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Creedo

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Posts: 2
Reply with quote  #1 
Question: If a landlord rents out a home and immediately goes into foreclosure on the home, is he in fact breaking the lease by not securing ownership of the property?

I signed a 6 month lease and was assured that in no way the home would be in danger of foreclosure, and that I was only interested in a long term rental (5+ years), and that I WOULD NOT be in a financial position after 6 months to move into another home. The landlord insisted on the first lease period to be 6 months as he was a 1st timer and wanted a "trial period". He assured me that there was no danger of me losing the home and can fully unpack and become comfortable in the home and that after 6 months we can do year to year leases. I repeatedly expressed my unwillingness to rent a home that was in danger of foreclosure. This was a verbal agreement between us.

If I move out into a home that has become available to me April 1st, will I be the lease breaker? Or is my landlord already the lease breaker for lying to me in order to get me to rent from him under false and undisclosed pretenses?

Many thanks! =)

Creedo
bayarea01

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Posts: 1
Reply with quote  #2 
We're facing the same issue.  We signed a year lease in November and foreclosure proceedings have begun.   We are still paying rent to the LL, but I would also like to know what would happen in a foreclosure scenario or short sale?  Would the bank have to honor the lease when the property is foreclosed upon?   Would the bank have to pay us for the remainder of the lease to leave the premesis?  How about a new owner?  If they want us out upon sale of the prpoerty, would they have to pay us to leave if they wish to move into the property?

Sorry for the barrage of questions.  We're just confused as to what our rights are in a foreclosure or possibly a short sale situation (which ever comes first).

Thanks

OHlandlord

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Posts: 3,814
Reply with quote  #3 
This is happening to lots of renters out there right now.  It is unfortunate that some LLs don't seem to be able or willing to pay their mortgages.  But believe me, most of us are hard working people who keep up with our mortgages and pay our bills on time.  You two have just gotten involved with a couple of LLs who didn't.

If a LL is still the owner on record of a property, that is, the property has not yet been foreclosed on fully and is not in the possession of the bank or has not yet been sold at auction to a new owner, the LL still retains his rights to the property.  One of those rights is the right to rent it out.  It may not be ethical to sign a lease with a tenant, but it is still legal.  So the lease is still valid as long as he retains ownership.  If you move out before the bank takes back the property or before the auction, you will be breaking the lease and can be held responsible for it.  You must continue to pay rent to the owner as long as he owns the property, or until the lease ends or the foreclosure goes through.

In most parts of the country, when the house is actually foreclosed on completely (process is finished) and the bank regains possession or the house is sold at foreclosure auction, the lease is terminated.  There are one or two parts of the country where this is not true, so check your local laws.  But in most places, the lease ends.  The new owner or the bank can give you 30 days written notice to vacate the premises.  If you fail to leave, you can be evicted.  A bank may pay you a small amount to move out.  (Or they may not.)  The bank will not pay you for the rest of the lease and may not even offer you any money to move out.  They have no obligation to do so, but some banks do, just to avoid the eviction proceedings.  Nearly all banks do not leave the tenant in place because they are not in the rental business.  They want to try to resale that house.

A short sale is different.  The house did not finish foreclosure.  The foreclosure was stopped by the sale of the property.  The new owner here must usually honor the existing leases.  If the owner wants the tenant out, he will have to offer an incentive to get you to move out.  Otherwise, you can stay until the end of your lease.
Creedo

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Posts: 2
Reply with quote  #4 
But if the LL lied in the process of our verbal agreements doesn't that hold water? I mean.... this guy completely lied to me about his current financial status and intentions with the home, AND that the home would be available to us long term.... he told me everything I needed to hear just to get me into a lease. Isn't that misrepresentation?
OHlandlord

Registered:
Posts: 3,814
Reply with quote  #5 
Verbal agreements don't hold up in court.  You can't prove what he said.  (It always turns into a he said - she said argument in court that the judge doesn't want to hear.)  A LL doesn't have to reveal his financial status to you.  He has no obligation to.  As long as he owns the house, he is permitted to rent it.  Unethical yes, illegal no. 

Nothing about the lease itself was misrepresented.  He was the owner, he did lease you the place, you are living there now.  He rented you the place for 6 months, which is what you signed and agreed to.  (Yes, you wanted longer, but you didn't sign a contract for longer.)  How much time is left on the 6 month lease and have you recieved notice yet of the auction date?  Figure on having at least 30 days after the auction before you have to move.
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