foreclosure, cash for keys, honoring previous lease...

28 Replies

Hello. I am a tenant in a house that has been foreclosed on while I was paying rent, $1300 / mo, lease isn't up until February but a new owner has the property, and hired a management company. They notified me by letter on the door, to contact them within 7 days, and said my options were 1) show previous lease and sign a new lease with them, or 2) vacate as soon as possible to avoid eviction. I am confused. What are truly the renter's rights in the situation. I've heard 60-90 days rent free is possible, I've heard of cash for keys, how does all this work from the tenant's end. Hoping someone will be generous enough to help me from the tenant side of things, and not just blow me off because I am a tenant (the enemy lol). I have to contact the new management company in 2 more days, and I want to fully understand my rights before they blast me with pressure. Please help. Thank you!

You would be covered under the Tenants in Foreclosure Act of 2009 if you have a current lease. You can look that up to see exactly what it covers.

If the new owner is an investor I doubt they're going to be offering cash for keys, that's generally something a foreclosing bank would do so they could have it vacant to sell. Unless your rent is way below market there's no reason to offer you any incentive to leave if the new owner is in the business of buying and renting properties. I would give the management copy of your current lease and tell them since you already have a valid lease on that property they need to honor it.

If the new owner is the bank that foreclosed on the property then they'd probably rather have you out and they'll typically pay tenants $2-3k to vacate as long as the property is left in broom swept condition.

Ditto. However, your lease apparently started in Feb or March of this year. The law states, among other things, that the lease was in effect "prior to notice of the foreclosure". Here that date is interpreted as the actual foreclosure auction date. Provide your lease, state your intent to remain, and let us know the response. You, as a tenant, are not the enemy on this site. You are the one that makes the investment work :)

I'm about 15 months or so, into a 24 month lease...Also wanting to know, what are my options if I don't want to sign with the new management company? This process has been a lot of drama and I've heard bad things about the new management co. Times are tight, and if there's a way I can stay in the house for a month or 2 rent free, it's about what I'd need to do, to save for moving costs and 1st mo / deposit elsewhere. Is this process exactly like a regular no pay / eviction, or does the foreclosure / new purchase / existing tenant with lease give any longer time frame for a "deadbeat tenant" if you want to call me that...

You have a valid lease! We're assuming your rent could be considered "market rates". The new owner is obligated to honor/assume your existing lease. You do Not have to sign the management co.'s lease, no matter what they say. Talk to Legal Aid, they truly are helpful, and probably deal with this 5 times a day. Submit your lease to them, and tell them you and the new owner will be honoring THIS lease, as per law. Talk to legal Aid.

They have to honor your signed lease even through a purchase or foreclosure. If you don't have the lease then you may not have a legal leg to stand on so hopefully you have a copy. I would give them a copy and tell them you intend to stay until the lease is up.

You are still obligated to pay the rent, there is no free rent, there is only you breaking your lease and I would imagine they will evict the second you stop paying. If you can't afford to move that is NOT the new owners fault or problem. You will also most likely be sued in court for the unpaid rent and possibly have wages garnished. It will go on your court record and hurt your credit score.

They may be interested for cash for keys but I would not expect anywhere near 2-3k. Maybe $500 - 1k depending on the unit.

Tenants are not enemies. I care about my tenants, I don't get involved with their personal issues but I care about them and wish them the best. I also care about my family and require rent for services :)

Bottom line is I would give them a copy of the lease, don't give them your copy, make a copy. Let them know you would like to stay and pay the rent on time to avoid eviction.

I'm looking out for myself, and just wanting you to help me do that with your knowledge. Legal aid in Memphis is a joke, trust me. So here are 2 questions:

1) do I have to stay here and sign the new lease? I doubt it, the old one is null and void because of the foreclosure.

2) How long can I stay here free? Yes there is an answer to this, whether it be 30 days, 60, or 90? I want free rent and don't want an eviction on my record. I'm not ashamed to be asking this. I shouldn't be having to deal with this in the first place - I've paid, owner didn't pay mortgage. So as a tenant, the "what it's" for months until it gets to this point are too much drama. My heart is elsewhere now. As I said I've heard many bad reviews of the new management company and don't want to sign with them. There is nothing wrong with a tenant asking how long he can stay free without an eviction on his record. The answer exists, I just want to know what it is

3) I want to know all of this before I talk to the new management company Thursday. Tenants have rights and owners have rights. Knowledge is always on the side of the owners. I just want to be armed with info myself.

It's possible that the new owner simply does not know the law. That's the simplest explanation. (The question comes up a lot on this site - usually from new investors wanting to know how they are supposed to deal with existing leases)

OR they may know the law, but hope that you don't. They'll likely back down right away, if not, do as @Wayne Brooks suggests and contact legal aid for your state and they'll write a letter or some such that should sort it out. Just google legal aid Tennessee, you'll find their info.

