Your landlord got foreclosed. Do you have to go?

Your landlord got foreclosed. Do you have to go?
By Les Christie




Renting a home that is going through foreclosure? If so, don't be fooled: Lenders can't kick you out; they have to honor the terms of your lease.

Of course, that doesn't mean that some lenders' representatives aren't trying to scare people away.

Sandra Pearson has lived in her rented townhouse in Santa Maria, Calif., since July 2007. But last October, the single mom -- whose 17-year-old son suffers from epilepsy and autism -- was served with a vacate notice.

The owner of the home had lost it to foreclosure and the servicer, First Federal Bank, wanted Pearson out. She showed them her lease, which runs through June 2010, and proof of on-time payments and thought everything was cleared up.

But in December, First Federal failed, and OneWest Bank took over its assets -- including the Santa Maria townhouse. When Pearson went to pay her rent, the agency managing the property for OneWest refused to accept the check. They threatened her with court action and claimed her lease was not legitimate.

"They scare the wits out of you," Pearson said.

OneWest eventually agreed to allow her to finish her lease; however, a bank spokeswoman said they still believe there were problems with the documents.

Under the Protecting Tenants at Foreclosure Act, which Congress passed last May, tenants like Pearson are usually eligible to stay after the property has been foreclosed as long as they have a valid lease and are paying their rent regularly. Even renters on a month-to-month lease get 90 days to leave.

But tenant advocacy groups charge that lender representatives, including some unscrupulous real estate agents, have been preying on tenants' ignorance. They pressure renters by sending them misleading letters that drive some out.

One letter sent out by a Texas law firm stated, "This letter constitutes formal and final demand that you vacate the premises within three days [emphasis ours] of the date this letter is delivered."

Worse, the message threatens legal costs if tenants don't comply. With that facing them, many fold their tents.

"The average person wouldn't know the law has changed," said Robert Doggett, an attorney for Texas RioGrande Legal Aid. "People assume they have to leave."

There is no official data identifying the number of people who have received such letters, but advocates think it could be quite high considering the number of properties bought for investment and rented out during the boom years.

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Source: CNN Money