If our apartment is up for foreclosure, whathappens with oursecurity deposit?

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If our apartment is up for foreclosure, whathappens with oursecurity deposit?

We have been renters at our current residence for 5 years. Suddenly we received a auction/estate sale for our apartment. We have paid our rent in full through April. However, what happens to our security deposit if it sells or not? And since the sale is scheduled for the middle of next month, can we hold off paying our rent to hear what happens in May? If not, should we pay only through the 13th to avoid and legal recourse? We know if we pay the full amount of May rent we will never see a dime back.

Asked on April 20, 2011 under Real Estate Law, California

Answers:

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

Answered 10 years ago | Contributor

First of all, you should be aware that a lender who takes possession of a property or a new owner who buys it at auction has to let a tenant stay for 90 days from the longer of the sale or the remainder of their lease.  The rules are a bit different if someone is buying the property to live in; they are allowed to terminate a lease with 90 days notice. 

Now with respect to your security deposit, your landlord is responsible for returning it back to you.  See if your landlord will let you apply it to next month's rent.  If not, you will have to get it back from him after the sale, if possible.  You may have to go to small claims court to do this.  Yet, even though you may win a judgment, actually getting the money that you are owed may be much more difficult.

As for not paying your rent, legally as long as your current landlord has title to the property, you are required to make your rent payments (regardless of the fact that a foreclosure is in progress).  However, once title passes, you can stop paying your landlord.  So technically you should pay all of next month's rent, but as a practical matter if you only pay 1/2 the month then if the title is transferred on or about the middle of the month, you should be OK; if for some reason title doesn't pass then you will have to pay the other 1/2 to your current landlord (and you would also be responsible for late fees, if any). In theory, your landlord could file an "unlawful detainer action" (i.e. eviction proceeding) for non-payment of the full rent but under the circumstances that's doubtful.

 

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

1) As long as the current owner is the owner, you have to pay him or her rent. Note that the issue is not necessarily when the foreclosure sale is--that determines who the new owner is--but rather then the current owner loses title or possession, which may be earlier. But if you don't pay on time while the current owner still owns, he could begin eviction proceedings.

2) Once the current owner(s) no longer own the home, your tenancy is terminated. However, you don't have to leave until evicted--you *can* leave once your tenancy is over, but if you don't go voluntarily, you must be evicted. You'd be responsible for the rent while staying, but since eviction, best case, usually takes 2 - 4 weeks *after* the process is initiated--and it may not be initiated immediately--this is almost certainly not a situation where you have to get out the day after the sale.

3) Also, there are laws that protect renters in your situation, such as a federal law called the (I believe) "saving our homes act." While they don't enable indefinite tenancy, they--depending in circumstances--should in most situations give you at least an extra 90 days, possibly longer.

4) You may be able to negotiate with the new owners to stay.

5) The current owner will need to return your security when the tenancy is ended with him or her. If you end up getting agreement from the new owners to stay, you'll likely have to pay them a new security.


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