I called on a rental the other day for a prospective tenant. The listing indicated that the landlord was looking for a 3 to 6 month tenant. I spoke with the agent, who indicated that the landlord was looking for a short term tenant, as he is behind on his payments, and knows the property will be going into foreclosure.
We are hearing many stories such as this one, where owners are behind on their payments, but are offering their homes for rent. Or, we are seeing rental deals that are too good to be true. A 2500 square foot home, 1 year new, barely lived in for just $1000.
We have also heard in the past of many unknowing tenants that have been paying their rent, that are being put on the street once a home goes into foreclosure. The tenant is often left with nothing. No last month's rent that he paid, and often times they have also lost their security deposit. Many don't have any savings to be able to move somewhere else. They are forced out.
Well, what is a tenant to do?
This week a new law was enacted to protect the rights of tenants that are renting a property that goes into foreclosure. Previously, a foreclosure ended a lease, except in Washington DC and New Jersey. According to the Associated Press the law stipulates that the tenant is allowed to stay through the end of their lease if they have remained current on their lease payments. And, then they can stay for an additional 90 days. If a tenant is without a lease, then they are allowed to stay for 90 days, after the foreclosure. But the question has been asked, who determines when the 90 days begins?
But, often lenders are not aware there is a tenant in the property. And, new owners are ready to take possession of their newly purchased property, and may be asked to wait. How will this work?
Now, this is definitely an improvement to what tenants were offered before. Often times, nothing.
Is this a win-win situation for the lender and the tenant? The lender will have income coming in, no immediate vacancy and someone taking care of the property.
But, on the other hand, who will handle any major maintenance issues? What about when the property is offered for sale and there are a number of people in and out, such as realtors, appraisers, etc.? And, will the tenant be insured that they will receive their security deposit back if they return the property in the condition in which they found it?
I think that this is definitely a step in the right direction to protect these paying tenants, with non paying owners facing foreclosure.
This article is authored by
Sandy Shores Realtor, Melbourne FL Real Estate
Brevard County Real Estate & Investing
Palm Bay Florida Real Estate News
I buy, sell, rent, own and manage Brevard County real estate.
that for you
I have seen this in our area also.
Sad but true,
Good Luck to you in 2009
Karina
Tenants are frequently the innocent victims of foreclosures. Rental agents need to be very careful to avoid liability when properties are going to foreclosure. Verify that the mortgage payments are current.
Follow me on Twitter: http://twitter.com/roykelley
Sandy, I feel ya on this. I've seen landlords collecting rents, defaulting on mortgages and skipping, leaving tenant and property manager holding the bag! It's aggravating and heartbreaking for the tenants.
I, too am divided regarding mandated enforcement of leases after a foreclosure for the reasons you mentioned. I definitely want to see tenants getting SOME reasonable notice in the event of a default, but banks in the property management business to me is just like banks in the real estate business -- not so good. And they will pass the costs of maintenance etc. along to the consumer . . .
I think that it may require lenders that finance a property as 'investor unoccupied' needing to build more safeguards into their guidelines, as I know they are . . .
An investor should not be financing a rental he/she doesn't have at least half a year's reserves in bank for . . .
Thanks for the info. It came just in time as I have clients that are renting a home from owners facing foreclosure.
Sandy, landlords taking tenants money without providing the shelter is theft. Unfortunately courts get involved and everything gets bogged down. Too bad we don't have a fast way to fix this. Shame, shame on the landlords. Happy Memorial Day.
Hi Sandy
Thanks for the information and yes this is becoming an increasing problem.
Good luck and success.
Lou Ludwig
Tricky questions Sandy. There seems to be no shortage of people who change locks, and clean out properties after foreclosure -- it's unfortunate that there are not enough people available to check the house 30 days after default.. are there tenants in the house? the Assignment of Leases and Rents in the loan document would allow the lender to start collecting the rent at that time - until such time as the owner cures the default or foreclosure proceeds
The new law is a step in the right direction to protect tenant rights... they have been in a very precarious and unprotected position, until now.
Banks and tenants. The never ending debate. To me it seems silly for a bank to kick out a paying tenant but I can understand the difficulties that the bank also faces. In my mind it makes sense for the banks to hook up with a management company to take care of the property but that still doesn't take care of the issue of major maintenance that the previous landlord would have taken care of. Truthfully the whole situation is a mess. Thus the debate never ends.
Karina, I hate to hear that. We keep hearing of more parts of the country that are being affected by this. Luckily, this should give us some relief.
Roy, We must all remain vigilent and be sure that we have done our homework upfront on rentals.
Candice, This will certainly be interesting to see how it all plays out.
David, Good news, that you will have tenants they may find some relief. I am sure many others are relieved also.
Gary, I agree, this is a shameful situation. Although I think it will take some time to iron out.
Hi Lou, I think it is indeed much needed.
Hey Miss Mary, I agree, it will head us in the right direction. Hopefully this will make it easier for paying tenants in foreclosed properties.
Justin, I think it's a step in the right direction, but I also agree that there are things that will need to be ironed out.
Hi SS,
it is unfortunate... there seems to be no end to the effects that the mortgage problems, our country is facing, are causing on lots of people.
I'm glad innocent renters are catching a break!
Hi TO, I agree, it seems to be a never ending cycle. I hope that this does give some unfortunate renters a needed break.
Thanks this is very helpful. Just a lil run down on what happen to me. Me and my partner was looking for a new place to stay and stumbled across a lovely 3 bed 2 1/2 bath townhome. The landlord was extremly nice and only wanted $1300 deposit and $1195 rent. Me and my partner gave hime the deposit and the week of july 24 we moved in. The neighbors was really nice and we was loving our new place. on july 31 we gave the landlord our rent of $1195. on Aug 1st we recvd a knock on the door from the home owners association stating that they are the new owners because the landlord had rent into FORECLOSURE on July30th. We did not understand what was going on how can someone stand there and say that they are the landlord, take our money as nothing had happen. we have been trying to ask people what do we do? The home owner association is now asking us for Aug rent which they have lowered it to $1000 but we just paid $1195 to the landlord. It really puts us in a bind to try and get up the money for Aug rent to pay them. of course the landlord is not giving us the money back. What do renters do to try and get money back from a landlord that has stolen rent and deposit from you? is their any assistance for the renters? please help. thanks
Courtney, Unfortunately, we hear stories like this all too often. My recommendation is to seek the advice of a real estate attorney, as they can advise you how to proceed ahead. I wish you the best of luck.