Landlord allowing foreclosure - do we still pay rent?

In My Humble Opinion
1

I’ve just been notified that the house we’ve been renting is going to be allowed to go into foreclosure. I googled around a bit and found this article, which does help ease some of my worries, but it does not address the issue of rent payments.

Our lease expired a few months ago, and our landlord (who lives in another state) has been, shall we say, elusive. We’ve been on month-to-month, as was allowed for in the original lease. We’ve received several ominous looking certified letters addressed to her, which we’ve returned to sender. The foreclosure isn’t that much of a surprise, considering these factors. The fact that we learned about it from the real estate agent who had been trying to sell it, was.

So what I’m wondering is, do we still need to pay rent? If so, to whom? I’m not interested in putting money into the pocket of someone who no longer owns the house, but I’m also not wanting to give anyone any reason to evict us for non-payment. And how do we keep tabs on what is going on with the status of the house?

Any advice gratefully considered.

2

Well, you can’t simply take the word of a real estate agent who comes to the door or calls you.

You know how to contact the landlord, correct? This is not a matter of the landlord abandoning the property, is it?

3

Is this agent trying to come into your apartment and show the space to buyers? I wouldn’t allow that if I were you.

4

Move out you’re about to be screwed over. Start looking for a different domicile.

5

Rental property manager checking in.

Legally, yes. You have to pay your rent. How have you been paying it in the past? Mailing it or delivering it? Keep doing it.

You do not have to let anyone see your apartment for sale if the landlord has not notified you that the building is for sale. Tell any agent who comes knocking that you are not letting them in until you hear from the landlord.

The new owners (bank or private) have to contact you about your lease and where to send your rent payments. Check to see if foreclosure is grounds for eviction in your state. If so, check to see how many months they have to give you before tossing you out.

6

I’ve turned away a real estate agent before. Do it regardless of how much they whine. You can laugh when you close the door in their face.

7

I should have stated in the OP that the house has been on the market for a year. We moved in in February, and by the beginning of May, we were informed that the owner was selling. The house has been shown on multiple occasions, as recently as last weekend.

The reason we found out from the real estate agent was because she had come to the house to remove the keysafe and sign. The listing had expired, and the realtor had been unable to contact the owner. The owner has several properties in the area, and has become uncommunicative to the point that she neglected to fill out short-sale paperwork for the one house she’s gotten an offer on.

My brother (who I share the house with) will be trying to contact the owner and will state in the email/voicemail/whatever that we will not be paying rent until we are contacted. I’m just worried that we might be shooting ourselves in the foot with that stance.

8

What state are you in?

9

Texas. Austin area, to be more specific.

10

Can you pay the rent to a third party who will hold it for you, like a lawyer or a housing official? That would show your good-faith intent to pay but you would not be throwing your money away if the landlord proves to have totally vamoosed.

11

What state are you in? Is there a foreclosure date set? When is the foreclosure date? Check your local laws or consult an attorney in your area.

FWIW, in some states, unless the date of the lease pre-dates the recording of the mortgage, a foreclosure ends the tenancy and no rent is due to the “old” landlord from the foreclosure date going forward.

The new owner can evict you but must typically provide notice to you first. The amount of notice varies by state. Some states allow 3 days while other states, 60 days.

You should plan on the old landlord stealing your security deposit. It may not happen, but plan for it.

So, if the foreclosure date is June 6 and your rent is normally due on June 1, then, legally, you probably owe 6 days rent for June to the old landlord.

Also, if you are behind in the rent, you have to figure that the landlord may not have time to evict you before the foreclosure date. So, if the foreclosure date is June 22, for example, and you fail to pay rent on June 1, the landlord may be gone via foreclosure before that landlord can evict you for failure to pay rent. You just saved 22 days of rent for yourself that you can use as an offset if the landlord fails to refund your security deposit.

Also, after the foreclosure, some new owners offer “cash for keys” which means they pay you to move instead of having to go to court to evict you.

I cannot advise you on your specific situation, check your local laws, consult an attorney in your area, find out the foreclosure date, and find out how much notice is required to evict a tenant after foreclosure. Plan accordingly.

12

This is a good start: http://www.housing-rights.org/foreclosures.html

I’d suggest calling them for more info: http://www.housing-rights.org/contact.html

13

From the linked article:

I need to look at that.

