Is is legal for a landlord to have a tenant renew their lease if the landlord is in default of their mortgage?

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Is is legal for a landlord to have a tenant renew their lease if the landlord is in default of their mortgage?

My landlord requested that I re-sign my lease for another year but did not disclose to me that he was in default. The property has gone into foreclosure and is set for auction next month.

Asked on April 3, 2012 under Real Estate Law, Nevada

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

It is "legal" in the sense that IF the landlord were still the owner at the time of the renewal, then even if foreclosure was pending, at that time, he could convey possession of the property--hence, he had the authority and right to renew the lease.

However, if he did not disclose an imminent foreclosure at the time of renewal, when he had knowledge of same, that could constitute a material misrepresenation (or a material omission of a fact which he would be considered under a duty to disclose), and that material misrepresentation could constitute fraud. Fraud would provide grounds to either rescind the lease and/or seek monetary compensation.

In addition, note that foreclosure terminates leases--unlike a sale of the building, where the buyer takes the property subject to any/all in-force leases, when a property is foreclosed upon, the landlord losses the right to transfer possesion and the leases are terminated. Therefore, if your interest is in escaping the lease, you should not have to do anything (though you may potentially still be able to sue the now-former landlord for monetary compensation, if so inclined). Concersely, if you wanted to preserve your tenancy, you should try to negotiate a lease with whomevery purchases the property at the auction.


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