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    LisaB4657's Avatar
    LisaB4657 Posts: 3,662, Reputation: 534
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    #1

    Feb 11, 2009, 01:05 PM
    Paying rent when property in Foreclosure
    If you are a tenant and you have received a notice that your landlord has not been paying the mortgage and the property is in the process of foreclosure, do not stop paying rent and do not immediately move out!

    The foreclosure process may have begun but that does not terminate your lease. You are still responsible for honoring the terms of your lease and paying rent. If you do not pay rent then the landlord has the right to file a lawsuit for eviction. If you try to break your lease (without working out an agreement with the landlord) then the landlord has the right to sue you for rent until the property is re-rented or until the end of the lease term.

    If the landlord is unable to stop the foreclosure then your situation may change.

    If the property is part of a multi-unit building, like an apartment building or multi-family house, then it is very likely that the new owner has to honor your lease and cannot evict you. It depends on the type of mortgage documents that the landlord signed. You will be notified by the new owner of where to send your rent.

    If the property is a single-family home then, in most states, the lease will be automatically terminated by the foreclosure. At that point the new owner must give you at least 15-30 days written notice that your tenancy is terminated and you must move. If you don't move within that time then the new owner has to file a lawsuit for eviction. They are not allowed to change the locks or turn off the utilities. If you are unable to find a new place before the court date then make sure you appear in court. You can ask the judge to postpone the eviction to give you more time to find a new place. Many judges will give you another 30 or 60 days.

    Some states do not follow these rules. We know for sure that in NJ a foreclosure does not terminate the lease. The new owner has to honor the terms of the lease and they must offer you a renewal of the lease unless the situation meets one of 16 specific requirements, the most common being that the new owner wants to live in the property. So if you are in NJ and your landlord goes through a foreclosure then you can be sure that you can stay there at least until the end of your lease.

    California has a law about rent skimming. You can read it at TITLE 6. RENT SKIMMING - Sections 890-894 - California Civil Code - California Code :: Justia That law basically says that if a landlord, during his first year of ownership of the property, accepts rent from a tenant but does not pay the mortgage, then the tenant can sue the landlord for their damages, including the security deposit and moving expenses. There has been some talk that the tenant may also stop paying rent or pay it into an escrow account but we have not been able to verify that yet and we do not suggest that you stop paying rent.

    If you are a tenant and you are notified that your landlord is in default or that the foreclosure process has begun, one of the best things that you can do is to try and work out an agreement with either the landlord or the lender to purchase the property. You may be able to get it through a short sale for just the value of the current mortgage. So if you receive a notice, speak to your landlord.

    Note from Scottgem. A US federal law was passed and went into effect in May that requires tenants be given a 90 day notice to vacate once a foreclosure is finalized.
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    ScottGem Posts: 64,966, Reputation: 6056
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    #2

    Feb 11, 2009, 01:09 PM
    Paying rent when property in Foreclosure
    This is a more and more frequently asked question in the current housing crisis. So I figured I'd post a sticky covering it.

    First we need to differentiate between renting a house and renting an apartment in a multi-unit building.

    In a multi-unit building, when the property is foreclosed, the outstanding leases will be honored. So the point is moot. The tenant continues paying rental as they normally do, until they are informed otherwise.

    However, in a house rental, the lease generally ends with the completion of the foreclosure. The new owner can then give the tenant notice to vacate. The tenant can delay this for a time, but eventually will be ordered by a court to leave. Courts are sympathetic to tenants caught in this situation and the tenants will be given a reasonable amount of time to find a new home.

    NJ is a recent exception to this. NJ law now requires the new owner to not only honor the lease, but renew it except under certain conditions, one of which being the new owner wants to occupy the property. (see this thread https://www.askmehelpdesk.com/real-e...re-295411.html)

    Under the law in almost all US states the tenant must comply with the existing lease until foreclosure is finalized. This means rent must continue to be paid and the tenant cannot break the lease (move out early) without permission from the landlord.

    The only exception I am aware of is in California where TITLE 6. RENT SKIMMING - Sections 890-894 - California Civil Code - California Code :: Justia permits a tenant, under certain conditions to cease paying rent.
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    #3

    Feb 11, 2009, 01:16 PM
    I moved your response to the sticky I put up. However, the timing was bad so I may have to play with this.

