If our landlord is in forclosure and omitted notifiying us when we signed the lease, if we found a new home close by can we break our lease before the auction?

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If our landlord is in forclosure and omitted notifiying us when we signed the lease, if we found a new home close by can we break our lease before the auction?

We extended the lease on our rental home for 12 months about 4 months ago. This week, we were notified that the home that we rent will be auctioned in 3 months . We have children and need to stay in our school district and so have a very narrow selection of comparable homes to rent in this area. We have found one and now wish to move. Our landlord stopped paying the morgage last year and was deceitful in her ommission of this information at the time we re-signed. We feel that the contract wasn’t offered in good faith. Do we have a leg to stand on to break this lease?

Asked on June 1, 2012 under Real Estate Law, Arizona

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

You may have grounds to terminate or rescind your lease under one or both of the following theories:

1) Fraud: if the landlord knew she was facing foreclosure, or reasonably should have known (i.e. she knew she was in default on her lease; foreclosure would be a normal and predictable consequence), then her failure to disclose it could be the sort of material (or important) omission of fact which she was under a duty to disclose (since it goes to her ability to actually provide possessio of the premises to you).

2) Breach of the implied covenant of good faith and fair dealing. All contracts have added to them by law the obligation to treat with the other party in good faith: to not do things which tend to destroy the "fruit of the contract" for the other party. You write that this was a renewal or re-signing of a lease; thus, there was an existing contractual relationship between you and her at the time, which could give rise to the covenant of good faith and fair dealing, a covenant she would have breached by  having you renew the lease without disclosing the likelihood of foreclosure.

It would be best if you consult with a landlord-tenant attorney in detail about the situation before taking action; however, as stated, from what you write, you may have grounds to rescind (fraud) or terminate (covenant of good faith and fair dealing) the lease.


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