What Happens to Tenants When a Property Forecloses in Broward?

As moratoriums on foreclosures and evictions have expired, more property owners are going to face foreclosure in the coming months. Many of those property owners are landlords, and the buildings they own are rental properties. Often, the tenants inside those properties have continued paying their rent on time, and think they should not have to face consequences brought on by something that was not their fault. So, what happens to tenants when a property forecloses in Broward County?

Protecting Tenants at Foreclosure Act of 2009

Prior to 2009, if a rental property was foreclosed and tenants lived within it, the new owner could evict both property owners and tenants when they took over ownership of the home. The foreclosure automatically terminated the lease and evicted any tenants, who were also not given a great deal of time to leave the premises. In most instances, the eviction came as a complete shock to renters because they had no idea the landlord was not paying the mortgage. Fortunately, Congress passed the Protecting Tenants at Foreclosure Act of 2009, which now provides much greater protections for tenants.

Under the Act, anyone that purchases a property at a foreclosure sale is required to give tenants 90 days notice to vacate the property. However, this requirement is only in place if the new owner intends to live within the property themselves. If the new owner is not going to move into the property and live there on their own, they must allow the tenant to continue living in the property for the remainder of their lease. If the tenants do not have a lease, the new owner must provide them with 90 days notice to vacate the property.

The Act has undergone many transformations since the time it was enacted. The Act initially contained a sunset provision, which meant it would automatically expire in 2012 unless Congress renewed it. Since that time the Act has been renewed, and many changes have been made to it, although the above provisions and protections still stand. In 2018, the Trump Administration made the Act permanent.

Exceptions Under the Law

Although the law does provide greater protections for tenants than it once did, there are some exceptions under the law. If the borrower is still residing within the home, they are not granted any protections under the law. Also, if the rent a tenant is paying is deemed to be “substantially lower than fair market value for their living space,” can be evicted without the proper notice that is typically required under the law.

Still, what is considered “substantially lower” is not defined under the law. Instead, it is left entirely to the judge’s discretion. As such, tenants can argue that their rent is not substantially lower than fair market value. The law does protect low-income tenants that pay lower than market value because they rely on certain government programs.

Do Tenants Still Have to Pay Rent During Foreclosure?

Losing your home is very upsetting, whether you are a property owner that is being foreclosed on, or a tenant that is losing their home due to eviction or foreclosure. Some people become so upset that they want to retaliate against the landlord by not paying rent. Others believe they are not obligated to pay rent if the landlord is not using it to pay the mortgage on the property. Unfortunately, this is not true.

Until the foreclosure is final, the landlord still technically owns the property. As a result, if you stop paying rent for any reason, your landlord will still have the right to evict you. Landlords are not required to use rental income for paying the mortgage on the property and so, you cannot stop paying rent and use this as a defense.

If you live in a multi-family dwelling, such as in an apartment building, the mortgage on the property likely includes an assignment of rents clause in the home loan contract. Under this clause, the lender is allowed to collect rents directly from tenants any time a landlord stops paying the mortgage on the property. Lenders must provide tenants with adequate notice that they will be collecting the rent instead of the landlord.

What Happens to the Security Deposit if a Rental Property Forecloses?

When a landlord’s rental property goes into foreclosure, it is typically because they have fallen on hard times financially. As a result, if you have paid a security deposit, you may fear that you will never get it back, even if you have paid your rent in a timely manner and kept the property in good condition. You may already assume that your landlord simply cannot afford to give your security deposit back to you.

Under the law, your landlord is required to return your security deposit to you, even if the property is lost in foreclosure. However, because landlords often cannot financially afford this, the only recourse you likely have if your landlord refuses is to file a lawsuit against them in small claims court.

Speaking to Your Landlord

Again, many tenants do not even know their landlord has fallen onto hard financial times and so, the foreclosure comes as a shock. Once you learn of the foreclosure, it is important to speak to your landlord so you can learn what they intend to do about it. Just because a lender has started the foreclosure process does not mean your landlord will lose the home, as there are many defenses available. Speak to your landlord and ask if they are going to allow the foreclosure to continue so you can start making plans in case you do have to find a new place to live.

Call Our Foreclosure Defense Lawyers in Broward County Today

If your landlord or a new owner has not upheld your rights, or you are facing foreclosure, our Broward County foreclosure defense lawyers at Loan Lawyers can help. We will always protect your best interests and advise you of the legal strategies that will give you the best chance of a positive outcome. Call us today at (954) 523-4357 or fill out our online form to schedule a free consultation and to obtain the legal advice you need.

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