    Quote Originally Posted by LisaB4657 View Post
    Quote Originally Posted by ScottGem View Post
    I may do that. Have you hear of any other states passing or contemplating such rent skimming laws?
    I'm reading the statute now and doing some searching. It doesn't say what we've been told it says.
    Yes, the member who brought this to my attention claime3d to have successfully sued her landlord under this statute. I know I have been careful, when referring to this, to say it MIGHT allow the tenant to stop paying rent.

    Quote Originally Posted by LisaB4657 View Post
    Did you see the post I made about NJ and foreclosing lenders not having the right to evict tenants?
    Not sure if I saw that one.
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    #4

    Feb 11, 2009, 01:18 PM
    Quote Originally Posted by ScottGem View Post
    This is a more and more frequently asked question in the current housing crisis. So I figured I'd post a sticky covering it.

    First we need to differentiate between renting a house and renting an apartment in a multi-unit building.

    In a multi-unit building, when the property is foreclosed, the outstanding leases will be honored. So the point is moot. The tenant continues paying rental as they normally do, until they are informed otherwise.

    However, in a house rental,
    in most states
    the lease ends with the completion of the foreclosure. The new owner can then give the tenant notice to vacate. The tenant can delay this for a time, but eventually will be ordered by a court to leave. Courts are sympathetic to tenants caught in this situation and the tenants will be given a reasonable amount of time to find a new home.
    In NJ the new owner does not have the right to evict the tenant. In addition the new owner must offer the tenant a new lease at the end of their old lease unless the situation meets one of 16 specific requirements, such as non-payment of rent, damage to the property, or if the new owner intends to reside in the house.

    Under the law in almost all US states the tenant must comply with the existing lease until foreclosure is finalized. This means rent must continue to be paid and the tenant cannot break the lease (move out early) without permission from the landlord.

    The only exception I am aware of is in California where TITLE 6. RENT SKIMMING - Sections 890-894 - California Civil Code - California Code :: Justia permits a tenant, under certain conditions to cease paying rent.
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    #5

    Feb 11, 2009, 01:19 PM
    LOL!!

    How about pulling the sticky and incorporating what I just added and what you just added and what I'm about to go find and send to you? :)
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    #6

    Feb 11, 2009, 01:21 PM
    Here it is...

    https://www.askmehelpdesk.com/real-e...re-295411.html
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    #7

    Feb 11, 2009, 01:21 PM
    Quote Originally Posted by LisaB4657 View Post
    In NJ the new owner does not have the right to evict the tenant. In addition the new owner must offer the tenant a new lease at the end of their old lease unless the situation meets one of 16 specific requirements, such as non-payment of rent, damage to the property, or if the new owner intends to reside in the house.
    I added this exception to the sticky. If anyone has any other comments or corrections please feel free to add them to this thread.
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    #8

    Feb 11, 2009, 01:25 PM
    Quote Originally Posted by LisaB4657 View Post
    LOL!!!
    I'm checking to see if I can change the order of posts. If not, I'll redo everything. In the menatime I edited the sticky to include what you said.
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    #9

    Feb 11, 2009, 04:31 PM

    OK, I've rearranged it so your excellent post becomes the OP here and my post an addition. I think we've covered the main issues now.

    Good addition on buying the property. I meant to include that
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    #10

    Sep 27, 2009, 01:15 AM

    Good Grief! "our" president signed a protection: Helping Families Act 2009 . If you have a lease agreement , "that" state MUSt honor said agreement, regardless of our long the lease is. If the property does go into "forecloscure" the "NEW" tenants most show that they are going to have that said property as a residence. If not, the bank or lender has to honor the end of the lease, and still give 90 days, along with if there is New owners and they can prove that they are to have said property as a "residence" , and that is the ONLY property that they have, then an only then can they ask the current tentants to vacate said property.. have 90 days of!!
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    #11

    Sep 27, 2009, 04:48 AM
    Not sure what the "Good Grief" is about. This post was originally put up in Feb 2009 several months before the Helping Families Act was signed into law. But it is certainly a good addition to this thread to mention Title VII of that act titled --
    PROTECTING TENANTS AT FORECLOSURE ACT

    You can see the full text of the act here:
    http://thomas.loc.gov/home/gpoxmlc111/s896_enr.xml

    Or see the next post (Thanks AK, I updated the link)

    Your description, however, is not quite accurate. An existing lease must be honored until its termination. If the termination date is less than 90 days from the date of notice of the completion of the foreclosure, then a minimum of 90 days notice to vacate must be given. The 90 days is not tacked onto the end of the lease. There is also an exception, as you noted, where the purchaser plans to occupy the residence. In that case, the lease can be terminated before its end with 90 days notice.

