Renters Beware of Foreclosure
Unfortunately, a sizable percentage of these 'landlords by necessity' are not current with their mortgage payments on their investment properties. As a result, these rental properties may be soon be subject to foreclosure and an acquisition by the bank that holds the mortgage lien!
Roughly 40 percent of all foreclosures involve property being rented, according to RealtyTrac. Here in Chicago, the Lawyers' Committee for Better Housing warns that as many as 2,500 renters and their families may be displaced by a landlord's foreclosure by the end of 2008.
Keep in mind a tenant's security deposit might be lost as well, should the foreclosure go through. Here in Illinois, and in many other states, the acquiring bank is not forced to refund the security deposit. However, a newly enacted Illinois law does offer a bit of protection, Kathleen K. Clark, executive director of the Lawyers' Committee, told the Chicago Tribune.
'If the tenant wasn't named as part of the foreclosure filing and is being taken into eviction court, they must be given 90 days notice,' Clark said. 'It's not a tremendous help, but it does give them confidentially of all court records a little bit of time.'
The new legislation also indicates that court records for a tenant who is evicted because of a landlord's foreclosure be sealed, except to law enforcement and government entities. In order to take advantage of the 90-day notice requirement, the tenants must be current in their rent or have made good-faith efforts to pay. This requirement prevents tenants who find out about their landlord's impending foreclosure to stop making their rent payments.
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Comments
Dean, thanks for that informative article. I don't think we hear much about the impact that foreclosure has on renters. Question: What would you advise a renter to do if he/she believes that their landlord may possibly be facing foreclosure? Moving out is an obvious answer, but what if that isn't a practical option right away?
Well, I certainly never thought about this as a renter. The lowsy home market is already making the renting more expensive, and now those of us who appear to be safe with long-term leases may be in danger as well. With Bill, I also wonder what you should do if you end up in this situation, or think you might be there.
Folks - Breaking your lease is not the answer - you are still obligated to pay rent and live up to it. Searching Public Records by Tax ID Number (in Cook County, your can check the Cook County Recorder of Deeds, a ccrd.info), might give you a clue of distress, but state law requiring notice to tenants, if they exist in your state, is usually the only protection for you. However - I am NOT an attorney, and am not qualified to give legal advice. Consult your lawyer FIRST before you take any action. DEAN MOSS & DEAN'S TEAM CHICAGO
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