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Foreclosure of Rental Property and Tenant Rights

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Know your rights as a tenant.

If you are a renter, foreclosure may not be a problem that has ever entered your mind. Unfortunately, more renters are finding themselves in the unique situation of living in property an owner has let slide into foreclosure. Do you have rights in this scenario? If so, what are they?


Your rights are protected under the Protecting Tenants at Foreclosure Act, enacted in May 2009 by President Obama. The act provides rights and protections to tenants living in property which has been foreclosed on, including tenants who are covered under Section 8 Housing.


Due to the massive housing slump, many renters living in smaller apartment buildings, condos and single family homes have suddenly received eviction notices through no fault of their own. Some of these homes were owned by a single owner, but many were owned by small investment firms or property management companies. Company owners expected to make profits from the rentals but instead found themselves underwater.


Prior to the protection act, many tenants’ leases expired as soon as foreclosure occurred. Now, tenants have the following rights:


·         Tenants with leases are, with a few exceptions, entitled to remain in the property until their leases end, regardless of the


·         Even those who are exceptions to the lease rule are entitled to a 90-day eviction notice.

·         Some states and local areas have laws entitling tenants to a longer stay. The tenant protection act does not supersede those

          local laws.

·         The law, as set forth in the tenant protection act, will be monitored by the FDIC.


Surrounding Issues

 Several issues arise when a tenant is living in a foreclosed property until the lease is up. For one thing, the landlord is likely no longer a person but a bank. Services once provided by the landlord, including repairs and maintenance of the property, are often no longer available. In some cases, the tenant may not even be aware the property is in foreclosure. He or she may continue to pay rent to the same landlord, and the landlord may keep the rent money but no longer take care of the property. Essentially, the tenant becomes a victim of the landlord’s anger toward the bank.


Sometimes, the landlord simply vanishes. In this case, it's practically guaranteed that no work or maintenance will be done on the property. The bank is simply counting the days until the tenant is legally evicted, at which point the bank can do whatever it wishes with the property.


Renters’ Options

If the owner of the property wants you out as soon as possible and plans to sell off the property, you may be able to convince the owner to let you to stay longer. Point out that vacant buildings are prone to vandalism and can quickly become unattractive. If you continue to live in the home, the property will remain in good condition, increasing street appeal and making it more attractive to potential buyers.


In some cases, the owner may try to chase the tenant out in order to move into the property himself. Even if you have a lease, this is one of the situations in which the lease is not enforceable. Should the situation occur, you may have the option to sue the owner through small-claims court. By defaulting on the mortgage, the owner of the property is violating his duty to you. When the owner signed the lease with you, one of the rules that came into play is the "covenant of quiet enjoyment." Violating that covenant opens the owner up to a potential lawsuit.


If you find yourself in the situation of renting a property in foreclosure, you may wish to consult with an attorney who specializes in rental issues and tenants' rights to learn additional rights and options you may have.


Jessica Bosari is a freelance writer and blogger for various publications and her own blog. You can read more of Jessica's work here. If you have any comments or questions about SavingTools or about saving money, leave your comments in the form below or email Thanks!


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