What happens when a landlord and a tenant have a rent to own agreement and the landlord defaults on the mortgage?

My landlord lives in CA, I live in CO. Before I moved into his property he had hired my husband and I to act as property managers since he lives out of state. When I ended up moving into the house, we entered into a verbal agreement (he has been sending the paperwork for 3 years now) that a portion of our monthly rent would be applied towards ownership of the property. The property is now in foreclosure. I have all my rent receipts, invoices, etc. Where do we now stand?

Asked on March 17, 2011 under Real Estate Law, Colorado


Denise Ferguson / Denise Ferguson Attorney At Law

Answered 9 years ago | Contributor

The Statute of Frauds applies. All real estate transactions must be in writing to be enforced. You really need to consult with an attorney in order to try to salvage anything. You may find that your verbal agreement was worth nothing and you are out the money because you did not have a written agreement.


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

1) An oral agreement is generally enforceable, though some contracts or agreements must be in writing to be enforced. It appears that in Colorado, it may be the case that a lease or lease to own agreement over a certain dollar amount of monthly payment may have to be in writing to be enforced; you should consult with a local RE attorney about this.

2) Assuming that the agreement is enforcable, you have a cause of action against the landlord for breach of it if he can no longer convey the ownership or title. Unforunately, you cannot  get the property itself if it's been foreclosed upon--the bank's security interest through the mortgage supercedes any interest you may have had. So you may be able to sue the landlord for monetary damages--and that's another thing to discuss with an attorney--but most likely, you cannot enforce the agreement so as to get the property.

3) If the property has been foreclosed, you may be able to buy it from the bank or lender at a favorable rate, and that's something worth discussing with the institution.

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