I Foreclosed on a House, What happens to exist sect. 8 tenant?

Question

I made a private Hard Money loan on a single-family property in Birmingham Alabama. Our borrower purchased the property, rehabbed it, and put a section 8 tenant inside.

Our borrower defaulted and we took the property to foreclosure. The tenant is now sending me rents, and Section 8 is sending their portion as well. My question is: what happens to the tenant now? I have never received a copy of the lease, info on tenant, etc.

I'm trying to figure out if I am OK to either 1)evict/sell retail  Or 2) renew lease / sell turnkey.

Jon Holdman · Answer

This is true for a sale, but generally not for a foreclosure.  A foreclosure wipes out leases.  The Protecting Tenants At Foreclosure Act was put in place in 2009 to give tenants protection after a foreclosure, but it expired at the end of 2014.  Here are a couple of links:

http://nlihc.org/issues/foreclosure

http://nlihc.org/sites/default/files/FactSheet_PTF...

According to the second link, Texas provides 30 days protection for tenants after a foreclosure.  As far as I know, nothing has been put in place after the PTFA act expired.   Here's another link mentioned legislation introduced in Feb of this year on the topic.

http://nlihc.org/press/releases/7507

Doesn't seem likely that will make much headway in DC.

Probably good to consult with a landlord/tenant attorney before taking any action.

Daniel Fleming · Answer

Thanks for the replies.

Brian, Thanks, I'm not looking to put a good paying tenant out, Just looking to know what my options are, and if I even have a choice in the matter. But yes, the first option would be to sell as is, performing turnkey to someone looking for a long term hold, and not interrupt the tenant's life.

Rob - the property is in Pleasant Grove. Know anyone who wants to buy a house?

Rob Drum · Answer

@Daniel Fleming At least you're collecting rents still ;) What part of town is it in?

Brian Garlington · Answer

@Daniel Fleming  Contact the local section 8 office and see if they have a copy of the lease.....out here in California the landlord has to provide a copy of the lease to the Housing Authority....

As an FYI....Is there a reason you want to evict the tenant? As an FYI, before trying to evict the tenant, you should make sure that you are able to get more rent than you're currently receiving now.....Out here I've seen a couple of landlords evict some tenants with housing vouchers that were good people.....only to find out that they couldn't get as much rent with the new potential tenants because of the area, etc.

Mark Byers · Answer

Section 8 should have a copy of the lease on file. It's not unheard of for them to misplace paperwork though. Pleasant Grove is a pretty hot area, you shouldn't have too much trouble finding a buyer.

Cara Lonsdale · Answer

The lease runs with the land.

If you have a tenant, you most likely can't evict without cause.  The first step would be to ask for a copy of the lease.  Either the previous owner (who may not be cooperative) or the tenant themselves.  Once you receive a copy of the lease, you will know the terms and timeline.  If you don't want the tenant, you will have to wait out the lease.  Make sure your properly notice the Tenant at least 30 days prior to the expiration of the lease to confirm, in writing, that you do not intend to renew.

Alternatively, you could offer them money to move before the lease expiration.  However, they don't HAVE to accept your offer, and you would need to make sure any offer didn't conflict with their section 8 agreement and/or eligibility.

Best of Luck to You!

I Foreclosed on a House, What happens to exist sect. 8 tenant?

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