They may actually have plans for the property, and be hoping to get you out, or they may just be hoping to squeeze a rent increase out of you. If the new owner wants the house empty really badly then I suppose you would have the option of negotiating with them to buy you out of your lease. But for now, it's your right to stay there, so don't do anything like that unless it really is of some benefit to you.

good luck!

@James Barker

Normally in these situation if a new company purchased the home you are living in they have to honor the existing lease so you should sign a lease with the new company but make sure its the same terms as what you have for the same length of time. If you fail to pay you will be evicted. You made a commitment to pay when you signed 15 months ago o regardless of who owns the home you should live up to your word otherwise your word is no good like most tenants.

there's where you are wrong, Curtis. I am so far the only person in this situation who has done the right thing. I have paid, and the owner did not. Clearly you take the superiority complex road of putting yourself in a class above tenants, and without knowing me, you put me in that category.

I do not have to sign the new lease. The lease I signed is between myself and an owner and management company who no longer have rights to the house, why? Because THEY did the wrong thing, didn't pay, and denied the entire thing to me, I had to find out for myself. So, I have ALREADY lived up to the entirety of the agreement I signed between the original parties. The agreement was defaulted on, on THEIR part. Dishonest, like most landlords :)

I am asking how long I can stay here without paying the new company, before I get evicted. I have paid every dollar to the old one.

The old lease is NOT null and void because of the foreclosure. That's explicitly covered by the "Protecting Tenants at Foreclosure Act". Your lease is still valid and still in effect. Here's a summary, with a link to the actual text.

You don't have any free months. If you don't pay your rent the new landlord will evict you.

ok Jon thank you for that info. Do I not still have the option of leaving the property and not signing with the new company, without them holding me to the old lease? I don't want to stay here after this, it's been too much drama to deal with not knowing when and if I would have to vacate during all of this, and I want to be somewhere else. Stability is important to me. Remember, I have been paying, the owner did not...

First, I am not an attorney. If you really want to be sure about your rights you need to see an attorney.

Reading the act it appears it gives the tenant the right to stay under their existing lease. It doesn't appear to require the lease to be honored by the tenant. So, as far as I can tell, you can get out if you want. If you want out, I would just ask if they want you to leave and if so, when. Don't expect them to give you any free time in the unit.

The former owner was "rent skimming" by collecting the rent but not paying the mortgage. That may or may not have been illegal in TN, I don't know. But that has no effect at all on your obligation to pay the rent. Had you pursued it before the foreclosure you might have gotten a court to tell you to send it to the lender directly or to have escrowed it. But you can't make a case that you can avoid paying rent because the landlord wasn't paying the mortgage.

Yes, the owner didn't pay and you did. But the owner didn't get a free pass, he got foreclosed on and will likely get sued for the rest of the debt. You didn't win the lotto just change in ownership.

You may be able to work out a 30 day deal with them if you want out and they want you out.

yes I understand...the past is the past, I don't have any recourse on the rent I paid. Just needing to make a decision now going forward, decided I don't want to stay here, and I'm sure I don't have to. The new owner doesn't even have a copy of my lease or any info regarding it, so they sure can't hold me to it. I just don't want to sign with the new company, I've heard very bad reviews on them and they're not even local. Plus I'd have to put up a new deposit I'm sure. Not worth it after all this. But yes it was intentional what the owner did - he offered to sell me the house in October for too much, and after that day he never made another payment. He was looking to dump it. And the owner and management company are personal friends which tells me whey all knew about it and tried to deny it to me. The letters coming to the house, and a quick check with the mortgage company told me otherwise lol

owner didn't get a free pass? He collected over $6,500 and used it for whatever. He's the only one coming out ahead. Clearly he didn't care about his credit. I'm not looking to win the lotto. How long do I have free here. 30 days?

correction: he collected over $9,000....and didn't pay. I'd say that's the free pass he was after intentionally wouldn't you?

The previous owner now has a foreclosure on his credit report. He won't get another mortgage for five years. As @Josh C. says its very likely the lender will come after him for everything that's owed. Not only the unpaid mortgage balance, but also all the late fees and legal fees. And, no doubt the property sold for a fire sale price at the auction. Not defending his actions, but you're fooling yourself if you think he's escaped with $9000.

As stated several times by several other people you have no free time in the house the lease is still valid. While you say the new owners don't have a copy of the lease you also say they are personal friend. If that's true and they are working together they have a copy of the lease or will get one.

That being said the new lease they want you to sign should have the same terms as the lease you hold only changing where the payment goes. If they try to change anything you rant comfortable with don't sign it and go to legal aid or a private attorney.

As for an additional security deposit they may ask for it but I don't see where you would be legally required to pay one. The way I see it, current owner accepted the risk when they bought the property the way they did.

We will agree to disagree but the previous owner didn't get a free ride and will have consequences to pay.

Originally posted by @James Barker :
I'm looking out for myself, and just wanting you to help me do that with your knowledge. Legal aid in Memphis is a joke, trust me. So here are 2 questions:

1) do I have to stay here and sign the new lease? I doubt it, the old one is null and void because of the foreclosure.

