Beware of Existing Tenants When Buying a Foreclosure Or Short Sale
Posted by: Administrator in tenants, short sale, self directed ira, renters, myblog, investment property, foreclosure, eviction, Brooklyn Troy, 401k rollover, 401k on
Feb 23, 2010
With the crash of the real estate market comes many opportunities for investors. Especially when purchasing the abundance of Short Sale and Foreclosure homes. There is however on caveat to these purchases that one truly has to consider and that is that you must honor any existing leases on the property for the duration of the lease term.
What many people are doing that no longer want their homes or are planning on letting it foreclose is relocating to a new home and renting out their previous residence. The reason for this is that these home owners choose to say rent a house around the corner for $1200, and at the same time collect rent on their home for the same or often times even more money. Well instead of paying that money to their mortgage they just keep it and use it for their own person expenses since they have decided to let the house go. All fine and dandy for them but it is the tenant who actually gets screwed over when the home is sold, or foreclosed on. Or do they?
If you've got an existing lease, the lender or whoever buys the property int he foreclosure auction has to honor your lease. The Protecting Tenants at Foreclosure Act, Pub. L. No. 111-22, §§ 701-704 (2009) became law on May 20, 2009, and applies to state eviction proceedings, and requires that a new owner who took title to residential rental property through foreclosure honor existing leases until the end of the lease term.
Even if the new owner wants to occupy the foreclosed property as a personal residence before the end of the lease term, or your lease expires within 90 days, or your tenancy is month-to-month, the owner has to give you at least 90 days notice to terminate the tenancy.
So this may help protect innocent tenants whose owners were not completely up front with the tenant but it may put a monkey wrench in your plans as an investor, especially if you plan to rehab and/or flip the home.
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