Pittsburgh Legal Back Talk

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Landlord-Tenant: When Your Landlord Faces Foreclosure . . .

Posted By Cliff Tuttle | January 10, 2009

Posted by Cliff Tuttle

When a residential landlord loses a property through foreclosure, there is little good news for the tenant. If you have heard a rumor, a lawyer can check the court dockets and confirm the rumor, including identifying the likely month in which the sheriff’s sale will occur. He/she can also tell you the name, address and telephone number of the lender and other useful information.

It is usually a good idea to start looking for another place to live. The lender will probably encourage you to leave as soon as the property is sold. Although investors usually buy apartment buildings in ordinary sales transactions with tenants included and consider it a bonus, this is not usually the case in foreclosures. The lender usually thinks that after a foreclosure, the property will be easier to sell empty.

However, you may not be required to accept this conclusion. If your lease pre-dates the mortgage (again, a lawyer can look it up) and there is no subordination or attornment clause in the lease (requiring you to recognize the primacy of the mortgage) your lawyer may be able to keep you in the apartment for the duration of the lease. This may involve resisting post-foreclosure eviction proceedings. It is possible — just don’t try to do it yourself.

On the other hand, if you want to leave, your landlord may be in breach by permitting the property to be foreclosed. If the landlord is in default under the terms of the lease, he or she may have released you. Again, you need a lawyer AND you need a copy of the signed lease.

Sometimes the lender will ask you to pay the rent directly to it. In order to be entitled to such a payment, the landlord should produce a signed copy of an “assignment of rents.” Once again, let a lawyer look at it. Keep a copy, plus proof of your payments, in the event that your landlord threatens to sue for the rent. You don’t want to pay twice.

When making arrangements to pay the lender rent, negotiate a deal that specifies exactly how
long you will stay and provides for you to get your security deposit back.” Yes,” you say to the lender, “I know you don’t have the security deposit, but I’m never going to see it from my landlord, so I’ll pay you until May, but you’ll give me June free and I’ll move out at the end of the month.”

You may be surprised when the lender’s representative agrees. After all, he half expected you to run out without paying the last month anyway. Make sure that you get this agreement in writing.

You may discover, by the way, that the lender is quite happy to collect the rent and is in no hurry to foreclose. This situation has been turning up lately, since the real estate market is terrible and any lender would just as soon not own another rental property, at least not just yet. Some will give the borrower some time to find a buyer and (Glory Halelluia!) pay off the loan.



CLIFF TUTTLE has been a Pennsylvania lawyer for over 45 years and (inter alia) is a real estate litigator and legal writer. The posts in this blog are intended to provide general information about legal topics of interest to lawyers and consumers with a Pittsburgh and Western Pennsylvania focus. However, this information does not constitute legal advice and there is no lawyer-client relationship created when you read this blog. You are encouraged to leave comments but be aware that posted comments can be read by others. If you wish to contact me in privacy, please use the Contact Form located immediately below this message. I will reply promptly and in strict confidence.

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