2) How long can I stay here free? Yes there is an answer to this, whether it be 30 days, 60, or 90? I want free rent and don't want an eviction on my record. I'm not ashamed to be asking this. I shouldn't be having to deal with this in the first place - I've paid, owner didn't pay mortgage. So as a tenant, the "what it's" for months until it gets to this point are too much drama. My heart is elsewhere now. As I said I've heard many bad reviews of the new management company and don't want to sign with them. There is nothing wrong with a tenant asking how long he can stay free without an eviction on his record. The answer exists, I just want to know what it is

3) I want to know all of this before I talk to the new management company Thursday. Tenants have rights and owners have rights. Knowledge is always on the side of the owners. I just want to be armed with info myself.

Well, you crossed over a wee bit into enemy territory when you say you want free rent and want us to help you with that :)

You don't have to sign a new lease. Your current lease is binding on both you and the new owner/property manager. The 90 day-notice in the Protecting Tenants in Foreclosure law is to terminate tenancy for those on a month to month lease, and for owners who bought the property and intend to live in. If neither of those apply, then you can stay until your lease is up. This assumes you have a written and signed lease that is properly executed and with fair market rents.

You are entitled to no free rent. If you don't pay per the terms of your existing lease or any subsequent lease you agree to sign, you will be served a pay or quit notice. This can be as soon as 3-5 days after you don't pay. If you don't pay after getting the notice, the new owner will file an eviction court case (also called an unlawful detainer). They will then get a court date and a judgment. Just my opinion, but the new owners have a property manager that appears to be on top of paperwork, etc. I wouldn't mess with non-payment of rent if you don't want a court case on your record.

Cash for Keys: you are not entitled to cash for keys. If you want to break the lease, you could negotiate terminating the lease with the property management. They may or may not be interested in allowing you to break the lease early. If you are paying fair market rents, there is little incentive for them to give you cash for keys to vacate. Even if you hunker down and stop paying rent, they may not offer to make a deal with you. The law is on their side and you will be evicted.

If you care about your credit and your court record, play by the rules outlined in your lease.

Just my opinions here, not legal advice.

Originally posted by @James Barker :
owner didn't get a free pass? He collected over $6,500 and used it for whatever. He's the only one coming out ahead. Clearly he didn't care about his credit. I'm not looking to win the lotto. How long do I have free here. 30 days?

Well I started of trying to help you because you posted as a tenant that was concerned about your ability to stay based on the foreclosure but this sure has taken a turn.

You are entitled to ZERO free rent. You only have the ability to pay rent and continue to stay, that's what the law entitles you to. A foreclosure doesn't "void" the lease but the new owner obviously doesn't have a copy of your lease and will not try to enforce it.....so if you want to move out tomorrow you're probably free to do so.

If you refuse to pay any rent to the new owners you most likely will be served with a 3 day pay or quit notice and upon the expiration of that they will be able to evict you just like any other tenant that doesn't pay their rent. The fact that the property changed ownership is not a get out jail free ticket to be a deadbeat tenant. If you can't afford the place then now's the time to get out. If you don't want an eviction on your record then you're going to need to move or pay rent.

As for your security deposit I don't believe the new owners can require one until the expiration of your current lease. Once you sign a new lease then they will require it. Your old deposit is still with the previous owner and you can try to collect it from that landlord. The new owner will not be responsbile for refunding the previous deposit.

Thomas: no, the old owner and old management company were friends. Not the new ones. I've had no contact with the new folks at all, they don't even know my name

Originally posted by @James Barker :
Thomas: no, the old owner and old management company were friends. Not the new ones. I've had no contact with the new folks at all, they don't even know my name

You know, it's possible you're making a mountain out of a molehill here. You haven't talked to them yet. So talk to them! maybe it will all be fine. If you want to stay, you have legal grounds to stay; if you want to go, they will probably let you go.

Don't get caught up in a "drama" that hasn't even happened.

Yes, your old landlord took your rent and didn't pay his mortgage. But it's not like he's sitting on a beach somewhere gleefully drinking margaritas paid for by your rent money. It's not fun to have an investment screw up on you and end up in foreclosure. The dude probably lost A LOT of money on that place while he was trying to ward off the foreclosure; it's very likely that his financial life is in the tank right now due to bad decisions or bad luck.

You paid for housing, you got housing.

He didn't pay for his property, he got the property taken away. Along with his downpayment (which was probably considerable), any other money he had put into the property, his credit, and probably a big chunk of his self-worth.

Personally, I'd rather be in your situation than his.

Sounds like you really want to move out and move on. Your best approach is to negotiate the "cash for keys" if the new owner does indeed offer you such an arrangement; I suggest you try to get at least all the "move in money" that you would need for a new place to rent.

jean: I'm not concerned with his situation and don't empathize with it. You do, because you're a landlord

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