Renters find foreclosure relief in new law

Q: I've got a lease for one year, but it looks like I'm about to get the boot. My landlord stopped by to say that he can no longer afford to pay his mortgage, and he's received a notice of default. He advised me to get ready to move, once the bank forecloses. What are my options? --Bruce B.

A: Your question is very timely. Before May 20, 2009, most renters lost their leases upon foreclosure. The rule in most states was that if the mortgage was recorded before the lease was signed (mortgages are usually recorded right after they're signed), a foreclosure wiped out the lease (this rule is known as "first in time, first in right"). Because most leases last no longer than a year, it was all too common for the mortgage to predate the lease and destroy it upon foreclosure. Sadly for most renters, your landlord's advice was accurate.

These rules changed dramatically on May 20, 2009, when President Obama signed the "Protecting Tenants at Foreclosure Act of 2009." This legislation provided that leases would survive a foreclosure -- meaning the tenant could stay at least until the end of the lease -- and that month-to-month tenants would be entitled to 90 days' notice before having to move out (this notice period is longer than any state's nonforeclosure notice period, a real boon to tenants).

An exception was carved out for buyers who intend to live on the property. These buyers may terminate a lease with 90 days' notice. Importantly, the law provides that any state legislation that is more generous to tenants will not be preempted by the federal law. These protections apply to Section 8 tenants, too.

Though you don't mention being under rent control, I should add that tenants who live in cities with rent control "just cause" eviction protection have always been protected from losing their homes at the hands of an acquiring bank or new owner. These tenants can rely on their ordinance's list of allowable, or "just causes," for termination. Because a change of ownership, without more, does not justify a termination, the fact that the change occurred through foreclosure will not end the tenancy.

So here's the bottom line: If your home is sold to a new owner at a foreclosure sale, and that owner intends to live there, your lease may be terminated with 90 days' notice. But if the bank hangs onto the property, or if it's bought as an investment property, your lease will survive.

Q: I've ended up with a deadbeat tenant, though I checked him out when I reviewed his application. I called his landlord, who said "No" when I asked if there had been any problems. That recommendation was the deciding factor in my decision to choose this applicant over a couple of others -- then the trouble began. I've since learned that he was about to be evicted from his last place and had caused all kinds of grief. In other words, that landlord lied to me in order to get me to take this guy off his hands. It's going to take me a lot of time and money to get this tenant evicted. Can I sue that liar? --Brian P.

A: Your experience is not unique, alas. Landlords without scruples will do just as this one did in order to save themselves the expense of an eviction (or in order to get rid of someone whose behavior, though not eviction-worthy, is highly annoying). That's one reason why savvy landlords always call the previous landlord as well as the current one -- a landlord once-removed has no motive to lie. ...CONTINUED

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