I live in the Commonwealth of Virginia. Only 7/1/11, I signed a one-year lease to rent the house my family is currently in. We rented this from the owner. About 6 weeks ago, the owner called us stating the house was in foreclosure. I asked what this meant for us, she said she thought that in the state of VA, that the new owners had to honor the lease. I tried looking up the laws and from what I understand... the new owners have to honor the lease UNLESS they want to occupy the house, which means we will have 90 days to relocate.

I've been trying to get answers from my landlord... and just before Thanksgiving, she said they were trying to work with the bank to save the house, but she was $2000 dollars short of the $6000 she needs. It makes me believe she was in financial trouble with this house when we signed the lease, and I feel we were deceived.

So now, I sit in limbo... not sure when and what is going to happen. She is waiting for word on the bank as to whether they will let her keep the house. This being in limbo has caused me much stress and actually sent my husband to the hospital for three days (stress/anxiety).

My questions are these:
1-Am I correct in understanding the law?
2-Should I start looking for another house now? (The landlady said she would return my deposit - however, if she is so strapped for money, how can I be sure I'll get it back in a timely manner? I am also strapped for money so would need the deposit to put down on another house. My credit score is really low or I would see about buying the house, taking over payments or something to that effect.
3-I don't want to "sue" the landlord or anything but this whole situation has caused us much stress and we are not enjoying our time in the house (as promised in the lease) because we are not sure if and when we are going to have to vacate. Are we entitled to anything because of this? As I mentioned, being forced into foreclosure takes months, so I feel they knew about this when they rented us the house.

Any help would be kindly appreciated.

Foreclosure and auction are different things, if this house is foreclosed the bank is taking it. The bank does not have to honor the lease in most states. If it was auctioned off then that new buyer would have to acceept the lease. I'd start looking for a new place asap and I don't see how you can successfully sue the LL.

From my understanding you understand this correctly.

No you were not deceived, they have no obligation to tell you how the situation is. In fact often if behind, from house sitting empty , finding a renter may save it, or get the bank to work with you longer. It is not what you want to hear, but what and how they use the money you pay as rent is not a legal concern of yours and they have no obligation to tell you anything about this.

You will owe them the rent till the day it sells at foreclosure.
After that day, you owe the new owner the rent, even if that is the bank.

You will just have to hope and pray that the landlord has your deposit saved in a bank account, but I doubt it. Most likely he does not have the money and you will have to sue him. ** but. Even if you sue him, you just win, it does not give you the money, so now you would have to try and find where he works, or where his bank accounts are, to try and garnish them.

So yes it is very likely you will not see your deposit money, of if you do, it will be so much a week for a long time.

First, try not to worry about when she knew. $6000 probably isn't very many months of mortgage payments.
Second, try not to worry about being kicked out. Foreclosures drag on and on, few buyers come forward, especially in the winter, and when they do, the lenders take their sweet time transacting.
Third, you are right about the (federal) law protecting house rentals in foreclosure for the term of the lease or 90 days notice if the buyers can PROVE they will occupy the house.
Buyers can't give 90 days notice until they close on the house, and you would have had a lot more warning before that.
In general, you probably can worry less about this than you would if the owner just decided to put the house up for sale!
Don't stop paying rent. If someone buys the house, they are credited your deposit and they have to pay it back. If the lender is the owner and they appear shady I might consider using it as last month's rent, even though that is not supposed to be advised. Many states have laws awarding double or triple damages for late return of deposits, but I've known people to 'win' that and still never get see a dime.
As for any needs for repairs on the house, then lender doesn't want to see it fall into disrepair and they are liable as landlords anyway once they foreclose, so don't worry about that either.
It's good to check out other rentals for an idea of the market, but you can also wait pretty safely.

Thank you all for your answers. The reason I think the landlady knew about possibly being foreclosed upon is that a mutual friend (who told me about the house), indicated to me recently that the landlady had "hoped it would not come to this". I understand and don't care what she did with the money I sent her each month, although I assumed she was using it to pay the mortgage. I don't want to sue the landlady, but I do want my deposit back when I'm looking for another house. I had to borrow the deposit money from my daughter and am in the process of paying her back so there is no way I could come up with a deposit for another house. A month after we moved in the A/C went out, I called the landlady and told her and she told me "she didn't have the money to repair it" (I should have taken that as a hint), so we paid for it and I deducted it from the rent. We want to stay in the neighborhood and right now rental houses are at a minimum, but I'm with joy that the whole procedure may take a while. I am now mailing the rent to the landlady because she still legally owns the house. I am keeping copies of everything, e-mails between she and I, etc. She is trying hard to keep her house and trying to work with the bank to keep it. Thanks for all your help.

I posted the other day about my predicament. Here are the new circumstances. I'm in Virginia, I rent a home, the home is now in foreclosure. The landlady tried to save her house, but could not stop the foreclosure. In corresponding with her, she states she is returning my uncashed December rent check and sending me a copy of what she has received from the bank's lawyer. Then she tells me to wait to hear from new owner. Is new owner the mortgage company/bank? She said people could bid on it as soon as Monday. She states she knows for a fact that the new owner will have to honor the rest of our 12 month least (6/30/12). When I get the money back from her, who do I pay rent to? The mortgage co? Do I hold it until someone asks for it? I take it our deposit will go to the new owner. The landlady came to the house on 10/1/11 and wrote a note stating that we were taking excellent care of her home and it looked wonderful. At the time, I didn't think I'd need it. Can I ask her to write me a letter stating that? I'm so confused, numb, shocked and distressed by all of this and guess I need some reassurance, if there is any to be had. Since the landlady doesn't own the house anymore, then I really don't have to stay in touch with her other than to make sure I get my rent check and my deposit when we move, right? Thanks.

The new owner is the lender. You don't need to keep in touch with the old lender, unless you don't have any written proof of the deposit. Don't worry about the condition of the house; it will be seen anyway.

Wait until you find out what's going on further. I doubt that it will be an auction. 'Bid' means auction, but 'as soon as Monday' makes no sense for an auction, so what she means is that people could make offers on it as soon as Monday - very different. And people RARELY put offers on rented houses! Try not to worry. Keep asking here as soon as you have a worry. Ask the lender for details. How much the owner owed, what the town appraised value is, what the lender's appraised value is. Information that helps you figure out if and when it might sell.

I have an offer in on a foreclosure (vacant). I can't get any information from the agent or anyone. All anyone tells me is that it will take time. No one else has placed an offer since it went on the market a year ago. And it's a nice house in a very nice community. Why? Because most people can't or won't wait indefinitely.

In fact if you would stop worrying so much you might use this to your advantage. Tell the lender that you will pay a REDUCED rent with the promise to vacate May 30, when the selling season starts. Like 30% less!

Also, I don't think she is right that you are guaranteed the rest of your lease, so check state law, because federal law allows someone who can prove they plan to LIVE there to give 90 days notice (as I said before). Don't go by what people 'tell you for a fact.' Find out in writing from the lawyer.

As for the actions of the landlord, as Chuck said, they could have felt that finally getting some rental income could have forestalled the foreclosure. So you shouldn't blame the landlord.

They still have to give you written notice. So you should have a reasonable amount of time to find a new place. Wait until you get official notice of who to pay rent to. But set the amount aside so you have it.

While a guess, many lenders are putting homes with these traveling auction companies, they come to Atlanta several times a year, other host online auctions, where they start bids and run them for several days to a week.
And it will depend how it is listed with them ( if it is even)

But at this point you wait to hear from new owner, who ever that may be.