what are renters rights if landlord forecloses property? renters have 5 months left on contract.?

Question

i am the landlord in california. the rent does not cover the mortgage and i can no longer make the difference and can't even come up with property tax. i need to short sale or foreclose the property. i didn't ask for a security deposit or first/last month rent. what do i need to do with the renters if the house forecloses or short sells? please help me with any and all info...

Answer 1

Nicholas is correct, to a point. Landlords are responsible for the lease contract which they signed, and can be sued for damages for inability to deliver what was contracted. If you engage in a short sale, you have the option to sell the lease along with the property. While the bank has to approve any short sale offer, you do as well, since you are the owner of the property involved.

If the bank forecloses and takes possession, they won't take the lease as part of the foreclosure, and they are not required to take it.

In the reality of foreclosures, banks generally evict tenants OR offer them 'cash for keys', which is merely a monetary enticement to move out willingly without going through eviction. If the tenant accepts 'cash for keys', you are off the hook, since the lender will require that they sign off on the terms of the lease in return for same.

Suits against former landlords are extremely rare, but Nicholas is correct in that they would prevail if they elected to pursue action. If YOU short sale and can't convince the new buyers to take the lease, I recommend that YOU pursue the "cash for keys' option.

Answer 2

Renters whose states follow the “first in time, first in right” rule, where a lease can be wiped out by a foreclosure if the mortgage was recorded before the lease, will not be able to convince a court to change that rule. But tenants who learn that their new landlord is a bank can at least lessen the financial consequences by suing the former owner. Here’s how it works.

After signing a lease, the landlord is legally bound to deliver the rental for the entire lease term. In legalese, this duty is known as the “covenant of quiet enjoyment.” A landlord who defaults on a mortgage, which sets in motion the loss of the lease, violates this covenant, and the tenant can sue for the damages it causes.

Small claims court is a perfect place to bring such a lawsuit. The tenant can sue for moving and apartment-searching costs, application fees, and the difference, if any, between the new rent for a comparable rental and the rent under the old lease. Though the former owner is probably not flush with money, these cases won’t demand very much, and the judgment and award will stay on the books for many years. A persistent tenant can probably collect what's owed eventually.