I rent a storefront and just found out the landlord is going into foreclosure. They've kept it secret until I got a letter from the bank telling me to mail my payments to them. I've only been here for 8 months and this started last Sept. so they knew they were doing this. Us tenants think they're doing it so they can buy back the place at a cheaper price. I want to move after my busy season in 3 months, but still have a 3 year lease. Doesn't this foreclosure cancel my lease? And can I not pay the next 3 months so it covers my moving expenses?

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Originally Posted by theadian

Doesn't this foreclosure cancel my lease? And can I not pay the next 3 months so it covers my moving expenses?

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Hello t:

Commercial leases are governed by contract law, whereas residential tenancy is governed by landlord/tenant law... Therefore, whatever rights you have as a tenant are written in your lease. If you can't find your right to cancel after foreclosure, then you don't have it. If there's no mention of withholding rent for moving expenses, then you don't have that right.

Apparently, the bank believes they're your landlord now, and I'm sure they've reviewed your lease.

It's clear that you have OTHER considerations for moving, and are looking for an out. I think you'll have to look further.

excon

First, the bank won't allow an owner to buy back a foreclosure at a cheaper price.
Second, you really need to have a friendly chat with the bank. You can't withhold rent for moving expenses, and you are probably jumping the gun anyway. Work out what the bank sees happening (some landlords actually want to keep their buildings and work out new plans) and whether you really want to move in 3 months or not.

While laws differ by state, the basic rule for commercial leases in foreclosure is called 'first in time, first in right.' If the mortgage was recorded before the lease was signed, the general rule is that the lease is wiped out. The new owner can sell it, lease it to the current occupants or lease it to someone else. The new owner can evict the current tenant (even if the tenant has fully complied with their lease), but typically must get court permission to do so. But your bank has no incentive to evict and resell. It's a renter's market in most commercial space.

Some leases contain subordination, non-disturbance and attornment clauses. Attornment means agreement to remain as a tenant with a new landlord. So check your lease.

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Originally Posted by theadian

I rent a storefront and just found out the landlord is going into foreclosure. They've kept it secret until I got a letter from the bank telling me to mail my payments to them. I've only been here for 8 months and this started last Sept. so they knew they were doing this. Us tenants think they're doing it so they can buy back the place at a cheaper price. I want to move after my busy season in 3 months, but still have a 3 year lease. Doesn't this foreclosure cancel my lease? And can I not pay the next 3 months so it covers my moving expenses?

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The title of this thread says bankrupt while your post says foreclosure. They are two different things.

And although the bank is demanding "rent interception", I am not sure that it is entitled to the rent until the foreclosure, if that is what it is, is complete.

You need to consult with an attorney before you do anything else.

But no, you probably will not be able to withhold payment and use it to pay moving expenses. If you still owe rent to your old landlord, even if your old landlord is liable to you for damages for defaulting on the mortgage, this would have to be sorted out by a court.

First and foremost, no you can not withhold rent, you could well find yourself locked out and your inventory being held to cover costs of default. (Depending on terms of default in your contract)

And the owner of the property has no legal obligation to tell you they are gong into foreclosure or going bankrupt.
** they are different and things are handled differently.

It is easy to write a letter saying you are entitled to the rent, but another to be, there had to be court action for this to happen.

You can request that the bank prove they have the right to collect the rental. Request that they show a court order confirming the foreclosure or their right to collect the rent. Once they do that, however, you do have to continue paying rent to them. Otherwise you face eviction. It is highly unlikely the foreclosure voids the lease.

I agree that I think you are unnecessarily panicking. If the bank as assumed ownership, then they are responsible for maintaining the property until it is sold. Since the foreclosure doesn't void your lease, then can't raise your rental either. So your lease protects you for the next 3 years. If the owners, whoever they might be, fail to provide the services listed in your lease, then you can move to void the lease.

But if you are trying to use this as an excuse to get out of a location that you know believe isn't good for your store, that won't fly.