Do I have to move out if I am renting a home that is being foreclosed on?

Posted by Katherine R. Kyle | Jan 06, 2022

Do I have to move out if I am renting a home that is being foreclosed on?


When a foreclosure lawsuit is filed against your landlord, as a tenant living the property, you will usually be served with the foreclosure lawsuit.  This means you will be handed a copy of the lawsuit by a process server or a sheriff.  The complaint will refer to you as the unknown tenant.

You may be thinking about how to come up with the first and last month's rent along with a security deposit to find a new place to live.  As a tenant, there are laws and safeguards in place to protect the rights of tenants in homes being foreclosed upon.  However, you do not have to move out just because a foreclosure lawsuit was filed.

Although, as a tenant you are not a party to the loan document.  You are a party to the lawsuit and therefore have the right to file a response to the complaint.  You must do so within 20 days of being served.  Your response can let the court know you are a tenant living in the property and explain the terms of the lease you signed with the landlord.  In addition, it will ensure if any hearings are scheduled in the case, you are notified.  This will ensure you are given plenty of notice in the event you do need to move out.

A foreclosure defense attorney can file an answer on your behalf and provide you with a list of your options and rights as a tenant. A foreclosure defense attorney can also fight the bank to make it prove its case in court, which will give you more time in the property.

The next question you might be thinking about is, “do I have to pay rent if the home I am renting is being foreclosed on?

It depends.

Legally, you are required to pay rent pursuant to the lease you signed with your landlord.  President Obama signed the “Protecting Tenants in Foreclosure Act of 2009” that, in most cases, allows tenants to stay until the end of the lease even though the home they are renting is being foreclosed.

If your lease has expired or you don't have a lease, you must be given a written 90-day notice to move out. This is usually given by the new owner after the foreclosure sale has occurred.

You paying your rent in accordance with the terms of the rental agreement you signed with your landlord has nothing to do with the foreclosure case or the mortgage.  If you fail to pay in accordance with the agreement you signed, the landlord has the right to evict you for nonpayment.  In my experience, many landlords do not.  However, understand the landlord has the right to evict you.

I would encourage you to have a conversation with your landlord about the foreclosure lawsuit you were served with.  Ask your landlord if he would allow you to stop paying rent or pay a reduced rent given the circumstances.  Be sure to get this in writing.  You will want to explain to the landlord your desire to use the money you would otherwise pay rent with to hire an attorney to help defend the foreclosure case.  If you are able to use the funds to pay a foreclosure attorney, you will be able to stay in the home longer and it will be cheaper than paying your rent.

Some mortgages have an assignment of rent clause when the borrower is defaulted and the home is being foreclosed.  The lender can try to force the homeowner to forward any rent money received to the lender.  This is a common term in mortgages for apartment complexes.  Although some mortgages have this term, in my experience, this is rarely enforced by the lender and the court.  For starters, the lender is not going to waste time trying to find out if rent is being paid and, even if it does, cannot evict you. If this clause is enforced, as a tenant, you would be given notice that you are to pay rent to the lender instead of the landlord. 

If you have been wanting to find a way to terminate your lease and you received a foreclosure lawsuit, this may be great for you.  You now can send a letter to the landlord explaining that you are terminating your rental agreement in 7 days because they did not pay the mortgage.

The last question that you may be thinking about, “will I get my security deposit back?”  The law provides that landlords must repay the security deposit even if the property has gone through foreclosure.  Unfortunately, if the landlord fails to return your security deposit, you may have to file a lawsuit in small claims court to recover your funds.

As a reminder, until the day the foreclosed home has actually been purchased by a new owner, you can still rent the home and live in the property.  However, remember if you fail to pay rent and do not have a separate agreement with the landlord, the landlord can still evict you.

If you are a tenant and were served with a foreclosure lawsuit because your landlord is behind on their mortgage, we can help you stay in the home and navigate the months ahead.  Contact Kyle & Kyle Law at 877-595-3529 for a free consultation with a foreclosure defense attorney.

About the Author

Katherine R. Kyle

Katherine grew up in the beautiful mountains of Western North Carolina in the small town of Sylva.  At the age of nine her parents were divorced, and it was then that she aspired to pursue a career as an attorney.  After high school, Katherine attended Western Carolina University in Cullowhee, ...

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