# Question about foreclosure and rental/tenancy **URL:** \ **Category:** Factual Questions\ **Created:** [April 26, 2010, 9:22pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455 "2010-04-26T21:22:51Z")\ **Posts on this page:** 11\ **Page:** 1
**Author:** ![Earl\_Snake-Hips\_Tucker](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/earl_snake-hips_tucker/32/3269_2.png) [@Earl\_Snake-Hips\_Tucker](https://boards.straightdope.com/u/Earl_Snake-Hips_Tucker)\ **Post date:** [April 26, 2010, 9:22pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/1 "2010-04-26T21:22:51Z")
I was reading an article about a [once proud Eastland Mall](http://www.bizjournals.com/charlotte/stories/2010/04/19/daily3.html) some distance north, and I thought to myself. . . When a commercial property goes into foreclosure, isn’t the new owner bound by the same leasing agreements as the previous owner? Same question about residential properties: If a single unit or apartment complex, doesn’t the new owner have to honor the previous lease arrangements? ---
**Author:** ![Oakminster](https://avatars.discourse-cdn.com/v4/letter/o/77aa72/32.png) [@Oakminster](https://boards.straightdope.com/u/Oakminster)\ **Post date:** [April 26, 2010, 9:29pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/2 "2010-04-26T21:29:10Z")
Property law was a long time ago, and the answer may vary by jurisdiction. Also not an area I practice. However, I think in my state, in order to bind a new owner, a prior lease must have been officially recorded, so that the new owner could have notice that it exists before completing the purchase, assuming he did a title search. Maybe someone with a better handle on such things will be along shortly… ---
**Author:** ![Gary\_Robson](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/gary_robson/32/3448_2.png) [@Gary\_Robson](https://boards.straightdope.com/u/Gary_Robson)\ **Post date:** [April 26, 2010, 9:46pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/3 "2010-04-26T21:46:51Z")
This is something that can be explicitly written into a lease. I recall it being a negotiating point when I leased a portion of a commercial building years ago in California. I had heard that the building was for sale, so my attorney added a clause making the lease binding on any new owners. I can’t remember the legal term, but he did tell me that the way the lease was originally written, it could have been terminated upon sale of the building. ---
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [April 26, 2010, 9:52pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/4 "2010-04-26T21:52:30Z")
Given the number of renters who have been thrown out of their homes when someone buys the buildings I would have to say “not automatically”. If it’s written into the lease or part of the buying agreement yes, the new owners have to honor the terms but apparently this has to be specifically added and, as I said, is not automatic. ---
**Author:** ![Quercus](https://avatars.discourse-cdn.com/v4/letter/q/7ab992/32.png) [@Quercus](https://boards.straightdope.com/u/Quercus)\ **Post date:** [April 27, 2010, 1:27pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/5 "2010-04-27T13:27:20Z")
> [@Broomstick](#): > > Given the number of renters who have been thrown out of their homes when someone buys the buildings I would have to say “not automatically”. If it’s written into the lease or part of the buying agreement yes, the new owners have to honor the terms but apparently this has to be specifically added and, as I said, is not automatic. IANA real-estate lawyer, but was under the impression that it’s generally the other way round (either through contract law, statute, or clause in standard lease forms)-- unless there’s an escape clause the new owner is bound by the pre-existing lease. I personally was renting a residential building that was sold and the new owners had to buy us out of the lease to get us to move out before it was up (I wasn’t the one who actually signed the lease, so don’t know what it said, but assume it was a standard form, since I don’t think anyone knew the building was for sale, and assume most landlords wouldn’t unnecessarily put anything in the lease restricting themselves). Additionally when I (briefly) looked into buying multi-family houses, finding out details of the current renters and their lease was considered important. In fact, it seems that if selling a building you own gets you out of your lease obligations, they’d hardly be worth the paper they’re printed on (at least as far as binding the landlord) – after all everybody has a brother in law they could sell the building to (not-temporarily-at-all-wink-wink) whenever they wanted to get out of a lease. Of course, a new owner doesn’t have to renew the lease once it’s up, and for people who have been renting for years, not having the lease renewed can feel like being ‘thrown out’ of their homes, but in my experience it can only happen when the lease is up (or at the end of the month if there is no lease). ---
**Author:** ![Muffin](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/muffin/32/4341_2.png) [@Muffin](https://boards.straightdope.com/u/Muffin)\ **Post date:** [April 27, 2010, 1:29pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/6 "2010-04-27T13:29:58Z")
Varries by jurisdiction and sometimes by type of contract (e.g. commercial or residential). ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [April 27, 2010, 1:31pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/7 "2010-04-27T13:31:21Z")
