What are my rights as a tenant if the owner is letting the house foreclose?

First of all, federal law gives some rights and protection to a tenant in the event that their rental unit is foreclosed upon. When a home goes into foreclosure, tenants who have a written lease can continue to occupy the home until the end of the lease term, or 90 days, whichever is longer. The only exception would be if the new owner intends to move in and occupy the home as their primary residence; in that case, a 90 day notice to move would apply. Tenants without lease have to be given at least 90 days notice to move.

You should be aware however, even if a foreclosure action has already been filed, as long as the landlord remains the owner of record (i.e. is still on the title to the property), a tenant must continue paying rent to them. Conseuently, a tenant must be careful to find out just when title to the property passes (at auction or otherwise). The fact is that former landlords have been known to try and continue to collect rent even after they no longer own the property. As a lawful occupant of a property in foreclosure, a tenant should be notified by the mortgage lender as to the sale/transfer date. After this time, the landlord will no longer be the legal owner. A tenant should then be informed where to send their rental payments by the bank or new owner.

With respect to the return of any security deposit there may not be much that a tenant can do. Typically, in such a situation, a tenant’s only legal recourse is to sue their former landlord in small claims court. And even though they may successfully win a judgment, actually getting the money may be much more difficult.