was a tenant of a landlord facing foreclosure.
TMZ.com is reporting that Jermaine Jackson
has been renting a home that is now in
foreclosure. During the past two years
many tenants have faced the same dilemma as Jackson. Through no fault of their
own they are facing losing their place of residence. They may have faithfully
been paying their rent in full and on time, but their landlord has not done the
same with the property's mortgage.
Unlike the landlord, the tenant is the person
facing the prospect of being homeless. So what does a tenant in this position
do? According to
Nolo.com, "Federal legislation signed in
May 2009 gives important rights to tenants whose landlords have lost their
properties through foreclosure."
Here are two important things to know posted on
What Can a Foreclosed-Upon Tenant Do?
Thanks to the 2009 federal legislation, most tenants with leases will keep their
leases, and month-to-month tenants will have at least 90 days to relocate.
Tenants with leases have no legal recourse against their former landlords,
because they are in the same position vis a vis the new owner as they were with
the old: The lease survives and ends as it would had there been no foreclosure.
Similarly, month-to-month tenants always know that they can be terminated with
proper notice, and 90 days is longer than any state's termination period.
However, a lease-holding tenant whose rental has been bought by a buyer who
wants to move in to the property ends up less fortunate than before the
foreclosure -- he may lose his lease with 90 days' notice, a result that
probably would not have happened had the owner simply sold the property to a
buyer who intended to occupy the property. (Normally, the new owner has to wait
until the lease ends, absent a lease clause providing for termination upon sale,
though such clauses may not be legal in all situations.)
Renters in Foreclosed Properties No Longer
Lose Their Leases
Before May 20, 2009, most renters lost their leases upon foreclosure. The rule
in most states was that if the mortgage was recorded before the lease was
signed, a foreclosure wiped out the lease (this rule is known as "first in time,
first in right"). Because most leases last no longer than a year, it was all too
common for the mortgage to predate the lease and destroy it upon foreclosure.
These rules changed dramatically on May 20, 2009, when President Obama signed
the "Protecting Tenants at Foreclosure Act of 2009." This legislation provided
that leases would survive a foreclosure -- meaning the tenant could stay at
least until the end of the lease, and that month-to-month tenants would be
entitled to 90 days' notice before having to move out (this notice period is
longer than any state's non-foreclosure notice period, a real boon to tenants).
An exception was carved out for the buyer who intends to live on the property --
this buyer may terminate a lease with 90 days' notice. Importantly, the law
provides that any state legislation that is more generous to tenants will not be
preempted by the federal law. These protections apply to Section 8 tenants, too.