14

The link in the article is to the actual law, which is remarkably short: http://www.tenantstogether.org/downloads/S.896.pdf

15

Well, Bearflag70, I wish I knew. We just learned about this this morning, and from a third party. We do not know which bank holds the mortgage, though I imagine we can find out with a bit of digging.

Some of the other things you list seem to have been alleviated by a new law that’s referenced in the link in my OP, such as the 3-day notice. Your warning about the security deposit is good - I hadn’t even thought about that.

I guess all we can do at this point is to see if we can get in touch with the owner.

16

This is odd. She has the opportunity to get rid of one of the houses and she doesn’t sign the appropriate paperwork? I’d withhold the rent (IANAL, btw) just to see if she contacts you. Is it possible she’s ill and unable to keep up with her affairs?

17

You may be able to find out through your local public recorder’s office or the court. You may also contact a title company or real estate person to check for you, maybe for a small fee.

Keep in mind that while a landlord facing foreclosure may not bother to initiate eviction proceedings, the landlord might do it anyway, which could show up on your credit report as an eviction filing. You might then have to explain the circumstances to new prospective landlords who run a credit check. However, it doesn’t seem like this landlord may bother.

18

This is strictly my take on “what’s right”, not anything to do with the law of course - but the person making the comment that you’re likely to lose your security deposit makes me think it’s worth considering withholding at least that much from the rent in the interim. Notify that landlord that you’ve heard foreclosure is happening, and that unless you hear from her, you will do this. Once you’ve covered the security deposit, then resume paying the rent.

You’re unlikely to be able to wrangle any money out of her if she tries withholding the security deposit, since she lives in another state. So there’s no incentive for her to pay it back. Even though there would be ZERO reason for her to withhold it, since it’s not like she’s going to have to make any repairs to the place!!

Another “right thing to do” might be if you can find out the mortgage holder and arrange to pay the rent to them instead. After all, it’s money due to them anyway (and hey, it might even stave off foreclosure!!).

19

Back in 2001, I signed a one year lease on a three bedroom ranch in upstate New York. Five months after moving in, a process server came to the door and handed me a copy of a foreclosure notice and advised that I start looking for another place to live.

I immediately stopped making rental payments to the owner, who had moved about 200 miles away and became an absentee landlord.

About 10 days after this guy usually received my rent, his wife calls me and tells me that their check for the mortgage bounced because they did not receive my rent. I said, “Oh, really! That’s interesting given the fact that, according to my copy of your foreclosure notice, you haven’t paid your mortgage in over three months!” I did not hear from either of them, directly, again.

I stayed in the house for the next nine months, completely rent free, saving up my dollars and keeping an eye out for a new place.

One day, two folks from a property management company based in NYC showed up. Their company had purchased the property at auction (or however folks obtain bank owned properties). They were shocked to learn that people were still living in the house. I told them that, yes, I realized the situation and was planning on moving out but finding a new place was proving tougher than I had expected. This was complete crap as there were several suitable rentals right in that area…I was simply squatting.

Now here’s the kicker. This property management company offered me $2500.00 to help me relocate! I absolutely could not believe it. I took their money and moved out within three weeks.

Interestingly, a few months later, I received a letter from a lawyer who was representing the former owners. They were attempting to sue me for seven months of unpaid rent (the remaining lease term). When I called and told this lawyer that I had stopped paying rent the minute I received copies of the foreclosure notice, he said he was unaware of any foreclosure and would check into it. I never heard from him again.

20

Escrow, escrow, escrow.

After you talk to a lawyer, what I would do next is ask that lawyer about paying the rent into an escrow account. A good real estate attorney would probably set that up for you. You continue to pay rent, but it just sits in the escrow account until it can be ferreted out who owes what to whom. The allegedly absentee landlord/owner can’t nail you for nonpayment of rent even though they aren’t getting a dime until who-owes-what-to-whom is sorted out.

Right? So find a lawyer or low-cost legal services in your area, figure out what your rights are, and never withhold rent. Always pay the rent… but into an escrow account so that you’ve got a good, established record of always paying your rent on time, which equates to easier for you to find another rental property later because you never withheld rent money.

(IANA Lawyer or Real Estate expert, but I rented for 10-15 years and learned a couple things with some crap landlords.)