Renter's Rights and Foreclosure

Renter's Rights and Foreclosure

By Laura Royer UF/IFAS Osceola County Extension

The possibility of losing a home to foreclosure can be scary and devastating for a homeowner. It can equally be upsetting for a renter who may be occupying a property that is being foreclosed. Until recently, the lease that you signed with your landlord would have ended with the foreclosure. However new federal legislation is providing more rights and protection to renters, making it possible to extend the time they occupy the property after a foreclosure is finalized.
 
In the foreclosure process, your landlord’s lender, usually a bank takes possession of the house or sells the home in a public auction. Sometimes this happens even before the foreclosure is finalized. The first thing a bank usually does is start the process of evicting any tenants and emptying the house so that the house can be turned around and sold as quickly as possible. During this time, the new owners of the property usually do not make repairs so that any remaining occupants are “persuaded” to leave.

In 2009, the Protecting Tenants at Foreclosure Act was passed. This law protects renter’s interest (including Section 8 tenants) during a foreclosure process in one of two ways:
1. Renters with no lease or a month to month lease must be given at least 90 days notice before they are required to vacate the property. 

2. If the tenant has a lease lasting longer than a month, the renter is permitted to remain in the home for the duration of the lease. Only after their lease expires can the evictions proceed. There is an exception made for buyers of the foreclosed property who intend to live in the home. For these cases, only 90-days notice must be given before breaking the lease. 

Please note: If the state of Florida law provides better protection for renters, then the state law overrides the federal Protecting Tenants at Foreclosure Act of 2009.

If you are thinking of moving out early, one option to consider is “cash for keys”. With cash for keys, the new property owner pays you to leave the property before the end of your lease. If you leave the rental clean and in good condition, you can receive anywhere from $250 to $2,500. This sum usually depends on the value of the house, what items you agree to leave behind and the new owner.

You may be wondering how to deal with your previous landlord if the property you are renting is entering foreclosure. Well one starting point for talking with your previous landlord would be to discuss what to expect and the possibility of recovering deposits as early as possible. 

After the landlord and the tenant sign the lease, they have a legally binding document. The landlord is legally bound to deliver the rental during the lease, which was violated when the property went into foreclosure. Because of this, the tenant can sue their former landlord for moving and house-searching costs, application fees and any differences in rent you might incur by having to move. 

Also, beware for an unscrupulous landlord who will continue to collect their tenant’s rent payments, even after they are no longer the legal owners of the property.  If this happens, you may want to explore your options with filing a small claims case in court. Keep in mind that your original property owner is probably hard-pressed for money right now and that awards for cases like these are usually relatively small. However, with a little time and effort, you could eventually get all that is owed to you.

Foreclosure can be an extremely disruptive process, but being prepared with the knowledge of what to expect can help you manage it and minimize any potential hazards. For more information about foreclosure, visit our website at http://osceola.ifas.ufl.edu and click the link for housing. Also, you can check HUD’s website for foreclosures www.hud.gov/foreclosure.