If our landlord files forbankruptcy and we have a one year lease, what are our rights?

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If our landlord files forbankruptcy and we have a one year lease, what are our rights?

We have been renting a townhouse for 2 months. Our written lease is for 1 year. The landlord says he may be filing for bankruptcy and if he does we will be out. We spent a total of $5,000 to move here and don’t have that kind of money to move again. We want to know what recourse we have? Does he have to “buy out” the remainder of our lease? Do we have to pay rent for the remainder of the lease?

Asked on September 18, 2010 under Real Estate Law, Florida

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

The landlord's bankruptcy would not affect your right to remain in the townhouse or his obligation to allow you to remain there. Depending on the type of bankruptcy, you may end up paying into a bankruptcy trustee or the court rather than directly to the landlord; however, again, bankruptcy by person A does not affect or cancel his contractual obligations to others, such as the his obligations as landlord under the lease. If the property ends up being foreclosed up by his lender (e.g. the bank that gave him a mortgage), that would end the landlord's ownership (at that point, you'd no longer pay rent to him) and would likely result in you having to move out after a few months--but that's foreclosure which affects the rights of tenants by changing ownership of the premises, not bankruptcy, which affects the landlord's debts to other people, not his lease obligations to his tenants. (Of course, if the landlord declares bankruptcy and stops paying the mortgage, foreclosure will then probably follow in fairly short order).

There are two caveats though:

1) If there's a written lease and it has a term which states that tenancy is terminated if the landlord declares bankruptcy; that lease term would be enforceable.

2) If it was a month-to-month lease, then on 30 days notice, the landlord could choose to not renew tenancy.

You should consult with a landlord-tenant attorney for detailed information about your rights and options.


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