It depends on the state. I worked in New Jersey rental property management for 26 years and unless the contract specifically stated the new owner was honoring the leases, after the closing the new owner had to take the tenants to court and try to evict them as “holdover tenants.” Usually the judge gave them six months to a year to find new places to live. ---
**Author:** ![Baracus](https://avatars.discourse-cdn.com/v4/letter/b/2bfe46/32.png) [@Baracus](https://boards.straightdope.com/u/Baracus)\ **Post date:** [April 27, 2010, 1:42pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/8 "2010-04-27T13:42:29Z")
> [@Earl\_Snake-Hips\_Tucker](#): > > Same question about residential properties: If a single unit or apartment complex, doesn’t the new owner have to honor the previous lease arrangements? I seemed to recall the that circumstances were a bit different for a foreclosure than a straight sale. [Nolo.com](http://www.nolo.com/legal-encyclopedia/article-30064.html) has some information about it. One of the more relevant sections: > [@](#): > > Before May 20, 2009, most renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed, a foreclosure wiped out the lease (this rule is known as “first in time, first in right”). Because most leases last no longer than a year, it was all too common for the mortgage to predate the lease and destroy it upon foreclosure. > > These rules changed dramatically on May 20, 2009, when President Obama signed the “Protecting Tenants at Foreclosure Act of 2009.” This legislation provided that leases would survive a foreclosure – meaning the tenant could stay at least until the end of the lease, and that month-to-month tenants would be entitled to 90 days’ notice before having to move out (this notice period is longer than any state’s non-foreclosure notice period, a real boon to tenants). ---
**Author:** ![Broomstick](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/broomstick/32/246_2.png) [@Broomstick](https://boards.straightdope.com/u/Broomstick)\ **Post date:** [April 27, 2010, 10:29pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/9 "2010-04-27T22:29:11Z")
> [@Quercus](#): > > IANA real-estate lawyer, but was under the impression that it’s generally the other way round (either through contract law, statute, or clause in standard lease forms)-- unless there’s an escape clause the new owner is bound by the pre-existing lease. Not everyone who rents has a lease. In fact, many renters who rented from a private individual rather than a corporation do not have leases. They are effectively month-to-month and thus the new owner need only tolerate them to the end of the month. ---
**Author:** ![Tim\_T-Bonham.net](https://avatars.discourse-cdn.com/v4/letter/t/46a35a/32.png) [@Tim\_T-Bonham.net](https://boards.straightdope.com/u/Tim_T-Bonham.net)\ **Post date:** [April 27, 2010, 11:18pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/10 "2010-04-27T23:18:34Z")
> [@Broomstick](#): > > Given the number of renters who have been thrown out of their homes when someone buys the buildings I would have to say “not automatically”. Certainly true here in Minnesota – I’ve had to help friends move suddenly when the building was sold or foreclosed and they had to get out at the end of the month, despite several months left on their lease. I’ve never understood this – why wouldn’t a new owner prefer to have a building already filled with tenants, with leases, instead of a bunch of empty apartments that he now has to try to rent. Besides the work of renting them, seems very likely that there would be a few of them that stay empty for a month or more, so losing rent money. If a new owner came around to tenants and said they were raising the rent, that might be understandable. But to just tell them they had to leave – where’s the profit in that? (I was once told that for a bank foreclosure, the bank did better by having the building empty, and dumping back on HUD or the bank bailout, thus the taxpayers take the loss, and the bank claims the original value, not the current assessed value. But I don’t know if that’s accurate.) Thank heavens Obama has signed the bill to make this early eviction of tenants illegal. ---
**Author:** ![Annie-Xmas](https://avatars.discourse-cdn.com/v4/letter/a/ecc23a/32.png) [@Annie-Xmas](https://boards.straightdope.com/u/Annie-Xmas)\ **Post date:** [April 28, 2010, 1:21pm UTC](https://boards.straightdope.com/t/question-about-foreclosure-and-rental-tenancy/537455/11 "2010-04-28T13:21:08Z")
> [@t-bonham@scc.net](#): > > I’ve never understood this – why wouldn’t a new owner prefer to have a building already filled with tenants, with leases, instead of a bunch of empty apartments that he now has to try to rent. Besides the work of renting them, seems very likely that there would be a few of them that stay empty for a month or more, so losing rent money. If a new owner came around to tenants and said they were raising the rent, that might be understandable. But to just tell them they had to leave – where’s the profit in that? Because in NJ there is rent control and you can only go up so much a year. Existing tenants may be paying much below market rent, and once the apartment is empty, the new landlord can increase the cost to market rent.