Foreclosure filings in the U.S. are at the lowest levels in 11 years, according to ATTOM Data Solutions, which curates a property database. Default notices, scheduled auctions and bank repossessions occurred on just 191,824 properties in the third quarter this year – the lowest since the second quarter of 2006, and the fourth quarter in a row to have prerecession foreclosure levels – according to the report.
It’s a far cry from the housing market crisis during the recession, when as many as 10 million families in the U.S. lost their homes to foreclosure.
For renters who have been paying their landlord as usual, the stability of the current housing market may make it a surprise when they find out the owner has missed too many loan payments, and the property they call home is now in foreclosure proceedings.
Regardless of the state of the economy, individual circumstances mean foreclosures still happen across the country, and it can be particularly hard for tenants, who have no control over the foreclosure process and no way to halt proceedings.
Additionally difficult for you as a tenant is the fact that you’ll likely find that the lender foreclosing on the property or the buyer who purchases the property following foreclosure is not interested keeping on a tenant. “Most of the buyers at trustee sales and foreclosure sales are going to want to occupy the property, or they want to renovate it and sell it, or rent it to a tenant of their choosing,” says Ron Thomas, an attorney specializing in tenant law in Arizona.
Receiving notice of foreclosure on your rental may be a surprise when it comes in the mail, is posted on your door or is handed to you in person, and will certainly be daunting, but you likely have a few options going forward. First, you need to determine what laws you have protecting you as the tenant in foreclosure.
Federal Protections Have Expired
To keep more people from being pushed out of their homes during the housing crisis, the federal government instituted the Protecting Tenants at Foreclosure Act in 2009. The act allowed existing leases with a termination date to be completed and tenants on month-to-month or unspecified leases to be given at least 90-day notices to vacate the property.
While the act kept tenants from having to scramble to find a new housing situation with little notice, it expired in 2014 and no replacement has been put in place at the federal level. State laws now dictate tenant protections. Depending on where you live, you may see your yearlong lease last until the end date specified in your contract, or you may get as few as three days to move out.
State and Local Protections Vary
States like California, New York and Illinois require a bona fide lease – or written lease with a fixed term – to be honored, though there are exceptions, including when the buyer intends to live in the residence.
Some states carry through the fixed-term protections previously existing in the PTFA. New York law, for example, allows tenants to remain at the property until the end of their lease or for 90 days after foreclosure, whichever is longer. An exception occurs when a buyer purchases the foreclosure property with the intent to live there, in which case an eviction with 90-day notice is allowed.
But without PTFA, that’s not the case for all tenants. “In Arizona we don’t have those sorts of protections, it’s very limited,” Thomas says, adding that the original landlord is required to give five days’ notice to the tenant prior to the date of foreclosure or auction. Once the property changes hands, the new owner is only required to give another five days’ notice for the tenant to vacate before eviction proceedings begin in court.
In Washington, tenants are given a longer reprieve, but the original lease is still null and void at the point of foreclosure. “Tenants should either receive a 60-day notice to vacate, or enter into a new rental agreement with the landlord,” says Daniel Pizarro, a Washington attorney who specializes in foreclosures and property redemption, as well as landlord-tenant disputes.
Whether you’ve only heard distant rumblings of a landlord's debt problems or you’ve received official notice of foreclosure proceedings, as a tenant you must be proactive to ensure your rights are honored and you don’t find yourself out in the cold. Here are your options:
Prior to foreclosure. As soon as you receive notice that the property you live in is being foreclosed, reach out to an attorney with experience working on behalf of tenants. It’s important to be informed of your legal rights as it pertains to your state or city. An attorney can also contact the lender to determine if a notice to vacate is likely upon foreclosure, or if it’s possible for you to stay on as a tenant.
Keep in mind that you must continue paying rent prior to foreclosure. A notice of foreclosure proceedings is not the same as a transfer of ownership. Until the foreclosure is complete, you should continue paying your rent as usual.
“Not paying rent might still cause a new landlord to seek an eviction, so it is a risky move that can cause problems,” Pizarro says.
Five options for you to end your rental contract before time is up.
Move out upon foreclosure. Receiving notice to vacate is an inconvenience at best, but regardless of the time period you have based on state or municipal laws, there are a couple reprieves.
As a vacating tenant, you can still expect to receive your security deposit. Various state laws may place the burden of payment of the security deposit on the previous landlord or on the new owner, even if the previous landlord did not pass on the security deposit amount at the point of foreclosure.
In that time period you’ve been given to move out after the transfer of ownership, you’re also not expected to pay rent, as “there is no contract between the new owner and the existing tenants,” Thomas says.
While many states give tenants as much as 30, 60 or 90 days to vacate the property, an eager buyer may be willing to sweeten the deal for you if you’re able to move out sooner, which Pizarro notes is often referred to as a cash for keys agreement. Any such agreement is up to the tenant’s discretion, however – no landlord can force you to vacate early in exchange for money or other assistance, Pizarro says.
Stay with a valid lease. If you live in a state where your fixed-term lease remains valid through foreclosure, the new property owner must abide by that lease as well. That means the new landlord “can’t raise rents in the middle of the lease,” says Nat Kunes, vice president of product at AppFolio, a full-suite property management software company. An increase in rent, more strict requirements for subletting or expectations for your move-out date are only valid if you agree to it in a new lease.
Even where your lease is no longer valid, not all buyers want to lose a tenant and some are willing to draft a short-term lease to make your move simpler. “That gives the tenants an incentive to keep the property in good condition and it minimizes conflict, and the new owner might even receive a little bit of income during the transition,” Thomas says.
