The Landlord Stopped Paying the Mortgage

Tom, I agree with everything you wrote in this post. IMHO, the tenant needs to pay his rent as in agreement with his lease. It has nothing to do with the landlord's mortgage problem.

Tom...

In most cases, a tenant loses all fights when they breach their contract ... but should always talk to a lawyer before stopping to pay the rent.

This is a HUGE problem in Florida.  There are thousands of landlords, who purchased 20 plus homes, and have never paid a payment since day 1.  They pocket all of the rent from each of the houses...tax free...and when a tenant refuses to pay, they evict them and get a new victim.  NOW there is a BLUE OCEAN STRATEGY that will land you in JAIL for tax evasion

This is becoming a problem more and more especially in the detroit area and now the tenants believe they can have all control its sad but true

They definitely are two separate matters.  It's a growing problem everywhere.

Yes, this happens all the time out here now. That landlord does not sound like he breached but the reaction of the tenant breeds the reaction of the other type of landlord in foreclosure.  Say nothing to the tenant, no sign on the property and make all offers subject to inspection once bank approval rolls in -- which I do not believe is fair at all. I tell people you need to be fair and upfront.  It is a difficult thing to get people to abide by these days. 

This sounds like a 'no-win' situation for everyone involved. Tenants are obligated to pay ... as are borrowers.

Tom this just happened to me.  Of course I refrained from giving advice.  I recently met a lady that serves on the court chair evictions and she indicated in 2014 the laws will change o benefit the Landlords.  Thanks for the article this really hits home and I have heard both sides of the story.

Totally.  Here is another side to the story - I had a client who was buying a house short sale, and a tenant lives in the property.  My client refused to buy after waiting for a while because she worried that the landlord is not going to get rid of the tenant until the lats minute and she had to evict the tenant to move in.  The short sale fell apart! 

In California they are two separate issues, also.  This situation can get complicated in accomplishing a short sale.

Tom:

This is becoming such a problem that someone who is considering renting anything should do a thorough check to see if the owner is in any sort of trouble.  However, I think once you are in a rental situation you probably owe the rent, no matter what.

Tom, the same thing happened to one of our tenants the first month in.

She contacted the landlord who tried to deny it, she stopped paying rent. He finally owned up to it.

She is putting her rent in an escrow account in the event she has to pay, he told her she didn't. But, you never know. She rented for 2 years, 2 small kids and fixed up lots of things when she moved in.

Hi Tom - they passed a law in Arizona which became effective Aug 01/10 about this sort of situation. The tenants rights are now protected under the law against landlords that default on their mortgage, they can even sue the landlord for fraud, and against a bank foreclosing on a property during the term of the lease. Texas should review the AZ law and your state association should lobby for your legislature to follow suit.

Tom,

Very well stated, they are two separate issues and the tenants have made a poor decision to simply stop paying the rent. It amazes me some of the logic that we see in this business. 

-Brent

If I was a tenant, I would ALWAYS pay the rent and consider my options while I'm still living in that place.  If you think something 'fishy' is going on, then find another place and move... but DON'T stop paying the rent.

Hi Tom, I can see the frustration of the renter, but like you stated they are two different contacts. Just because the owner has defaulted with the bank does not make it OK for you too to default the landlord. I see this scenario a lot in So. Florida. If the lease is still valid, current the tenant has rights.

I think a lot of tenants just see it as free lunch, knowing that the landlord is almost down to their knees and they just decide to take advantage of it. 

Not to say that a lot of landlords havn't done the same to the banks but yes they do not have any correlation between each other. 

Had to do this for almost a year with a tenant who tried first tried to negotiate a lower payment when the property went to short sale and then stopped paying all together. While the owner/seller's attorney felt that  the rental agreement (unsigned) was separate from the short sale, in this case the City of Chicago has landlord-tenant law that appears to lean in favor of the tenant. BofA's short sale and DIL departments gave conflicting advice.

Renters and agents have easy access to LP filing info and should stay on top of the status of a property.

Good post Tom.

So many problems evolve from the problem of mortgage default. I'm not sure though why a tenant feels justified in living in a property for free because a landlord is in financial difficulty? There is something wrong with that picture, or that morality.