Foreclosure Quetions


Foreclosure- Plagued market affects renters

		by Tricia Nario Canites - The Sacramento Bee February 2, 2008
		Tricia Nario Canites is managing attorney for the Human Rights-Fair Housing Commission's downtown Sacramento office at 112 I Street, Suite 250, She can be reached at (916) 444-6903 or (916) 444-0178

	In a housing market marked by so many foreclosures, not only are homeowners losing their homes, but so are many families that are renting the homes. Because the foreclosure process differs from a voluntary sale of a home, the process raises many questions for tenants occupying a foreclosed homes. Here are some of the most common issues faced by tenants during and after a foreclosure:

Question: My landlord recently received a notice of default. As a tenant, how does this affect my obligation to pay rent and my right to stay in the property?

	Answer: A notice of default is the first step in the foreclosure process and serves to formally notify homeowners that they are in default of their loan. By law, homeowners have three months from the date the notice is filed with the recorder's office to cure the default. During this time, the homeowners still hold title to the property and are entitled to continue to collect rent from any tenants. As long as the homeowners have title, they also may terminate a month-to-month tenancy without cause and with proper written notice of 30 days to tenants of less than one year, 60 days to tenants of one year or more and 90 days to tenants participating in the Housing Choice Voucher Program. Homeowners generally may not terminate a fixed=term lease without cause.

Question: My landlord is in default on his loan. I have not been able to contact him to pay my rent. What should I do?

	Answer: As long as the homeowner holds title to the property, the tenant is obligated to pay rent. If the tenant can't contact the homeowner to pay rent, that money should be set aside in the event the tenant receives a three-day notice to pay rent or quit. Failure to pay the rent could lead to the homeowner filing an unlawful detainer action, or eviction, against the tenant.

Question: About a month ago, my landlord received a Notice of Trustee's Sale, and today there was a three-day notice to quit posted on the front door and addressed to my landlord. Now that my landlord has lost his hone, how does this affect my right as a tenant to stay in the property?

	Answer: The law entitles the homeowner only three days to vacate the property once it has been lost through the foreclosure process. Once the bank or subsequent buyer takes title to the property from the previous homeowners, proper notice also must be given to any remaining tenants to terminate their tenancy. After foreclosure, tenants are entitled to 30-day written notice, regardless of the length of the tenancy and usually regardless of a lease. If the tenants fail to vacate by the end of the notice period, the bank or subsequent buyer must file an unlawful detainer action to regain possession of the property. Unless and until the tenancy is terminated, the tenant has an obligation to pay rent to the new owner.

Question: I paid my landlord a security deposit when I moved in, but my landlord has since lost the property through foreclosure. Do I have to pay the new owner another deposit, and what happens to my deposit when I move out?

	Answer: When the homeowner transfers or loses title to the property, the homeowner must either return the security deposit to the tenant or transfer the deposit to the new owner, which could be a bank or a subsequent buyer. The new owner may not collect an additional deposit from a tenant if the original deposit has not been returned. It's the new owner's responsibility to obtain the initial deposit from the previous homeowner. Tenants are entitled to the return of their deposit within 21 days of vacating the property, minus any deductions. If the deposit isn't returned, the tenant can sue both the previous homeowner and the new owner jointly, as both parties are legally responsible for returning the deposit to the tenant.

Question: If my tenancy is terminated by my landlord who is in default or by the bank or new buyer after a foreclosure, can I choose to not pay rent and instead allow it to be deducted from my security deposit?

	Answer: The law allows the owner of the property to deduct rent owned from the security deposit. The law also requires the tenant to pay rent until the notice of termination expires and the tenancy is terminated. Even if the current owners, are in default, they still are entitled to collect rent and may issue a three-day notice to pay rent or quit followed by an eviction if the tenant fails to pay. The bank or a new buyer also is entitled to collect rent and may do the same if the tenant doesn't pay. If the tenant withholds rent during the last month of tenancy, that amount would be deducted, in addition to any other legal charges, from the security deposit held by the property owner.

		by Tricia Nario Canites - The Sacramento Bee February 2, 2008
		Tricia Nario Canites is managing attorney for the Human Rights-Fair Housing Commission's downtown Sacramento office at 112 I Street, Suite 250, She can be reached at (916) 444-6903 or (916) 444-0178