    There is nothing in the act that allows tenants to stop paying rent during prior to vacating, either before foreclosure is final or afterwards. Upon notice of the finalization of the foreclosure, the tenant will then pay rent to the new owner.
    AK lawyer's Avatar
    AK lawyer Posts: 12,592, Reputation: 977
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    #12

    May 7, 2011, 01:33 PM
    Quote Originally Posted by ScottGem View Post
    ... Title VII of that act titled --
    PROTECTING TENANTS AT FORECLOSURE ACT

    You can see the full text of the act here:
    Search Results - THOMAS (Library of Congress)
    ...
    The link appears to be stale. Here is the full text of the Protecting Tenants at Foreclosure Act (Title VII of the Helping Families Save Their Homes Act of 2009):

    "TITLE VII—Protecting Tenants at Foreclosure Act

    SEC. 701. Short title.

    This title may be cited as the “Protecting Tenants at Foreclosure Act of 2009”.

    SEC. 702. Effect of foreclosure on preexisting tenancy.
    (a) In general.—In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to—

    (1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice; and

    (2) the rights of any bona fide tenant, as of the date of such notice of foreclosure—

    (A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1); or

    (B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),
    except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.

    (b) Bona fide lease or tenancy.—For purposes of this section, a lease or tenancy shall be considered bona fide only if—

    (1) the mortgagor or the child, spouse, or parent of the mortgagor under the contract is not the tenant;

    (2) the lease or tenancy was the result of an arms-length transaction; and

    (3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit's rent is reduced or subsidized due to a Federal, State, or local subsidy.

    (c) Definition.—For purposes of this section, the term “federally-related mortgage loan” has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

    SEC. 703. Effect of foreclosure on section 8 tenancies.

    Section 8(o)(7) of the United States Housing Act of 1937 (42 U.S.C. 1437f(o)(7)) is amended—


    (1) by inserting before the semicolon in subparagraph (C) the following: “and in the case of an owner who is an immediate successor in interest pursuant to foreclosure during the term of the lease vacating the property prior to sale shall not constitute other good cause, except that the owner may terminate the tenancy effective on the date of transfer of the unit to the owner if the owner—

    “(i) will occupy the unit as a primary residence; and

    “(ii) has provided the tenant a notice to vacate at least 90 days before the effective date of such notice.”
    ; and


    (2) by inserting at the end of subparagraph (F) the following: “In the case of any foreclosure on any federally-related mortgage loan (as that term is defined in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602)) or on any residential real property in which a recipient of assistance under this subsection resides, the immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to the lease between the prior owner and the tenant and to the housing assistance payments contract between the prior owner and the public housing agency for the occupied unit, except that this provision and the provisions related to foreclosure in subparagraph (C) shall not shall not affect any State or local law that provides longer times or other additional protections for tenants.”.

    SEC. 704. Sunset.

    This title, and any amendments made by this title are repealed, and the requirements under this title shall terminate, on December 31, 2012."
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    #13

    Dec 16, 2014, 12:39 PM
    The PTAFA apparently was a part of the Dodd-Frank Act. I believe it may have been extended to the end of 2013 or 2014, but I cannot find any reference in the online United States Code I use. See Section 704, as quoted by me above on May 7, 2011. Thus my suspicion is that it either sunsetted almost a year ago, or will do so at the end of this month.

    If anybody can find a current link, it would be a good idea to post it here.
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    AK lawyer Posts: 12,592, Reputation: 977
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    #14

    Jun 16, 2015, 02:13 PM
    My opinion that I wrote here last December was correct.

    I have it on good authority (a law firm that specializes in foreclosures) that PTAFA expired 12/31/14.

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