I am renting a house that is being foreclosed. The current owner has it until the middle of July. He wants me to pay rent for the whole month of July?? I say only for half of July? If I vacate by July 15, 2010 I shouldn't owe any rent? Is that correct?

No that is really not the way it works.

First is there a foreclosure sale in the middle of July, is that why there is a firm date he will no longer own it ?

But you will be merely renting from the new owner.

The if, is how doyou know he will only have it till mid July

We received the foreclosure papers and the property goes up for auction on July 16, 2010. He has told me that as well. But he insists we should pay him for all of July?

You are actually caught between. Since your rent is due on 7/1, then you need to pay it. You don't know for sure that the auction will actually go through. The good news is that the law allows you 90 days after the foreclosure before you have to move.