What Happens to Tenants if the Rental Property Goes into Foreclosure?

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A rental property that goes into foreclosure is owned by the bank. In most cases, the banks give the tenants 30 days notice after taking back the property from the landlord. There’s no warning of the foreclosure from the landlord or the bank prior, and renters have to scramble to find temporary housing.

How It Works

The person or entity holding the mortgage that has been defaulted on, which is often a bank, is the owner of the rental property when it goes into foreclosure. They have the option to hold onto the property, or sell it at a public sale. In most cases, it’s sold at a public sale. A bank doesn’t get directly involved with the sale, but hires a company to take care of it. As a tenant, you’re not in a good position, because a bank is not interested in being a landlord. If the renters have repairs and other issues, they’re on their own.

Who Collects Rent

The worse part about finding yourself in the middle of a foreclosure is that because you won’t know what’s happening until 30 days before a sale, you still pay rent to your original landlord. Some landlords don’t notify renters that the rental property is in foreclosure, and continue to collect rent as if nothing is happening. Trying to get that same landlord to maintain the premises or otherwise uphold the lease agreement is a waste of time. They have no incentive to respond, and many don’t.

What Happens to the Lease

A foreclosure trumps the lease agreement as long as the mortgage was in place before the lease agreement, according to most state laws. The lease no longer exists in the eyes of the court, and the only requirement on the bank’s part is to give the proper notice to terminate the lease, which is 30 days.

Eviction Lawsuit

A tenant living in a rental property that goes into foreclosure must vacate. If a tenant refuses to leave, they’ll be summoned to court for an eviction lawsuit. Evictions have a horrible effect on trying to rent future apartments. Landlords look at the rental history and won’t rent to a tenant who’s been evicted, even if the property was in foreclosure. This makes finding future housing very difficult, and there’s not much protection under state laws for that.


Some states protect the tenant from an eviction when a rental property goes into foreclosure. These include Massachusetts, New Hampshire and New Jersey. The tenant has to violate the lease in order for the new landlord to successfully evict the tenant. For example, the bank can evict a tenant who fails to pay rent in these states.

A tenant who finds out that the rental property is in foreclosure should do everything possible to find another apartment and move out. They won’t get much help with maintenance and repairs in that situation, which makes living there not worth it.

12 Responses to “What Happens to Tenants if the Rental Property Goes into Foreclosure?”

  1. April 27, 2010 at 7:11 pm, Anonymous said:

    have no comment


  2. April 27, 2010 at 7:16 pm, felica said:

    no comment


  3. April 28, 2010 at 12:45 pm, Rebecca said:

    This is SO wrong! Why are you feeding tenants incorrect info!?! Tenants have SO many rights when it comes to this! Please know your laws and rights. Do NOT go off of this. Look up Tenants at Foreclosure Act 2009.
    IF the new owner wants to move in they have to give you a 90-day notice!
    IF you have a month to month lease they must give you 90-days!
    IF you have a long-term lease and they don’t plan on occupying the residence you get to live out your lease!

    There are more conditions please research for yourself; arms-length, before foreclosure notice…etc!

    http://www.tenantstogether.com is a great website for California tenants to get info on ALL their rights!



  4. August 30, 2010 at 11:19 pm, mark said:

    if the bank forecloses on an apartment building owner, and then attempts to sell at court house steps without any buyers, the bank becomes the “immediate successor”of the property. if the bank then sells it to an investor, the investor can evict the tenants and the federal law does not apply. Short sales and auctions are the two circumstances that apply , designed by congress to protect tenants from overzelous banks and their associates.


  5. September 15, 2010 at 9:13 am, Kingz said:

    Wow this is so wrong, you should be ashamed of yourself for posting such lies and unresearched information.

    to all that read this, just look up Tenants at Forclsure Act 2009. the only good thing that nut case oboma has done good in his office.


  6. September 16, 2010 at 5:10 pm, mark said:

    Read the act and then tell me where it says i’m wrong. The Act is talking about forclosures, not people who buy properties directly from a bank after the bank forecloses on someone else. the bank is the immediate successor.


  7. October 07, 2010 at 9:34 pm, mark said:

    Kingz apparently is the one who did not read the act carefully. No response from him says it all.I am not ashamed for getting it right. do your homework before popping off.


  8. December 26, 2010 at 10:48 pm, denise said:

    do we keep paying rent to if it goes to auction


  9. October 31, 2011 at 5:51 pm, Marla said:

    Hello my name is Marla and i house i rent is going to be auction in 30 days. the owner said he is working with the bank. my quested is, is the house already lose or does he have t’ill that day to find out if he lose or and is it possible that he can save the house at this point?


  10. May 12, 2012 at 9:57 pm, Rosina said:

    not completely correct, mark you love your loopholes huh?..but whoever buys it AFTER bank forcloses has to abide by your original lease,unless you all come to a mutual arrangement.at the very least give you from 30 – 90 days but tenants cant stop paying rent. if they dont know who to pay their rent to. hold it in an escrow account at their county courthouse.


  11. May 13, 2012 at 8:34 pm, Crazygirl32 said:

    Hi. My apt was auctioned off 2 months ago and my old landlord said to keep paying him and the new landlord said to pay him. My bf and I are saving the rent just in case. What I want to know is who legally owns our apt? New landlord sent us a letter in March saying we send the rent to him and we haven’t and haven’t heard from the new landlord since the letter. We checked town hall and they said old landlord owns apt but mortgage is in other person’s name. We called other person and he said not to pay the old landlord. Can’t remember much else what other person said but what I want to know is, can we get evicted, and, what do we do?


  12. July 21, 2012 at 5:58 pm, Chrysta said:

    This is hilarious! I hope anyone who is reading this understands that this was either written by a bad real estate agent or a bank! This couldn’t be further from the truth! Do your research and try looking up the Protecting Tenants from Foreclosure Act of 2009 which was revised. Don’t panic from this article!!!!


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