How long you can stay in your property after foreclosure depends on whether you are a tenant or the former owner, and, if you are the former owner, also in which state you live. By and large, tenants have more rights in a foreclosed home than a former owner does. Either may negotiate with the lender to "get cash for keys," or voluntarily leave without any credit from the new owner rather than face eviction.
On May 20, 2009, the Tenants at Foreclosure Act went into effect nationwide. It is applicable to properties that were renter-occupied at the time of foreclosure. This law clarifies that leases survive a foreclosure and requires a 90-day notice to evict tenants after a foreclosure. If the tenants have a lease for a specific period of time that has not expired, the new owner must honor the lease. Only at the end of the lease may the lender send a 90-day notice asking the tenants to leave. If they have not left at the end of 90 days, the owner may go to court, forcing an eviction. A few states, including New Hampshire and New Jersey, and a number of cities, predominantly in California and New York, also have local rent-control ordinances that limit evictions to "just cause" such as non-payment of rent. Foreclosure is not considered a just cause, so renters are permanently protected from eviction based solely on foreclosure in these places.
Notice to Prior Owner
Owners who remain in their homes after foreclosure are not afforded the same protections as ordinary tenants. The new owner must provide notice to the former owner to move out; however, in some states, like California, this notice need only be three days before a court eviction filing. How long the eviction takes after court filing varies and will depend on whether the former owner exercises his rights to fight the eviction in court and how busy the court calendar is. Fighting this eviction in court is not necessarily an advisable strategy for delaying an eviction, however, because in some states the losing parties must pay court costs and attorney fees and in all cases it will become a part of your record.
Cash for Keys
Some lenders have adopted a "cash for keys" program for former owners and tenants alike. In this program, the lender offers the occupant between $1,000 and $3,000 to move out voluntarily within a specified period of time. Both the amount of cash and the time period are negotiable; however, because the new owner is not required to make this offer, the final terms are in its hands. Tenants generally have more leverage in these negotiations because they are better protected by leases and notice requirements.
Barring restrictions of state and local eviction law, a foreclosing lender holds most of the cards in determining how soon it may evict the occupants of the property it has foreclosed upon. However, the lender is also anxious to receive a property free from damage, to cut eviction costs and to avoid adverse publicity. For these reasons, even in the absence of a cash for keys program, lenders are sometimes open to negotiating a move-out date rather than mandating one through eviction. If the property in which you live is in foreclosure, contact the lender, try to negotiate a new lease and, if that fails, offer a proposed time line for your move. You have absolutely nothing to lose.
Mary Gallagher runs Mary Gallagher Planning (mgaplanning.com), an urban planning and consulting business in San Francisco. She is the former assistant planning director for San Francisco and planning director for San Mateo. Gallagher has been writing about real estate, development and land use for numerous websites since 1995. She holds a master's degree in historic preservation planning from Cornell University.