a foreclosure situation reserve the right to sue a landlord in Small Claims Court for failing to honor the term of the lease. You would need to contact a lawyer or tenant organization to determine if this would apply to you.
If you are allowed to sue for damages, here are some fees you might be able to recoup:
- Moving companies and rental trucks
- Expenses incurred to find a new home
- Loss of security deposit
- Difference between present rent and new rent
- Cost of new security deposit
- Time away from work
Don't hesitate to contact a lawyer for further advice. Section 8 tenants, however, might be protected under different laws. Contact HUD.
Tenants might call their landlord to find out if they can apply their security deposit to future rental payments, because in some states such as California, the foreclosure wipes out the rental agreement. In that instance, your security deposit is gone.
Cash for Keys
Once a home has gone through foreclosure and title has passed to the lender, be ready to hear from the lender's representative. Some use hardball tactics to try to make tenants move out earlier than the law dictates.
One remedy at a tenant's disposal is to ask for cash for keys. A tenant might collect enough to pay for the first month's rent and security deposit on a new home. Make sure the agreement from the bank is in writing before handing over the keys.
A handy place to scope out the foreclosure process is the National Low Income Housing Coalition. This nonprofit organization lists the eviction process during foreclosure, state by state.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.