When a lender acquires a house through foreclosure, does a tenant have to pay the lender any back rent due?
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When a lender acquires a house through foreclosure, does a tenant have to pay the lender any back rent due?
Tenant on a long term lease did not pay rent on the 1st knowing that foreclosure auction was set for the 15th. Bank acquired title via the auction on the 15th. Can tenant be forced to pay Bank for any part of the rent due for that month? Did tenant’s failure to pay the rent on the first effectively terminate the lease? Does this wipe out tenant’s rights and protection under the Protection of Tenants in Foreclosure Act of 2009? If Bank agrees to continue lease, will the bank have to return tenant’s deposit at end of the remaining year of the lease term?
Asked on May 16, 2011 under Real Estate Law, California
Answers:
M.D., Member, California and New York Bar / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
You have several questions here, so let's take one at a time.
First of all, rent is only owed to the legal owner of the property. So any back rent is owed to the former owner. From the time the new owner takes over rent is then due to that owner. So, using your example, the new owner would be owed rent from the 15th to the end of the month.
Secondly, a lease cannot be terminated for non-payment without proper notice being given to the tenant and typically the tenant being given the opportunity to cure any breach (i.e. they would be given the right to bring their rent up to date as per the terms of the lease and/or state law).
As long as a valid "bone fide" lease exists, a tenant is protected under the Act.
Finally, as to the retrun of your security deposit, when a property is foreclosed on there may not be much that a tenant can do. Your former landlod is responsiblt for its return. Typically, in such a situation, a tenant’s only legal recourse is to sue the landlord in small claims court. Yet, even though they may successfully win a judgment, actually getting the money that they are owed may be much more difficult.
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