My Landlord is in Foreclosure. Do I Need to Pay Him?
I hear this question about 2 times a week. And as with any question you ask an attorney, the answer is: “Maybe” The legalize answer boils down to ever holds the rights to your apartment/house to receive the rent is entitled to the rent. Sometimes that is your landlord, sometimes that is someone else.
Let’s look at a couple of different scenarios and see who you as a tenant would owe rent.
1. What happens if the landlord still holds title to the property and home has not been sold at a foreclosure sale/auction? (Also, no receiver has been appointed. [We will get to what a receiver is in a minute.])
This is easy. The landlord may be in foreclosure proceedings and may have even declared bankruptcy, but he still owns the property. If you do not pay rent, the landlord can evict you from the property, and sue you for back rent.
Sure this may not seem right, but that is the way the cookie crumbles. The landlord is still entitled to be paid. And if you do not pay, the landlord can enforce his rights and have you evicted. There are many landlords that are in foreclosure proceedings that drag out the foreclosure proceedings as long as possible just to collect as much as possible while they have no intention to ever pay back their lender just to collect as much rent as possible.
Once your landlord loses title to the property through a sheriff sale/foreclosure auction and a deed is delivered to a new owner, then that new owner is entitled to the rent that your lease says that you were supposed to have paid.
Now, you are wondering, “But what about my damage deposit?!?!!!” Well, believe it or not, the new owner is most likely on the hook for your damage deposit. (see N.J.S.A. 46:8-20 and -21) As a tenant in a foreclosed property, you do have rights.
2. What happens if the landlord still holds title to the property and home has not been sold at a foreclosure sale/auction? (And. a receiver has been appointed.)
Now you are asking, “What is a receiver?” A receiver is normally a third party (typically an individual person or business) that is appointed by the court for the purpose of preserving the property securing the loan (i.e your home) whenever there is a danger that the property will be damaged or rental income lost. This means the lender went to court and asked the court to let someone else other than the landlord collect rent so that they could get paid, and the court agreed that this was a good idea. This normally happens for multi-unit buildings that are being foreclosed, but it can happen for any building with tenants commercial or residential.
It is possible that a receiver has been appointed to your home and the landlord is still trying to collect rent even though he has no right to collect the rent anymore. If you are unsure of who to pay, you can open a bank account and deposit the money into the account and then inform everyone asking for the money that you are waiting for a court order to know who to pay. Eventually, you may be brought to court to be evicted, but if you can show that you have the money and explain to the judge what you were doing and why, the odds are very small that you will be evicted. Before you try anything like this, talk to an attorney to make sure it really is your best course of action. Everyone’s situation is different, and reading blog posts on the internet is not always the best way to find information on how to live your life.
3. What happens if tbe home is sold at a sheriff auction?
Once the sheriff deed is delivered to the new owner, the new owner is entitled to rent. The old landlord may still try to collect, but as previouslly mentioned you may want to start holding on to the rent until who you know to pay for sure.
4. What happens if tbe home is sold at a sheriff auction but to the bank/lender that held the note is the winner of the auction?
The bank is your new landlord and are entitled tot he rent. They do not always try to collect, so it may seem like a wind fall but it doesn’t mean that you are living for free yet.
5. What happens if tbe home is sold at a sheriff auction but to the bank/lender that held the note is the winner of the auction and they sell the property 2 years later to a new buyer?
So, for two years you haven’t paid rent now you have a new landlord demanding rent, what are you supposed to do? Well, technically the new landlord most likely purchased the property as-is and bought all of the bank/lender’s rights. Which would include the right to collect back rent…. So, you may find your self with someone trying to collect 2 years of rent and you probably do not have the money. In a situation like this, you may want to try to come to an agreement with the new owner.
If you find yourself in any of these situations, talk to an attorney.
Your situation is unique to yourself. A landlord/tenant attorney will be able to give you better advice then whatever you find on the internet that is specific to your situation.