Does a foreclosure wipe out a lease for inherited tenants?

Question

I've recently foreclosed on a property in MO as the lender. The inherited tenant and I are butting heads about me enforcing the existing lease and for now we're not communicating. The lease is poorly written, and with this tenant having a two-year lease (signed just before the sale date, probably intentional) with no security deposit and a rent around $225 below market, there isn't any reason to keep her other than put off some repairs and paint the interior.

I went to my attorney to see my options. She told me that a foreclosure wipes out a lease and I could evict her. What?!? I thought the lease always stood and my only options would be to hope she doesn't pay or there is some other lease violation, then evict on those grounds.

I am just confirming and want to get some advice beyond what I get with my attorney for evicting after foreclosure. I am assuming that the best practice in most cases with inherited tenants that look to be problematic is to evict straight way. If the old owner couldn't pay the mortgage, he's probably not a good landlord either.

Thanks!

Nancy Truong · Answer

In some states ex. California or Texas, after foreclosure, you'll have to evict the people from the property (if you choose to require them to move out). Foreclosure is about ownership of title whereas leases are about possession of property. These are two separate property laws.

If the eviction process is long, consider other options such as cash for keys or lease the property to those tenants.

-Nancy Truong, Texas Attorney.

If the eviction process is long, consider other options such as cash for keys or lease the property to those tenants.

-Nancy Truong, Texas Attorney.

Dwayne Poster · Answer

The notice of action, addressed to the 'tenants on the land', give them more time than most any other process. Court process, redemption, court orders. It can take many months, as I'm sure you've experienced. Your attorney may even had requested monies slated for tenant removal, as many banks will have done. The court ruling supersedes any agreements. That's why it's done, to resolve an unworkable arrangement.

Seek legal advice though, as I only speak from my experience as a layman. I have seen several court directives where rent tenancy is maintained, but the rent payments are redirected. It all depends on what you asked for in resolution, and what the courts final declaration were.

Chris Seveney · Answer

@Larry Bowers

I doubt you will get anything as there is no agreement - they are considered squatters and it will cost you a lot more in legal than what you would collect.

Chris Seveney · Answer

@Larry Bowers

I believe your attorney is correct - tenant had a contract with the prior owner and the foreclosure removed them from property and all interests. You could keep them in the property but are not required too.

Also any deposits they provided you would not be obligated for

Again speak to your attorney but I believe they are correct

Bill B. · Answer

I was pretty sure during the Great Recession leases had to be honored after a foreclosure. Did they crack down on that?

Paul Winka · Answer

@Dwayne Poster Since this is not an eviction for cause on the part of the tenant, I would expect the legal process to take longer to give the tenant time. Have you noticed these types of evictions taking longer?

Dwayne Poster · Answer

If the action you sought before the courts was against the borrower and all that resided on the property, and that action was ruled in your favor, you have vacant possession. Every foreclosure I've worked with includes 'tenants on the land'. Omitting them in litigation could be a problem. Your attorney that filed can explain your case best. If you are taking monies from residual tenants, you are likely creating a legal lease.

Does a foreclosure wipe out a lease for inherited tenants?

Does a foreclosure wipe out a lease for inherited tenants?

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