One of the worst situations that a tenant can find themselves in is to be renting a house that is going into foreclosure. It's an uncertain situation and may eventually see the tenant evicted through no fault of their own.
If you find yourself in this situation, you have a number of rights that you should be aware of.
Will I Be Evicted?
Before 2009 the vast majority of tenants would lose their lease once the home entered into foreclosure, leaving them in a situation where they had to find somewhere else to live.
However, in 2009 the Protecting Tenants at Foreclosure Act changed so that any tenant in a foreclosed property can maintain their lease and continue to live there, assuming the new owner doesn't want to use the home for themselves.
While it is certainly not ideal, you will find that many people purchase foreclosed properties as an investment, rather than as a place to live themselves. That means many will be happy to keep you where you are, as they will now be receiving monthly money without having to put any work in.
Bear in mind that this differs slightly for tenants who are on a rolling monthly contract. In these cases the tenant will be given 90 days to vacate the property once ownership is transferred, unless they can reach an agreement with the new property owner.
What About Maintenance?
This is where the issue becomes a little stickier. Before a foreclosed property is sold to a new, individual owner it will usually become the property of a bank or mortgage provider for a period of time. There is no determining what this period of time is going to be, but it can be detrimental to maintenance efforts on the house.
A bank is not inclined to make sure everything in the house is working as you need it to, and your old landlord will no longer care once the house enters foreclosure. This means that any maintenance issues are likely to go neglected until there is a new property owner who is happy to allow you to keep renting.
In some cases, the tenant will also have the option of pursuing legal action against their former landlord, particularly if the landlord failed to inform them that the property was being foreclosed on.
In a legal sense, this failure to provide information essentially amounts to fraud, which means that the tenant can sue for monetary damages, such as any costs associated with the tenant being forced to move and any rent increases that they have had to endure in the process.
Unfortunately, if it has gotten this far then it is likely that you will have had to move out of the rented property, which is not an ideal situation.
The risk of foreclosure is something that should be disclosed, if it is a possibility, before the tenant ever signs the lease. Otherwise, they are having vital information withheld from them, which means their decision is less informed.