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Foreclosure's Impact On TenantsWhat do I do if I learn that the property I rent is in foreclosure?Foreclosure is a court process where a bank or a mortgage company sues a property owner to take away that property. Your landlord is probably behind in his payments to the bank and now the bank is trying to take your landlord's property by foreclosure. If the bank wins the foreclosure, it will get title to the property, and your landlord will lose whatever rights he had in the property. The foreclosure may happen one of two ways-- strict foreclosure or foreclosure by sale. In strict foreclosure, a judge will set a "law date." On the law date, the landlord loses his or her rights to the property. The bank or mortgage company then becomes owner of the property. In foreclosure by sale, a judge will set a "sale date." On the sale date the property is auctioned off to the highest bidder. Up until the sale becomes final, or the law day, your landlord may sell the property to pay off what he or she owes, or can come up with the money he or she needs to pay off what is owed. If you are on a lease, and the owner is successful in selling the property, your lease stays in full force and effect. If the new owner is not an investor, he may make you an offer to vacate the property before your lease expires. You are not required to accept any such offer, but may do so if you desire. Tenants usually first hear about a mortgage foreclosure when they are served, either in person or by mail, with a Summons. This document gives notice to the landlord and tenants that a foreclosure proceeding has begun. This summons will have the name and phone number of the bank lawyer responsible for the foreclosure. Be sure to let your property manager know about any such notices you may receive. If you learn a lender is trying to foreclose on your landlord's property, KEEP PAYING YOUR RENT! Until the bank wins the foreclosure and gets title to your landlord's property, your landlord still owns the property. You should deal with all matters relating to your home with your landlord. If you stop paying your rent, your landlord will have the right to evict you. If the bank wins the foreclosure, it cannot just throw you out of your home. They may not communicate with you immediately after the foreclosure, but when they do, they must give you at least 30 days notice to move out. Some banks, like investors, may offer you a bonus to vacate the property earlier than the required 30 days. The bank may get a court order appointing a "receiver of rents." You must then pay rent to the receiver instead of to your landlord. If you do not pay the rent to the receiver, you could be evicted for nonpayment of rent. Finally, remember that your landlord can stop the foreclosure by making the required payments or reaching some other agreement with the bank. Janet S. Regan, MPM, RMP Broker Horizon Properties News articles
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