Of course, the decision to keep tenants on with a new lease is up to the new owner. In the current real estate market, many buyers of homes that have been foreclosed on are looking to personally occupy the property, rather than keep a tenant for very long. As the tenant may decline a cash for keys offer to move out prior to the state-mandated time limit, a new owner can also decline a tenant’s offer for a new lease. Be prepared for all possible scenarios once you receive the notice of foreclosure proceedings.
Pulling one over on your property manager won't work.
Your ability to communicate with your landlord or property manager as a renter is key to living happily and in peace. When you fail to notify your landlord of problems you encounter – or try to hide guests or other things that may not be permitted in your lease – the relationship is often compromised. Especially in instances when you’ve brought in an unauthorized pet or let a maintenance issue get worse due to not reporting it, you may find yourself having to pay your landlord extra, losing your security deposit or even getting evicted.Stay in touch.
Stay in touch.
Any good landlord will encourage tenants to be in communication often, which makes it easy to request maintenance or ask a question about what the lease allows. Property management companies often offer multiple forms of communication, from face-to-face conversation with a receptionist or leasing agent to contact via email or an online resident portal, says Lynn Edmondson, regional manager of Wendover Housing Partners, a property management company based in Altamonte Springs, Florida. Once you send a request, the property manager or landlord will then “communicate in writing about what’s going on and what needs to be done,” Edmondson says. Read on for seven things you shouldn’t – and likely won’t be able to – hide from your landlord.A new roommate
A new roommate
Living with a roommate is a great way to save on housing expenses, but your landlord has to know about said roommate – and approve. It may be a matter of simply revising the lease once you notify your landlord of the desired addition, but your landlord also has the right to run the potential roommate through the same vetting process as with every other tenant, which can include a credit check, employment confirmation and previous residence referrals. If you sneak a roommate in, your illegal co-tenant could be evicted. One exception is when you have a dependent, which can be a child, elderly parent or an adult relative you legally care for. Laws in certain states clarify that “you’re not allowed to ask an applicant if they have any dependents living in the unit with them,” says Nat Kunes, vice president of product at AppFolio, a full-suite property management software company. Check your state's landlord-tenant laws, which should be available online, for more information.A sublet
Just like a roommate, sneaking a sublet tenant into your rental will likely be found out by a landlord, and it can have devastating consequences. Always review your lease first for a subleasing policy. The landlord may not allow sublets at all or could require the subtenant to go through the same vetting process all residents go through when applying to live there. Also check your state laws on subleasing, which may give you more or less leeway depending on how detailed the law is. In South Carolina, for example, the law states a sublease agreement isn’t valid unless the landlord has signed off on it. An illegal sublet could result in your eviction for violating the lease, as well as the subtenant’s eviction for residing there illegally.A pet
A dog or cat won’t help you pay the rent, but millions of Americans love adding to the rental family by bringing a pet home. Again, however, your landlord has the right to establish a no-pets policy or place restrictions on the pets allowed, such as the type of animal, size and breed. “If the pet [is] qualified to live there, it’s just a minor thing of changing the lease to add that and collect the appropriate fee,” Edmondson says. If you get caught keeping a pet in your place when the landlord hasn’t approved it, you’ll likely have to fork over the fees anyway. But if the place doesn’t allow pets, you’ll likely either be asked to move out or rehome your pet.Pet damage
Outside of properly notifying your landlord or property manager of a new pet, Edmondson says damage to a rental caused by a pet is one of the more common issues she sees residents try to cover up. Whether you struggled to housetrain a puppy or your cat loves scaling the blinds, the best course of action is to own up to the damage before moving out. “I’ve had that happen several times, when [cleaners] go in to clean the carpet and they come back and say, ‘We can’t clean it, there’s too much pet damage,’” Edmondson says. You’ll have to pay for the repairs regardless, but it keeps a more positive interaction between you and the property manager if you’re honest. Trying to get away with damage could also lead to a negative report from the property manager if any future landlord calls to check on your residential history.Maintenance problems
Whether it’s a backed-up toilet, a leaky roof or fire damage in the kitchen, any problem should be reported to your landlord or property manager as soon as you become aware of it. “A lot of those types of maintenance issues that over time get much, much worse,” Kunes says, noting a leak can lead to extensive water damage and mold. Edmondson says there are tenants who simply don’t report such issues for fear of having to cover damage they caused: “They think after they move out they will not be responsible for those damages.” Of course, any damages outside normal wear and tear will come out of your security deposit, and you can additionally be billed for damages exceeding that amount.Broken appliances
If the fridge, dryer, garbage disposal or any other appliance stops working properly, you have the right to report it and expect it to be fixed. There’s a good chance the landlord will replace an older appliance at no charge to you. If the appliance is relatively new or was damaged from particularly hard use, the landlord may look to you to cover it. If you move out before notifying the landlord, it will be discovered, and you’ll be expected to pay it, Edmondson says.A pest problem
A pest problem
Pests can get into a rental property in a variety of ways: Rodents could be stirred up by construction next door, or maybe other tenants have a habit of leaving food uncovered on the counter or table. Either way, it’s imperative you notify your landlord immediately about a pest problem so it can be taken care of. Most large apartment complexes have standing relationships with pest control companies, which consistently work to keep pests from accessing any rental homes and limit the spread of those that do get inside. If you don’t start communicating with your property manager early on, the problem could become worse – and the blame may fall on you as a result. “That could be a tenant-caused issue that the tenant could be responsible for to pay,” Kunes says.Read More
Corrected on Nov. 28, 2017: A previous version of this story incorrectly stated Nat Kunes’s title. He is vice president of product at AppFolio.
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at firstname.lastname@example.org.