When you own a house that you rent out but your circumstances force you to allow the house to go into foreclosure, it's not your responsibility to evict the tenants. Legally, you can't evict them in many cases; only the new owner can do that. State laws differ slightly about when you can evict tenants, so check with your state department of consumer services for the requirements in your area.
Reasons to Evict
As a landlord, you rely on your renters to follow the terms of the lease contract. If they break major covenants of the lease, you can evict them. For example, if the renters don't pay their rent, you can start the eviction process. Other major violations include if they damage the property and refuse to pay for repairs or bringing in a pet when it's prohibited by the lease. When the lease expires and the renters don't move out, you can evict them. However, if the renters are following the terms of the lease agreement, you can't evict them if you're allowing the house to go into foreclosure.
Under most state laws, you aren't obligated to notify existing tenants that you're allowing the house to go into foreclosure. The bank must send notifications to the tenants, and the new owner -- whether it's the bank or an individual who purchases the home at auction -- should notify the tenants about the new ownership. Some state laws require you to notify prospective tenants that a foreclosure might be imminent, but if the situation doesn't arise until after the renters move in, you don't have to notify them about the foreclosure.
Getting Your Rent
While the foreclosure process is ongoing, the renters still are required to follow the terms of the lease regardless of whether you're paying your mortgage with the money they give you. This means that even after the renters find out about the pending foreclosure, they must continue to pay you rent or risk violating the terms of the lease. If they stop paying rent before the foreclosure is final, you have the right to evict them if you choose. After the foreclosure is final, the renter must negotiate with and pay rent to the new owner, which is often the bank, or risk eviction.
After the foreclosure is final, you have no rights to evict the tenants. The new owner can evict them, however. If the foreclosure occurs while the tenants are still within the lease terms that they agreed upon with you, the bank or new owner can't evict them until the end of the lease, unless the new owner wants to move into the home. In that case, he must give the tenants 90 days' notice to move out before starting the eviction process. If no written lease exists or if the tenants are month-to-month, the bank or new owner can provide 90 days' notice for the tenants to move out, or he can begin eviction proceedings.
- Nolo: Foreclosure and Renting to a New Tenant -- Tenant Remedies
- Cornell University Law School: Eviction -- An Overview
- MSN: Renters Get Relief from Foreclosure
- Federal Reserve Bank of Boston: What Every Tenant in Massachusetts Should Know in This Foreclosure Crisis
- Oregon Department of Consumer and Business Services: Tenant’s Rights in Foreclosure
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