Tenants' Rights in Foreclosures
Tenants who believe their landlord might be facing foreclosure—the seizure of a home by the mortgage lender—should act quickly to find out whether it's true. Pending foreclosures are part of the public record.
Laws vary from state to state, but in many states, a tenant has the right to request a copy of the notice of default, a letter from the lender stating the borrower is behind on mortgage payments. (In some states, a notice of default must be attached to the home, perhaps in the front window, so a tenant would find out about the notice in that manner.)
In California, it's fairly easy and inexpensive to obtain the copy, and anybody can file for one. Since many states follow California when it comes to legal procedures, the process of requesting a copy of the notice of default in that state will be outlined. Check with your county government in your own state to find out how the process might vary there.
Information for the Request Form
Go to ForeclosureForum to obtain the form, fill it out, and print it. You can also request this form from the customer service department of your local title company.
You will need the trustor, trustee, beneficiary, instrument (document) number, and the book and page numbers for the Official Records of the county in which you reside. All of that information is available at the County Recorder's Office.
You must have the form notarized before turning in the request at the County Recorder's Office where you will be charged a recording fee of $17.
Once your request has been recorded, if your landlord's mortgage company forecloses, you will receive a copy of that notice in the mail.
In California, foreclosures typically take about 3 1/2 months to complete from the date the notice of default is recorded. That should give you plenty of time to find a new place to live, provided your landlord agrees to let you stay that long.
If the owner plans to do a short sale—the sale of a property that nets the lender less than the amount due to the lender after all costs are factored in—it could take longer than 3 1/2 months to close.
Leasing Vs. Month to Month
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 federal Helping Families Save Their Homes Act of 2009, month-to-month tenants have a minimum of 90 days to move, and tenants with a lease have the right to stay in the home until the leasing agreement has expired.
Bear in mind that even if the property owner is not paying the mortgage, a tenant is still required in most states to continue to pay rent.
Suing Your Landlord
Some tenants in a foreclosure situation may choose to sue the building's owner in small claims court for failing to honor the terms of the lease. You should contact a lawyer or tenants' rights organization to help determine if that would be a good choice for you.
If you are allowed to sue for damages, there are several types of expenses you might be able to recoup:
- Moving companies and rental trucks
- Loss of security deposit
- Difference between prior and new rent
- New security deposit
- Time away from work
- Any other expenses incurred to find a new home
Tenants in Section 8 housing that is part of a federal low-income aid program might be protected under different laws and should contact the U.S. Department of Housing and Urban Development.
Tenants might also want to call their landlord to find out if they can apply their security deposit to future rental payments; in some states, including California, tenants run the risk of losing their deposit after the foreclosure process is completed.
National Low Income Housing Coalition is another resource for tenants facing eviction because of a foreclosure.
Cash for Keys
Once a home is in foreclosure, 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 money from the mortgage lender to pay for the first month's rent and security deposit on a new home.