Rental Property Going Into Foreclosure? What Tenants Need to Know
Have you received notice that the home you rent is going into Foreclosure? See below for information that may ease some of the worries…
So you come home one day to find in the mail a letter regarding a Notice of Trustee Auction. This letter states all the legalese regarding the home you rent being put up for public auction. What this means is that the current owner of the home is in default of their mortgage payments to such an extent that the bank is willing to sale the home to another buyer to recoup their costs. What does this mean for you as the tenant?
The natural thing to do is freak out thinking you have to move immediately. It is not the case that you have to vacate before the auction date. Actually, it is quite the opposite. There are federal laws that give guidelines about tenants staying in rental homes after a Foreclosure. Most specifically, the main federal law is titled “Protecting Tenants at Foreclosure Act of 2009” (PROTAFA). This law protects tenants from being evicted from rental homes sold at a Foreclosure Auction. It allows the tenants at least 90 days to find other living arrangements before eviction proceedings can commence. Furthermore, if there is a lease in place at the time of the auction, tenants may be able to stay the remainder of the lease term, unless the buyer of the property intends to occupy the home for at least a year. Tenants on the Section 8 Housing Voucher program and those in rent-controlled cities are also protected by this Act.
Another option that is available after a Foreclosure is known as “Cash for Keys.” What this means is that the tenants are offered a sum of cash for moving out quickly and turning over the property. Some tenants choose to take this offer to help move them into a new place.
Regarding your security deposit after a Foreclosure, there should not be any need to worry about getting it back. The new owner is held just as liable for returning the security deposit to you as the old owner. The old owner can make deductions from the security deposit as legally allowed, remit the remaining amount over to the new owner, and provide you with a list of deductions. Some owners may just transfer the whole security deposit to the new owner and let them handle the disbursement once you eventually move out of the home. Any way that it happens, you should rest assured you will get your security deposit back minus any necessary, legal deductions.
If you would like to read more on topics I have discussed regarding being a tenant during a Foreclosure, you can visit housing.ucsc.edu, stevebeede.com, trulia.com, or google.com.