It’s not just homeowners or landlords who need to know what to do in the case of foreclosure. Renters do, too.
Most discussions on foreclosure center on the plight of homeowners, but what about the renters in homes or apartments that have been foreclosed?
Tom LeFevre, a business-law attorney with the Gainesville, Ga. law firm Stewart, Melvin & Frost, has seen examples locally of renters being caught up in foreclosure of their place of residence.
Question: Is the problem of renters getting caught up in the web of foreclosure is something that you witness quite frequently in your practice?
Tom: Yes. I see it quite often in my practice in working with banks, landlords, etc.
Nationally, more than 20 percent of properties facing foreclosures are rentals, according to the National Low Income Housing Coalition. So that should give you an idea of the extent of this problem in today’s foreclosure market.
Just recently, I was involved in a matter involving a family who had moved to the North Hall area and had their child enrolled at a local elementary school. Unfortunately, they suddenly found themselves in the position of having to relocate, because the house they were renting went into foreclosure.
Question: If you are renting a home that goes under foreclosure, will you be evicted immediately? What are your rights?
Tom: Good news for tenants is that there is a relatively new federal law that provides some protection. It’s called the Protecting Tenants at Foreclosure Act.
This law gives tenants the right to remain in their rental unit for at least 90 days from the date that the property changes ownership – or through the end of their lease, whichever is longer.
The only exception: If the new owner of the rental property wants to make the place a primary residence, then the tenant must move out – even if their lease is for a longer period. But they still get 90 days.
Before the new law, protections for renters varied widely from state to state. And there was no clear definition about how long they could stay in their rental unit after it was foreclosed. This new law provides more clarification and consistency from state to state.
Question: Was the new law enacted in response to the recession and the national housing crisis?
Tom: Yes. The original legislation was signed into law by President Obama on May 20, 2009. At first, it was set to expire at the end of 2012. But under the financial overhaul legislation enacted this past summer; the Tenant Protection from Foreclosure Act was extended to the end of 2014.
In addition, the original law had said that renters had at least 90 days from the date of a “notice of foreclosure.” Now, the date of a “notice of foreclosure” means the date on which the property is sold and the ownership actually changes hands.
Question: So what advice do you have for a renter who finds themselves caught up in a foreclosure of their apartment or rental house?
Tom: If you have a signed rental agreement, you need to review it as soon as possible – and make sure you hold onto it in case the new owner has any questions. Your lease should give you an idea of how long you can remain living there before finding another residence – for example, if you’re under a month-to-month lease, then you might not have as much time as you would under a longer-term agreement.
I have noticed that too many renters view a foreclosure as an opportunity to stop paying their rent. But I would not advise this.
If there is any question as to who your new landlord is – or to whom you pay the rent – then, you should at least set aside your rent payment in a savings account until the matter is clarified. Too often I have seen the renter go out and blow their rent money on other expenses, then be unable to pay the back rent when the new owner takes over.
If you learn that your rental unit is being foreclosed on, one way to obtain more information might be to contact the bank that is taking over the property. The legal sections of the newspaper or title-deed records at the courthouse are usually a good source of information to get started.
Finally, if you still feel confused about your rental situation under a foreclosure, you may also want to consider contacting an attorney for legal guidance about your rights under the new tenants’ law.