How can we get or security deposit back if our landlord lost our rental home to the bank due to foreclosure?

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How can we get or security deposit back if our landlord lost our rental home to the bank due to foreclosure?

We paid 1st and last month’s rent upfront, including a security deposit (which was specified as such on the lease). The landlord is refusing to refund our last month’s rent and security deposit saying it isn’t her responsibility any more but now the bank’s. How can we get our money back, which is $5645.? We were current on rent before the foreclosure so she has no reason to keep our money.

Asked on September 10, 2012 under Real Estate Law, California

Answers:

M.T.G., Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

More information is needed here to guid you which way to go but even with that I can tell you that the issue is really not clear under the law - California or otherwise.  When a house is trasnferred via sale or other non-foreclosure situations, California Civil Code 1950.5(h) and (1950.5(j) will govern the security deposit. What ususally happens is that the old owner/landlord transfers the tenants' security deposit to the new owner/landlord.That satisfies the law and the old landlord's responsibilities. Otherwise, the old landlord and the new landlord both remain on the hook "jointly and severally" as they say.  But in a foreclosure action it is not clear what will happen. In the Protecting Tenants After Foreclosure Act the existing lease must be honored by the new owner but the issue of security deposits is not dealt with. And since a security deposit is considered to be an issue that does not deal with the property itself (i.e., it is personal), court's can be hesitant to make the new owners liable for the money.  I would strongly suggest that you seek help suing your old landlord. And if the foreclosure sale has not gone through yet consider using that money toward future rent.  Good luck.


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