We have been renting on contract, to purchase a home in Inpls In, for the past 16 months.
We had a one year lease and extended it in Sept 07 for a second year. In our contract it stipulates a percentage of rent shall go towards the down payment.
On Dec 17,'07 we received papers that the owner was in default on the mortgage and the bank had began the foreclosure process. We learned that he had not made any payments since June '07. Although he had the nerve to raise our rent $75 in Sept.

Is there any legal action we can take to save our house?

Is there legal action I can take against the landlord?

Do I have to continue to pay rent in full, or at all?

Hello steped:

It really depends on what your contract says.

However, there are things you can do to save your house if you're ready to purchase it now. You'll have to exercise your option.

If you can't do that, then you have recourse against the landlord for your down payment back. But, if he's broke (and he is), you won't collect.

In fact, I would resort to "self help" in order to collect. You need to pay rent as long as you're living there. However, if the contract is being cancelled, I'd offset my rent by the amount he owes you. I don't know how long you have left. The foreclosure might just be starting or it might be ending.

excon