The home you rent is in foreclosure. What happens now?
By Georgie Miller
A couple of years ago, a letter came to the condo that my husband and I rent. I read it and said, "Honey, I think our house is being foreclosed on."
He hopped online and went to the website where foreclosure notices for our county are posted, which confirmed the bad news. The home we were living in was, indeed, going into foreclosure.
We were shocked -- though we knew our landlord was underwater on the home -- but maybe we shouldn't have been. Since the economy crashed in 2008, millions of properties have been foreclosed on. While the economy seems to be recovering at the moment, there's still a long way to go. And even in the best economy, a property owner can get into financial troubles and lose their rental property.
If you are facing this situation, you may be wondering: What are your rights? Fortunately, in 2009 President Obama signed into law the Protecting Tenants at Foreclosure Act (PTFA) that specifically addresses this issue. This act was initially set to expire at the end of 2012, but it's been extended to the end of 2014. Here are some things you should know if the home you rent goes into foreclosure.
1. Your rights
PTFA gives a renter the right to finish out their lease if the home is foreclosed upon. There are some exceptions, such as if the new owner intends to reside in the property or if your lease is month-to-month. In those situations, you are entitled to a 90-day notice. And while this federal protection applies everywhere in the United States, state and local laws may even entitle you to additional protections. An attorney or tenant advocate in your area can tell you more.
2. Your responsibilities
Homeowners must stay current on their mortgage to keep their property out of foreclosure. Similarly, a renter must stay current on their rent payments in order to be eligible for their rights under PTFA. So if your rent is delinquent at the time of foreclosure, you may be forfeiting a lot of your rights.
3. The property's ownership chain
While you should continue paying rent to ensure your rights under PTFA, it is important that you are paying the current owner. Most counties post the status of properties and their current owners' identities online (which is how we were able to confirm what was happening with our home). If your county is behind the times technologically, you may need to go in person to your county's records office to get this information.
4. The importance of getting things in writing
Things you are told verbally may not necessarily be true, so don't fall to misinformation on top of everything else. If something doesn't sound right to you, send a certified letter that requests that the other party clarifies things in writing.
5. Your choices in a "cash for keys" situation
The new owner probably wants you out of the home as soon as possible. They may offer you a lump sum to vacate the property earlier than you are required to, sometimes called "cash for keys." Remember, it's a request, not a requirement. If you think it's a bad deal, you don't have to take it. Again, an attorney or tenant's rights advocate may be a good resource for negotiating this type of situation.
When we found out about our property, we started preparing immediately -- scouring the internet for alternate places to rent, stashing every penny we could in our savings accounts and carefully managing our credit card balances. Fortunately, our landlords were able to refinance and retain the property, but you might not be so lucky. If you are facing this situation, understanding the items above can help make sure your rights are respected.