Can I pay my rent into an escrow account while my landlord has a notice of default on his loan?

I received a notice of default for a home that I am renting . Someone suggested paying rent into an escrow account until my landlord provides proof of cancellation of this default. Is that something I should do? How do I go about setting that up? How can I best protect myself in this situation?

Asked on December 1, 2011 under Real Estate Law, Utah


M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney

Answered 8 years ago | Contributor

Even though your landlord is in default on their mortgage, as long as your landlord remains the owner of record (in other words he is still on the deed to the property), you must continue to pay your rent to them. If you do not you could be evicted. Just be careful to find out just when title to the property passes at a foreclosure sale. Former landlords have been known to try and continue to collect rent even after they no longer own the property. As the tenant (i.e. legal occupant), you should be notified by the mortgage lender as to the transfer date of the property. After this time, your landlord will no longer be the legal owner. You will then be informed where to send your rental payments. Note: your landlord is still responsible for the return of your security deposit.

Additionally, you should be aware that federal law gives protection to a tenant in your situation. When a rental premises goes into foreclosure, tenants who have a written lease can continue to occupy the home until the end of the lease period, or 90 days, whichever is longer. The exception being if the new owner intends to move in and occupy the home as their primary residence. In that case, a 90 day notice to vacate would apply. Further, in cases where state law provides more protection than the federal law, the state law applies.

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